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 September 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 oNon-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




1


The
number of shares of the registrant’s common stock outstanding as of November 16,
2009, was 410,159,156, which does not include 800,000 common shares returned to
treasury stock which the Company intends to cancel in the fourth quarter of
2009.




2


POWER
3 MEDICAL PRODUCTS, INC.


FORM
10-Q





INDEX




PART I – FINANCIAL INFORMATION
            4Item 1 – Financial Statements
            4Item 2- Management’s Discussion And Analysis Of
      Financial Condition And Results Of Operations
            25Item 3 - Quantitive And Qualitative Disclosures
      About Market Risk
            28Item 4 – Controls and Procedures
            28PART II – OTHER INFORMATION
            29Item 1 – Legal Proceedings
            29Item 1A – Risk Factors
            29Item 2 - Unregistered Sales of Equity
      Securities
            30Item 3 – Defaults Upon Senior
    Securities
            32Item 4 - Submission of Matters to a Vote of Security
      Holders
            33Item 5 – Other Information
            33Item 6 – Exhibits
            34SIGNATURES
            35






3




PART
I – FINANCIAL INFORMATION




ITEM
1 – FINANCIAL STATEMENTS




POWER 3 MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


BALANCE
SHEETS





September
      30, 2009
                          (Unaudited)
                        
                        
                        December
      31, 2008ASSETSCash
      and cash equivalents
                        
                        $
                        38,371
                        
                        
                        $
                        8,331Other
      current assets
                        
                        
                        8,076
                        
                        
                        
                        6,645Total
      current assets
                        
                        
                        46,447
                        
                        
                        
                        14,976Furniture,
      fixtures and equipment, net of accumulated depreciation of $113,856
      and $101,253 at September 30, 2009 and December 31, 2008,
      respectively
                        
                        
                        46,745
                        
                        
                        
                        6,253Deposits
                        
                        
                        5,704
                        
                        
                        
                        5,450Total
      non-current assets
                        
                        
                        52,449
                        
                        
                        
                        11,703TOTAL
      ASSETS
                        
                        $
                        98,896
                        
                        
                        $
                        26,679




4


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


BALANCE
SHEETS


(Continued)





September
      30, 2009
                            (Unaudited)
                          
                          
                          December
      31, 2008LIABILITIES
      AND STOCKHOLDERS' DEFICITAccounts
      payable
                          
                          $
                          1,070,059
                          
                          
                          $
                          1,043,682Notes
      payable – in default
                          
                          
                          451,000
                          
                          
                          
                          451,000Notes
      payable – net of unamortized discount of $-0- and $47,736 at September 30,
      2009 and December 31, 2008, respectively
                          
                          
                          -
                          
                          
                          
                          64,174Notes
      payable to related parties
                          
                          
                          50,000
                          
                          
                          
                          68,927Convertible
      debentures-in default, net of unamortized discount of $-0- and $97,036 at
      September 30, 2009 and December 31, 2008, respectively
                          
                          
                          361,247
                          
                          
                          
                          767,974Convertible
      debentures - net of unamortized discount of $43,831 and $577,668 at
      September 30, 2009 and December 31, 2008, respectively
                          
                          
                          6,169
                          
                          
                          
                          442,332Convertible
      debentures – related party, net of unamortized discount of $2,279 and
      $672,836 at September 30, 2009 and December 31, 2008,
      respectively
                          
                          
                          27,721
                          
                          
                          
                          696,599Other
      current liabilities
                          
                          
                          521,921
                          
                          
                          
                          617,486Derivative
      liabilities
                          
                          
                          10,779,084
                          
                          
                          
                          1,352,247Total
      current liabilities
                          
                          
                          13,267,201
                          
                          
                          
                          5,504,421TOTAL
      LIABILITIES
                          
                          
                          13,267,201
                          
                          
                          
                          5,504,421STOCKHOLDERS'
      DEFICITPreferred
      Stock - $0.01 par value: 50,000,000 shares authorized; 1,500,000 Series B
      shares issued and outstanding as of September 30, 2009 and December 31,
      2008
                          
                          
                          1,500
                          
                          
                          
                          1,500Common
      Stock-$0.001 par value: 600,000,000 shares authorized; 394,788,366 and
      149,959,044 shares issued and outstanding as of September 30, 2009 and
      December 31, 2008, respectively
                          
                          
                          394,788
                          
                          
                          
                          149,960Additional
      paid in capital
                          
                          
                          67,902,134
                          
                          
                          
                          63,499,938Stock
      held in escrow
                          
                          
                          -
                          
                          
                          
                          (20,000
                          )Treasury
      stock
                          
                          
                          (16,000
                          )
                          
                          
                          -Common
      stock payable
                          
                          
                          68,750
                          
                          
                          
                          123,286Common
      stock subscriptions receivable
                          
                          
                          (4,166
                          )
                          
                          
                          -Deficit
      accumulated before entering the development stage
                          
                          
                          (11,681,500
                          )
                          
                          
                          (11,681,500
                          )Deficit
      accumulated during the development stage
                          
                          
                          (69,833,811
                          )
                          
                          
                          (57,550,926
                          )TOTAL
      STOCKHOLDERS' DEFICIT
                          
                          
                          (13,168,305
                          )
                          
                          
                          (5,477,742
                          )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                          
                          $
                          98,896
                          
                          
                          $
                          26,679







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




5


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


STATEMENTS
OF OPERATIONS


(Unaudited)





Three
      Months
                      Ended
      September 30,
                    
                    
                    Nine
      Months
                      Ended
      September 30,
                    
                    
                    Period from May 18,
      2004 to September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    2009REVENUES:Sales
                    
                    $
                    41,337
                    
                    
                    $
                    -
                    
                    
                    $
                    209,814
                    
                    
                    $
                    -
                    
                    
                    $
                    637,063Total
      revenue
                    
                    $
                    41,337
                    
                    
                    $
                    -
                    
                    
                    $
                    209,814
                    
                    
                    $
                    -
                    
                    
                    $
                    637,063OPERATING
      EXPENSES:Employee
      compensation and benefits
                    
                    
                    117,429
                    
                    
                    
                    213,945
                    
                    
                    
                    393,723
                    
                    
                    
                    740,850
                    
                    
                    
                    31,443,235Professional
      and consulting fees
                    
                    
                    382,533
                    
                    
                    
                    106,783
                    
                    
                    
                    1,007,868
                    
                    
                    
                    918,275
                    
                    
                    
                    12,310,808Impairment
      of Goodwill
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    13,371,776Impairment
      of intangible assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    179,788Occupancy
      and equipment
                    
                    
                    8,412
                    
                    
                    
                    33,997
                    
                    
                    
                    27,538
                    
                    
                    
                    101,937
                    
                    
                    
                    696,013Travel
      and entertainment
                    
                    
                    3,239
                    
                    
                    
                    4,762
                    
                    
                    
                    5,931
                    
                    
                    
                    83,464
                    
                    
                    
                    432,315Write
      off lease
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    34,243Other
      selling, general and administrative expenses
                    
                    
                    54,102
                    
                    
                    
                    46,849
                    
                    
                    
                    182,818
                    
                    
                    
                    202,111
                    
                    
                    
                    916,952Total
      operating expenses
                    
                    $
                    565,715
                    
                    
                    $
                    406,336
                    
                    
                    $
                    1,617,878
                    
                    
                    $
                    2,046,637
                    
                    
                    $
                    59,385,130LOSS
      FROM OPERATIONS
                    
                    $
                    (524,378
                    )
                    
                    $
                    (406,336
                    )
                    
                    $
                    (1,408,064
                    )
                    
                    $
                    (2,046,637
                    )
                    
                    $
                    (58,748,067
                    )OTHER
      INCOME AND (EXPENSE):Derivative
      gain/(loss)
                    
                    $
                    (9,211,930
                    )
                    
                    $
                    1,235,262
                    
                    
                    $
                    (9,368,581
                    )
                    
                    $
                    3,656,122
                    
                    
                    $
                    (2,345,608
                    )Gain
      on legal settlement
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    17,875
                    
                    
                    
                    36,764Interest
      income
                    
                    
                    -
                    
                    
                    
                    1,247
                    
                    
                    
                    -
                    
                    
                    
                    1,822
                    
                    
                    
                    7,867Gain/(loss)
      on conversion of financial instruments
                    
                    
                    (82,599
                    )
                    
                    
                    382,784
                    
                    
                    
                    (1,090,628
                    )
                    
                    
                    380,400
                    
                    
                    
                    918,768Mandatory
      prepayment penalty
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (420,000
                    )Other
      expense
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (194,886
                    )Interest
      expense
                    
                    
                    (53,662
                    )
                    
                    
                    (393,543
                    )
                    
                    
                    (368,497
                    )
                    
                    
                    (978,780
                    )
                    
                    
                    (5,630,905
                    )Total
      other income and (expense)
                    
                    $
                    (9,348,191
                    )
                    
                    $
                    1,225,750
                    
                    
                    $
                    (10,827,706
                    )
                    
                    $
                    3,077,439
                    
                    
                    $
                    (7,628,000
                    )NET
      INCOME/(LOSS)
                    
                    $
                    (9,872,569
                    )
                    
                    $
                    819,414
                    
                    
                    $
                    (12,235,770
                    )
                    
                    $
                    1,030,802
                    
                    
                    $
                    (66,376,067
                    )Deemed
      dividend
                    
                    $
                    (13,012
                    )
                    
                    
                    -
                    
                    
                    $
                    (47,115
                    )
                    
                    $
                    (12,071
                    )
                    
                    $
                    (76,821
                    )Net
      income/(loss) attributable to common stockholders
                    
                    $
                    (9,885,581
                    )
                    
                    $
                    819,414
                    
                    
                    $
                    (12,282,885
                    )
                    
                    $
                    1,018,731
                    
                    
                    $
                    (66,452,888
                    )Net
      income/(loss) per share – basic and diluted
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.04
                    )
                    
                    $
                    0.01Weighted
      average number of shares outstanding
                    
                    
                    385,487,654
                    
                    
                    
                    148,543,647
                    
                    
                    
                    307,723,354
                    
                    
                    
                    136,364,780








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




6


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


STATEMENT
OF STOCKHOLDERS’ DEFICIT


(Unaudited)





Common
      Stock
                                
                                
                                Preferred
      StockShares
                                
                                
                                Par
      Value
                                
                                
                                Shares
                                
                                
                                Par
      Value
                                
                                
                                Addt'l
      Paid In Capital
                                
                                
                                Other
      Equity Items(1)
                                
                                
                                Retained
      Deficit
                                
                                
                                TotalBalances
      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
                                )
                                
                                $
                                2,562,751Issued
      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
                                )
                                
                                
                                -
                                
                                
                                
                                4,320,000Issued
      shares for acquisition of equipment
                                
                                
                                
                                15,000,000
                                
                                
                                
                                15,000
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                13,485,000
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                13,500,000Stock
      option expense
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                626,100
                                
                                
                                
                                (626,100
                                )
                                
                                
                                -
                                
                                
                                
                                -Issued
      shares for cash
                                
                                
                                
                                242,167
                                
                                
                                
                                242
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                314,575
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                314,817Cancelled
      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
                                
                                
                                
                                -
                                
                                
                                
                                8,311,012Net
      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
                                )
                                
                                $
                                10,349,294Cancelled
      shares returned from employee
                                
                                
                                
                                (1,120,000
                                )
                                
                                
                                (1,120
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,307,855
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,308,975
                                )Issued
      shares for compensation
                                
                                
                                
                                140,000
                                
                                
                                
                                140
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                41,860
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                42,000Issued
      shares for services
                                
                                
                                
                                850,000
                                
                                
                                
                                850
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                155,150
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                156,000Amortize
      deferred compensation expense
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                13,222,517
                                
                                
                                
                                -
                                
                                
                                
                                13,222,517Net
      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




7


POWER 3
MEDICAL PRODUCTS, INC.


STATEMENT
OF STOCKHOLDERS’ DEFICIT


(Unaudited)


(Continued)





Common
      Stock
                            
                            
                            Preferred
      StockShares
                            
                            
                            Par
      Value
                            
                            
                            Shares
                            
                            
                            Par
      Value
                            
                            
                            Addt’l
      Paid In Capital
                            
                            
                            Other
      Equity Items(1)
                            
                            
                            Retained
      Deficit
                            
                            
                            TotalIssued
      shares for services
                            
                            
                            2,449,990
                            
                            
                            
                            2,449
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            311,865
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            314,314Issued
      shares for cash
                            
                            
                            2,452,746
                            
                            
                            
                            2,452
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            222,548
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            225,000Issued
      shares for compensation
                            
                            
                            1,253,098
                            
                            
                            
                            1,254
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            176,763
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            178,017Adoption
      of FAS 123R
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (475,324
                            )
                            
                            
                            475,324
                            
                            
                            
                            -
                            
                            
                            
                            -Amortize
      deferred compensation  expense
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            4,603,747
                            
                            
                            
                            -
                            
                            
                            
                            4,603,747Net
      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
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            284,200Issued
      shares for conversion of debt
                            
                            
                            22,265,224
                            
                            
                            
                            22,264
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            606,412
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            628,676Issued
      shares for warrants exercised
                            
                            
                            5,270,832
                            
                            
                            
                            5,272
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            336,396
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            341,668Issued
      shares for cash
                            
                            
                            7,630,625
                            
                            
                            
                            7,632
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            992,818
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,000,450Placement
      agent fees
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (58,500
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (58,500
                            )Stock
      received
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100Unreturned
      shares
                            
                            
                            5,000
                            
                            
                            
                            5
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            4,495
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            4,500Deemed
      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
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            592,341Issued
      shares for cash
                            
                            
                            7,492,875
                            
                            
                            
                            7,493
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            639,911
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            647,404Issued
      shares for conversion of debt
                            
                            
                            22,172,536
                            
                            
                            
                            22,173
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,568,626
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,590,799Issued
      shares for lawsuit settlement
                            
                            
                            325,000
                            
                            
                            
                            325
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            30,550
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            30,875Issued
      shares for payables
                            
                            
                            2,133,333
                            
                            
                            
                            2,133
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            186,867
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            189,000Stock
      held in escrow
                            
                            
                            2,000,000
                            
                            
                            
                            2,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            18,000
                            
                            
                            
                            (20,000
                            )
                            
                            
                            -
                            
                            
                            
                            -Issued
      preferred shares
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,500,000
                            
                            
                            
                            1,500
                            
                            
                            
                            357,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            358,500Deemed
      dividend
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            12,071
                            
                            
                            
                            -
                            
                            
                            
                            (12,071
                            )
                            
                            
                            -Loss
      on related party debt conversion
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (89,049
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (89,049
                            )Common
      stock payable
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            123,286
                            
                            
                            
                            -
                            
                            
                            
                            123,286Net
      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





8


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


STATEMENT
OF STOCKHOLDERS’ DEFICIT


(Unaudited)


(Continued)





Common
      Stock
                      
                      
                      Preferred
      StockShares
                      
                      
                      Par
      Value
                      
                      
                      Shares
                      
                      
                      Par
      Value
                      
                      
                      Addt’l
      Paid In Capital
                      
                      
                      Other
      Equity Items(1)
                      
                      
                      Retained
      Deficit
                      
                      
                      TotalBALANCE,
      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
                      
                      
                      130,299,070
                      
                      
                      
                      130,297
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,344,299
                      
                      
                      
                      87,056
                      
                      
                      
                      -
                      
                      
                      
                      2,561,652Common
      stock payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      57,750
                      
                      
                      
                      -
                      
                      
                      
                      57,750Issued
      shares upon exercise of warrants
                      
                      
                      8,015,924
                      
                      
                      
                      8,016
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      70,816
                      
                      
                      
                      (4,166
                      )
                      
                      
                      -
                      
                      
                      
                      74,666Stock
      contributed for debt payment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      276,558
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      276,558Issued
      shares for services
                      
                      
                      41,966,663
                      
                      
                      
                      41,966
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      671,036
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      713,002Issued
      shares for cash
                      
                      
                      35,801,314
                      
                      
                      
                      35,802
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      219,354
                      
                      
                      
                      (170,000
                      )
                      
                      
                      -
                      
                      
                      
                      85,156Issued
      shares for payables
                      
                      
                      30,746,105
                      
                      
                      
                      30,747
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      575,291
                      
                      
                      
                      (22,286
                      )
                      
                      
                      -
                      
                      
                      
                      583,752Stock
      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
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      47,115
                      
                      
                      
                      -
                      
                      
                      
                      (47,115
                      )
                      
                      
                      -Options
      issued for services
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      176,927
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      176,927Release
      of stock held in escrow
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      24,000
                      
                      
                      
                      -
                      
                      
                      
                      24,000Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (12,235,770
                      )
                      
                      
                      (12,235,770
                      )BALANCE,
      SEPTEMBER 30, 2009
                      
                      
                      394,788,366
                      
                      
                      $
                      394,788
                      
                      
                      
                      1,500,000
                      
                      
                      $
                      1,500
                      
                      
                      $
                      67,902,134
                      
                      
                      $
                      48,584
                      
                      
                      $
                      (81,515,311
                      )
                      
                      $
                      (13,168,305
                      )





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.





9


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


STATEMENT
OF STOCKHOLDERS’ DEFICIT


SCHEDULE
OF OTHER EQUITY ITEMS


(Unaudited)





Deferred
      Compensation Expense
                                          
                                          
                                          Stock
      Held in Escrow
                                          
                                          
                                          Common
      Stock Payable
                                          
                                          
                                          Treasury
      Stock
                                          
                                          
                                          Subscriptions
      Receivable
                                          
                                          
                                          Total
      Other Equity ItemsBalances
      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
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,311,012BALANCE,
      DECEMBER 31, 2004
                                          
                                          $
                                          (18,301,588
                                          )
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (18,301,588
                                          )Amortize
      deferred compensation expense
                                          
                                          
                                          13,222,517
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          13,222,517BALANCE,
      DECEMBER 31, 2005
                                          
                                          $
                                          (5,079,071
                                          )
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (5,079,071
                                          )Adoption
      of FAS 123R
                                          
                                          
                                          475,324
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          475,324Amortize
      deferred compensation expense
                                          
                                          
                                          4,603,747
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,603,747BALANCE,
      DECEMBER 31, 2006
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -BALANCE,
      DECEMBER 31, 2007
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -Stock
      held in escrow
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (20,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (20,000
                                          )Common
      stock payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          123,286
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          123,286BALANCE,
      DECEMBER 31, 2008
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (20,000
                                          )
                                          
                                          $
                                          123,286
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          103,286Issued
      shares for conversion of debt
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (90,000
                                          )
                                          
                                          
                                          7,056
                                          
                                          
                                          
                                          170,000
                                          
                                          
                                          
                                          87,056Common
      stock payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          57,750
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          57,750Issued
      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
                                          )Release
      of stock in escrow
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,000BALANCE,
      SEPTEMBER 30, 2009
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          68,750
                                          
                                          
                                          $
                                          (16,000
                                          )
                                          
                                          $
                                          (4,166
                                          )
                                          
                                          $
                                          48,584





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




10


POWER 3
MEDICAL PRODUCTS, INC.


(A
Development Stage Enterprise)


STATEMENTS
OF CASH FLOWS


(Unaudited)




Nine
      Months Ended September 30,
                      
                      
                      Period
      fromMay 18, 2004to
      September30,20092009
                      
                      
                      2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income/(loss)
                      
                      $
                      (12,235,770
                      )
                      
                      $
                      1,030,802
                      
                      
                      $
                      (66,376,067
                      )Adjustments
      to reconcile net income/(loss) to net cash used in operating
      activities:Gain/(loss)
      on conversion of financial instruments
                      
                      
                      1,090,628
                      
                      
                      
                      (380,400
                      )
                      
                      
                      (915,616
                      )Impairment
      of goodwill
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      13,371,776Impairment
      of intangible assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      179,788Loss
      on previously capitalized lease
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      34,243Amortization
      of debt discounts and deferred finance costs
                      
                      
                      234,021
                      
                      
                      
                      774,238
                      
                      
                      
                      3,959,451Change
      in derivative liability, net of bifurcation
                      
                      
                      9,368,581
                      
                      
                      
                      (3,656,122
                      )
                      
                      
                      3,499,509Stock
      based compensation
                      
                      
                      947,679
                      
                      
                      
                      576,341
                      
                      
                      
                      34,318,351Debt
      issued for compensation and services
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,028,927Stock
      issued for settlement of lawsuit
                      
                      
                      -
                      
                      
                      
                      30,875
                      
                      
                      
                      30,875Depreciation
      expense
                      
                      
                      12,008
                      
                      
                      
                      1,744
                      
                      
                      
                      113,262Release
      of stock held in escrow
                      
                      
                      24,000
                      
                      
                      
                      -
                      
                      
                      
                      24,000Other
      non cash items
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (34,933
                      )Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
                      
                      
                      (1,431
                      )
                      
                      
                      (14,384
                      )
                      
                      
                      184,653Inventory
      and other assets
                      
                      
                      (254
                      )
                      
                      
                      -
                      
                      
                      
                      16,348Accounts
      payable and other liabilities
                      
                      
                      413,256
                      
                      
                      
                      343,470
                      
                      
                      
                      3,586,514Net
      cash used in operating activities
                      
                      
                      (147,282
                      )
                      
                      
                      (1,293,436
                      )
                      
                      
                      (6,978,919
                      )CASH
      FLOWS FROM INVESTING ACTIVITIESCapital
      expenditures, net
                      
                      
                      (52,500
                      )
                      
                      
                      (2,797
                      )
                      
                      
                      (194,250
                      )Increase
      in other assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (179,786
                      )Net
      cash used in investing activities
                      
                      
                      (52,500
                      )
                      
                      
                      (2,797
                      )
                      
                      
                      (374,036
                      )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from sale of common stock
                      
                      
                      85,156
                      
                      
                      
                      647,404
                      
                      
                      
                      2,349,327Borrowings
      on notes payable related party
                      
                      
                      20,000 -
                      
                      
                      
                      45,000
                      
                      
                      
                      95,376Borrowings
      on notes payable
                      
                      
                      50,000
                      
                      
                      
                      600,000
                      
                      
                      
                      3,838,430Principal
      payments on notes payable related party
                      
                      
                      -
                      
                      
                      
                      (30,000
                      )
                      
                      
                      (47,300
                      )Principal
      payments on notes payable
                      
                      
                      -
                      
                      
                      
                      (90,000
                      )
                      
                      
                      (122,478
                      )Proceeds
      from CD, warrants and rights net of issuance cost
                      
                      
                      74,666
                      
                      
                      
                      -
                      
                      
                      
                      1,275,375Net
      cash provided by financing activities
                      
                      
                      229,822
                      
                      
                      
                      1,172,404
                      
                      
                      
                      7,388,730Net
      change in cash and equivalents
                      
                      $
                      30,040
                      
                      
                      $
                      (123,829
                      )
                      
                      $
                      35,775Cash
      and equivalents, beginning of period
                      
                      $
                      8,331
                      
                      
                      $
                      125,679
                      
                      
                      $
                      2,596Cash
      and equivalents, end of period
                      
                      $
                      38,371
                      
                      
                      $
                      1,850
                      
                      
                      $
                      38,371





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




11


POWER 3
MEDICAL PRODUCTS, INC.


STATEMENTS
OF CASH FLOWS


(Unaudited)




Nine
      Months Ended September 30,
                                                              
                                                              
                                                              Period
      fromMay 18, 2004to
      September30,20092009
                                                              
                                                              
                                                              2008SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      paid for interest
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              59,840Cash
      paid for income taxes
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -Non-cash
      transactions:Stock
      for conversion of debt, related party
                                                              
                                                              $
                                                              1,047,794
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              2,062,727Warrants
      exercised for subscriptions receivable
                                                              
                                                              $
                                                              4,166
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              4,166Stock
      for common stock payable
                                                              
                                                              $
                                                              112,286
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              112,286Exchange
      of debt, related party
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              214,075Exchange
      of convertible notes for stock
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              1,995,894
                                                              
                                                              
                                                              $
                                                              2,525,070Stock
      issued in settlement of payables
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              175,000
                                                              
                                                              
                                                              $
                                                              195,697Deemed
      dividend
                                                              
                                                              $
                                                              47,115
                                                              
                                                              
                                                              $
                                                              12,071
                                                              
                                                              
                                                              $
                                                              76,821Exchange
      of convertible preferred stock for common stock
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              3,380,975Preferred
      stock issued for payables
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              360,000
                                                              
                                                              
                                                              $
                                                              358,500Stock
      held in escrow
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              190,000
                                                              
                                                              
                                                              $
                                                              20,000Stock
      contributed for debt payment
                                                              
                                                              $
                                                              276,558
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              276,558Return
      of stock held in escrow
                                                              
                                                              $
                                                              16,800
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              16,800Cashless
      exercise of warrants
                                                              
                                                              $
                                                              133
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              133Stock
      rescinded for debt
                                                              
                                                              $
                                                              8,256
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              8,256










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




12


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. (“Power3”, the “Company,” “we” and “us”) 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 (who has
since been appointed a Director) 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 September 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.




13


Concentration
of Credit Risk


Our
revenues generated from the license agreement with Transgenomic, Inc. accounted
for nearly 100% of our total revenues during the nine months ended September 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 value 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 nine
months ended September 30, 2009 and 2008 as the effect of our potential common
stock equivalents would be anti-dilutive.




Stock
Based Compensation


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.





For the
nine months ended September 30, 2009, we recorded compensation expense of
approximately $204,000 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 September 30, 2009, there was approximately
$213,000 of unrecognized compensation expense related to the unvested restricted
stock award, which is expected to be recognized over a weighted average period
of approximately three years.





14


The fair
value of the option granted to an employee during 2009 was estimated on its
respective grant date using the Black-Scholes pricing model.  The
Black-Scholes pricing 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 $12,282,885 for the nine months ended September 30, 2009
and has total accumulated deficits of $81,515,311 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 September 30, 2009, Power3 had $38,371 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.  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
additional capital sufficient 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.




NOTE
4 – OTHER CURRENT LIABILITIES




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





September
      30, 2009
                  
                  
                  December
      31, 2008Accrued
      rent
                  
                  $
                  -
                  
                  
                  $
                  28,566Accrued
      interest
                  
                  
                  294,149
                  
                  
                  
                  335,033Prepayment
      penalty
                  
                  
                  -
                  
                  
                  
                  25,000Accrued
      payroll taxes
                  
                  
                  17,608
                  
                  
                  
                  44,347Accrued
      liabilities
                  
                  
                  44,939
                  
                  
                  
                  33,575Salaries
      payable
                  
                  
                  165,225
                  
                  
                  
                  150,965Total
                  
                  $
                  521,921
                  
                  
                  $
                  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.





15


Also as
is more fully explained in Note 7, we received 1,200,000 shares of common stock
for cancellation 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).  During the
quarter ended September 30, 2009, we clarified with our President that the issue
of 46,910,896 shares of common stock on March 2, 2009 included the settlement of
principal and interest on this convertible note payable along with other notes
issued to him.





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 and a warrant to purchase 10,000,000 shares of common stock at
$0.02 per share to our Chief Financial Officer.





Also as
is more fully explained in Note 7, during the nine months ended September 30,
2009, the holders of convertible debt of $268,678 and accrued interest of
$25,717 clarified the previous conversion of such debt.  Net of the
debt discount of $51,985 remaining at the date of clarification, we recorded a
gain on retirement of $242,410 which was recorded as an increase of additional
paid in capital.





Also as
is more fully explained in Note 7, during the nine months ended September 30,
2009, the Company clarified the settlement of $170,000 of subscriptions
receivable.  We recorded a loss on settlement of $170,000 which was
recorded as a reduction of additional paid in capital.




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, and the Company settled the debt on August 31,
2009.





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.  As of September 30, 2009, we are current
with our payments.





On
September 28, 2009, Ms. McCormick exercised the option to convert a $30,000 note
plus interest into common shares of the Company’s common stock.  The
Company disputes the amount due to Ms. McCormick under the note.  The
Company carries the full amount of the note on the Balance Sheet included in
convertible debentures-related party.  As of November 16, 2009, the
Company has not converted the note.  We are aware that Ms. McCormick
has engaged an attorney to represent her interests in connection with the
matter.




16


NOTE
7 - EQUITY




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




Capital
Stock Transactions


As of
December 31, 2008, we had 149,959,290 shares of common stock issued and
outstanding.  During the nine months ended September 30, 2009, we
undertook the following transactions involving 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 shares of
common stock a revision in the terms of the warrants from an exercise price of
$0.98 per share to an exercise price of $0.01 per share in connection with the
immediate exercise of such warrant.  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 common shares to an accredited investor for
a subscription of $80,000.  During the quarter ended September 30,
2009, we clarified with the investor that the shares issued were in settlement
of notes payable in the amount totaling $80,000 with interest payable at 12% and
a subscription in the amount of $10,000.  The notes and subscription
receivable were retired at September 30, 2009.





Also on
March 2, 2009, we issued 11,252,381 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
$190,166.





Also on
March 2, 2009, we issued 12,857,143 common shares to an accredited investor for
a subscription of $90,000.  On October 13, 2009, we clarified with the
investor that the shares issued were in settlement of notes payable in the
amount totaling $80,000 with interest payable at 12% and a subscription in the
amount of $10,000.  The notes and subscription receivable were retired at
September 30, 2009.





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.





17


Also on
March 2, 2009, we issued 2,857,143 common shares to an accredited investor who
subscribed to our common stock in 2008 for $20,000 in cash.





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 issuance 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
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.





Also 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 per share to an exercise price of $0.01 per share.  The
re-pricing was done in order to encourage the holder to exercise the warrant,
which exercise was affected immediately subsequent to such
re-pricing.  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 3,333,333 warrants to purchase common
stock a revision in the terms of the warrants from an exercise price of $0.10
per share to an exercise price of $0.01 per share.  The re-pricing was
done in order to encourage the holder to exercise the warrant, which exercise
was affected immediately subsequent to such re-pricing. 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.





Also 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 per share to an exercise price of $0.01 per share.  The
re-pricing was done in order to encourage the holder to exercise the warrant,
which exercise was affected immediately subsequent to such
re-pricing.  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”.





Also 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 per share to an exercise price of $0.01 per share.  The
re-pricing was done in order to encourage the holder to exercise the warrant,
which exercise was affected immediately subsequent to such
re-pricing.  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.





18


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 issuance 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 issuance 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 issuance 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 issuance date and included
$10,000 of professional fees in “Professional and consulting fees”.





Also on
April 24, 2009, we issued 12,500,000 shares to a consultant pursuant to a
consulting agreement.  We valued the shares on the issuance 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 issuance 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
issuance 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
issuance 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 issuance
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 issuance date, $0.02, or $20,594 and included the resulting $2,471
loss as an increase of “loss on settlement of debt”.





Also 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 issuance 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 issuance
date, $0.02, or $16,980 and included the resulting $6,028 loss as an increase of
“loss on settlement of debt”.





19


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
issuance date, $0.02, or $10,000 and included the resulting $5,000 loss as an
increase of “loss on settlement of debt”.





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 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 issuance date, $0.02 per share, or $30,000 and included the resulting
$15,000 loss as an increase of “loss on settlement of debt”.





Also 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 issuance date, $0.02, or $7,934 and included the resulting $3,967
loss as an increase of “loss on settlement of debt”.





Also 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 issuance 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 issuance
date, $0.02, or $148,451 and included the resulting $52,849 loss as an increase
of “loss on settlement of debt”.





Also 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 issuance
date, $0.02, or $15,613 and included the resulting $5,613 loss as an increase of
“loss on settlement of debt”.





Also 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 issuance 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 $8,000 of liability at December 31, 2008 which was included in
“common stock payable”.





Also 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 issuance date, $0.02, or
$240,000.  These shares vest in three equal annual installments,
beginning June 1, 2010.  We recorded $20,000 and $26,668 in
“employment compensation and benefits” for the three months and nine months
ended September 30, 2009, respectively, in connection with the vesting of the
two installments.  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.





Also 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 nine months ended September 30,
2009.  The fair value of the option granted was estimated on its
respective grant date using the Black-Scholes pricing model.  The
Black-Scholes pricing 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.





20


On June
9, 2009 we issued 6,000,000 common shares to an accredited investor in
consideration for $30,000.





On June
11, 2009, we issued 500,000 common shares to an accredited investor in
consideration for $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.





On July
1, 2009, we issued 8,333,300 common shares to retire a convertible note in the
amount of $83,333 and accrued interest of $21,469.  The excess of the
shares issued were to retire accrued interest and mandatory prepayment
penalties.  We recorded a loss on conversion of $1,930.





Also on
July 1, 2009, we issued 92,592 shares of common stock to a holder of a warrant
to purchase 208,333 shares of common stock, pursuant to a cashless exercise
feature of the warrant.





Also on
July 1, 2009, we issued 833,330 shares of common stock to a consultant pursuant
to a placement agent agreement.  We valued the shares on the issuance
date and included $16,667 of professional fees in “professional and consulting
fees”.





Also on
July 1, 2009, we issued 40,000 shares of common stock to a holder of a warrant
to purchase 90,000 shares of common stock, pursuant to a cashless exercise
feature of the warrant.





On July
6, 2009, we issued 528,446 shares of common stock to a consultant to settle an
outstanding invoice of $7,821.  We recorded these shares at the fair
value on the issuance date, $0.02 per share, or $10,569 and included the
resulting $2,748 loss as an increase of “loss on settlement of
debt”.





On July
9, 2009, we issued 5,000,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $100,000 of professional fees in “professional and consulting
fees”.





On July
24, 2009, we issued 500,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $5,000 of professional fees in “professional and consulting
fees”.





On August
13, 2009, we issued 1,000,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $10,000 of professional fees in “Professional and consulting
fees”.





On August
19, 2009, we issued 1,000,000 common shares to retire a convertible note in the
amount of $30,000 and accrued interest of $2,841.  Per the terms of
the conversion feature of the note, the principal balance was convertible into
1,000,000 shares.  We recorded a gain on conversion of
$947.





On August
20, 2009, we issued 500,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $10,000 of professional fees in “professional and consulting
fees”.





Also on
August 20, 2009, we issued 1,000,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $20,000 of professional fees in “professional and consulting
fees”.





On August
26, 2009, we issued 515,600 shares of common stock to an accredited investor in
consideration for $5,156.




21


Also on
August 26, 2009, we issued 500,000 shares of common stock to a consultant to
settle an outstanding invoice of $12,500.  We recorded these shares at
the fair value on the issuance date, $0.03 per share, or $15,000 and included
the resulting $2,500 loss as an increase of “loss on settlement of
debt”.





On
September 3, 2009, we issued 500,000 shares of common stock to a consultant for
consulting services.  We valued the shares on the issuance date and
included $40,000 of professional fees in “professional and consulting
fees”.





Also on
September 3, 2009, we issued 2,500,000 shares of common stock to an accredited
investor in consideration for $25,000.





On
September 10, 2009, we issued 2,000,000 shares of common stock to an accredited
investor in consideration for $20,000.





Also on
September 10, 2009, we granted a holder of 1,000,000 warrants to purchase shares
of common stock a revision in the terms of the warrants from an exercise price
of $0.08 per share to an exercise price of $0.01 per share.  The
re-pricing was done in order to encourage the holder to exercise the warrant,
which exercise was affected immediately subsequent to such
re-pricing.  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: $0.03; exercise price
of options: $0.08 (old) and $0.01 (new); option term: 0.25 years; discount rate:
0.15% and computed volatility: 153.16%.  We deemed this revaluation as
a dividend in the amount of $13,012.  The exercise entitles the
Company to receive $10,000 in cash, which was received from the holder on
September 9, 2009. We then issued 1,000,000 shares of common stock to the holder
upon the exercise of the revised warrant.





Also on
September 10, 2009, we issued 1,800,000 shares of common stock to a consultant
pursuant to a placement agent agreement.  We valued the shares on the
issuance date and included $108,000 of professional fees in “professional and
consulting fees”.





In order
to obtain bridge loan financing for the Company with Able in June and July,
2008, Steven B. Rash, the Company’s former Chief Executive Officer pledged
12,548,369 shares of Power3 common stock and 1,500,000 shares of Power3
preferred stock that he owned personally, as collateral for the bridge loans
obtained.  During the nine months ended September 30, 2009, Able
applied the net proceeds of $244,417 from the sale of the common shares to
retire a portion of the principal and accrued interest on the
notes.  During the three months ended September 30, 2009, the
preferred stock were converted to common stock at a 1:1 ratio, and the resulting
1,500,000 common shares were sold by Able, with the net proceeds of $32,141
applied to retire a portion of the principal and accrued interest on the
notes.  The net proceeds were treated as an addition to additional
paid in capital.





At
September 30, 2009, the Company owed 3,291,667 shares of common stock for
consulting services under the terms of a consulting agreement between the
Company and Dr. Lourdes Bosquez.  The shares are valued based on the
closing price at the date they became due.  The total value of these shares
is $58,750, which is presented as a stock payable on the balance
sheet.





At
September 30, 2009, the Company owed 500,000 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 and Director.  The shares are
valued based on the closing price on the date they became due.  The total
value of these shares is $10,000, which is presented as a stock payable on the
balance sheet.





NOTE
8 – FINANCING ARRANGEMENTS AND DERIVATIVE LIABILITIES




New
Borrowings


During
the nine months ended September 30, 2009, we received $20,000 in cash from two
existing creditors.  As is more fully explained in Note 7, we
clarified with these creditors that these amounts were retired at September 30,
2009.





Also, we
received $50,000 in cash from two additional creditors.  An 8% note
for $25,000 is due February 26, 2010, and an 8% note for $25,000 is due March 3,
2010.




22


Derivative
Liabilities


Our
derivative liabilities increased from $1,352,247 at December 31, 2008 to
$10,779,084 at September 30, 2009, primarily due to the increase in our stock
price during September 2009, resulting in a loss of $9,252,434 on derivative
liabilities.





Some of
our warrants contain a reset provision which was triggered when we granted
warrants at $0.01 per share, which was below the strike price of those
previously outstanding warrants during March 2009.  The amount of
increase in liabilities due to these reset features was $116,147.





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





September
      30, 2009
                  
                  
                  December
      31, 2008Common
      stock warrants
                  
                  $
                  7,986,269
                  
                  
                  $
                  554,637Embedded
      conversion features
                  
                  
                  2,792,815
                  
                  
                  
                  778,178Other
      derivative instruments
                  
                  
                  -
                  
                  
                  
                  19,432Total
                  
                  $
                  10,779,084
                  
                  
                  $
                  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. (“Transgenomic”).  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 nine months ended September 30, 2009, we recorded revenues of $209,109
relating to this agreement which includes the $100,000 up-front license
execution fee.




NOTE
10 – SUBSEQUENT EVENTS




Subsequent
to September 30, 2009, we issued 5,868,750 unrestricted shares of common stock
under our stock incentive plan to contractors for services rendered and
5,728,455 restricted shares of common stock for services rendered.





23


On
October 20, 2009, Bach Farms, LLC notified the Company of its intention to
exercise their warrant to acquire 4,167 shares of the Company’s common stock for
$42.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 20, 20009, Sage Capital Investments notified the Company of its
intention to exercise their warrant to acquire 62,500 shares of the Company’s
common stock for $625.  As of this date, the exercise has not been
fulfilled by the Company.





On
October 20, 2009, Mohawk Funding LLC notified the Company of its intention to
exercise their warrant to acquire 25,000 shares of the Company’s common stock
for $250.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 28, 2009, Rockmore Investment Master Fund notified the Company of its
intention for a cashless exercise of their warrant to acquire 23,756 shares of
the Company’s common stock pursuant to the cashless exercise feature of the
warrant.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 29, 2009, the Company and Dr. Lourdes Bosquez, agreed to a modification
of the exercise price of an aggregate of 13,318,682 warrants to purchase common
stock previously at an exercise price of $0.04 per share to an exercise price of
$0.053 per share, and Dr. Bosquez subsequently exercised warrants to purchase
3,773,585 common shares for aggregate consideration of $200,000.





On
November 12, 2009, Roger Kazanowski notified the Company of his intention for a
cashless exercise of his warrants to acquire 5,000,000 shares of the Company’s
common stock pursuant to the cashless exercise feature of the
warrant.  As of this date, the exercise has not been fulfilled by the
Company.The Company
currently has an ongoing dispute with the warrant holder regarding issues
surrounding the warrant holder’s beneficial ownership of the Company’s
securities among other matters, and as a result, has not accepted the warrant
exercise to date.





On
November 12, 2009, Marion McCormick notified the Company of her intention for a
cashless exercise of her warrants to acquire 466,667 shares of the Company’s
common stock pursuant to the cashless exercise feature of the
warrant.  As of this date, the exercise has not been fulfilled by the
Company.





There are
no additional subsequent events to report through November 16, 2009, the date
the financial statements were issued.





24




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. (“Power3”, the “Company”, “we” and “us”) 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 (who has since been appointed as a Director) 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 our number of
employees.





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 (which is
retroactively reflected throughout this report, unless otherwise indicated) and
changed our name from Surgical Safety Products, Inc. to Power3 Medical Products,
Inc.




25


Results
of Operations For the Three and Nine Months Ended September 30, 2009, Compared
to The Three and Nine Months Ended September 30, 2008




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 during the three months ended September 30,
2009.   Total revenues were $41,337 and $209,814 for the three
and nine months ended September 30, 2009, respectively.  We had no
revenues in the same periods in 2008.




Operating
Expenses


Employee
compensation was reduced $347,127 or 46.9% from $740,850 for the nine months
ended September 30, 2008 to $393,723 for the same period in 2009, as we replaced
our employees with contractors and significantly reduced
headcount.  Employee compensation similarly decreased $96,516 or 45.1%
from $213,945 for the three months ended September 30, 2008 to $117,429 for the
same period in 2009.





Professional
and consulting fees, mostly resulting from costs associated with our statutory
filings and strategic funding initiatives, increased $275,750 or 258.2% and
$89,593 or 9.8%, respectively, from $106,783 and $918,275 for the three and nine
months ended September 30, 2008, respectively to $382,533 and $1,007,868 for the
same three and nine month periods in 2009.





Occupancy
and equipment was also substantially reduced by $25,585 or 75.3% and $74,399 or
73%, respectively, due to our scaling back of our office space in 2009; from
$33,997 and $101,937 for the three and nine months ended September 30, 2008,
respectively to $8,412 and $27,538 for the same three and nine month period
ended September 30, 2009, respectively.





Travel
and entertainment was also reduced $1,523 or 32% or $77,533 or 92.9%,
respectively, from $4,762 and $83,464 for the three and nine months ended
September 30, 2008, respectively to $3,239 and $5,931 for the three and nine
months ended September 30, 2009, respectively, reflecting a more scaled back
operation in 2009 from that in 2008.  Similarly, general and
administrative expenses were reduced $19,293 or 9.5% from $202,111 for the nine
months ended September 30, 2008 versus $182,818 for the nine months ended
September 30, 2009, whereas general and administrative expenses increased $7,253
or 15.5% from $46,849 for the three months ended September 30, 2008 to $54,102
for the three months ended September 30, 2009.





Total
operating expenses increased $159,379 or 39.2% from $406,336 for the three
months ended September 30, 2008, compared to $565,715 for the three months ended
September 30, 2009.  Total operating expenses decreased $428,759 or
20.9% from $2,046,637 for the nine months ended September 30, 2008, compared to
$1,617,878 for the nine months ended September 30, 2009.




Other
Income and Expense


We had an
increase in derivative expense of $13,024,703 or 356.2% to an expense of
$9,368,581 for the nine months ended September 30, 2009, compared to a gain of
$3,656,122 for the nine months ended September 30, 2008.  We had an
increase in derivative expense of $10,447,192 or 845.7% to an expense of
$9,211,930 for the three months ended September 30, 2009, compared to a gain of
$1,235,262 for the three months ended September 30, 2008.  The
increased expense associated with our derivative liabilities resulted mostly
from an increase in our stock price from December 31, 2008 to September 30,
2009.  Additionally, we had an $82,599 loss and a loss of $1,090,678
for the three and nine months ended September 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
gains were $382,784 and $380,400, respectively.





Interest
expense decreased $339,881 or 86.4% and decreased $610,283 or 62.4%,
respectively, from $393,543 and $978,780 for the three and nine months ended
September 30, 2008, respectively to $53,662 and $368,497 for the same periods in
2009.  The decrease in interest expense was mainly due to the
reduction of the Company’s debt load.




26


Deemed
Dividends


Certain
of our warrants were re-priced during March and August 2009, resulting in a
deemed dividend charge to common shareholders of $47,115 for the nine months
ended September 30, 2009.   For the same period in 2008, we had
$12,071 of such deemed dividends.




Net
Income/ (Loss)


Our net
loss attributable to common shareholders for the three and nine months ended
September 30, 2009 was $9,885,581 and $12,282,885, respectively.  Our
net income attributable to common shareholders for the three months and nine
months ended September 30, 2008 was $819,414 and $1,018,731,
respectively.  The change was mainly 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.





We had
total assets of $98,896 as of September 30, 2009, consisting of current assets
consisting of cash and cash equivalents of $38,371, other current assets of
$8,076, and long-term assets consisting of furniture, fixtures and equipment net
of accumulated depreciation of $46,745 and deposits of $5,704.





We had
total liabilities of $13,267,201 as of September 30, 2009, consisting of current
liabilities including the following: accounts payable of $1,070,059; notes
payable which are in default of $451,000; notes payable to related parties of
$50,000, including a $15,000 note payable to our former Chief Executive Officer
and a $35,000 note payable to our former Chief Financial Officer; convertible
debentures of $361,247; convertible debentures to related parties of $27,721;
other current liabilities of $521,921; and, derivative liabilities of
$10,779,084.





We had
negative working capital of $13,220,754 and a total accumulated deficit of
$81,515,311 as of September 30, 2009.





Net cash
used in operating activities amounted to $147,282 for the nine months ended
September 30, 2009, compared to $1,293,436 of net cash used in operating
activities for the nine months ended September 30, 2008.  The change
in net cash used in operating activities during 2009 compared to net cash
provided by operating activities for 2008 was primarily due to changes in the
fair value of derivative liabilities, and net income for the nine months ended
September 30, 2008 compared to the significant net loss for the same period in
2009.





We had
$52,500 of net cash used in investing activities for the nine months ended
September 30, 2009, which was solely due to capital expenditures.





We had
net cash provided by financing activities of $229,822 for the nine months ended
September 30, 2009, which included $85,156 of proceeds from the sale of common
stock, $20,000 of borrowings on notes payable, $50,000 from proceeds from
certificate of deposit, and warrants and rights, net of issuance cost, of
$74,666.





As of
September 30, 2009, our principal source of liquidity was $38,371 in
cash.




27


Plan
of Operation and Cash Requirements


We
currently have minimal operating revenues from product sales and 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 first quarter of
2010, of which there can be no assurance.





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




Off
Balance Sheet Arrangements


None.




ITEM
3 - QUANTITATIVE 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.





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 September 30, 2009,
based on the criteria established in "Internal Control-Integrated Framework"
issued by the COSO.




28


Change
In Internal Control Over Financial Reporting


During
our review of our internal control over financial reporting for the period ended
September 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 nine months ended September 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) 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 (ii) 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 (“McLennon”) is
alleging unpaid legal services of approximately $115,000 plus interest and
costs.  We demurred to the complaint, and we expect McLennon to amend
their complaint to the breach of contract cause of action. We previously accrued
for this amount and it is carried in accounts payable at September 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 September 30, 2009.  We are
current on our payments to IS&T under this settlement to date.





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.  However on September 15, 2009, the lawsuit was
dismissed.





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, and the Company settled the debt on August 31,
2009.





29


On August
7, 2009, the Company reached an agreement with the Internal Revenue Service to
make monthly payments of $1,400 on a total of $85,100 of payroll taxes owed for
the tax periods of December 2005, June 2008, and September2008.  We
are current on our payments to the Internal Revenue Service under this
settlement to date.





On
September 28, 2009, Marion McCormick, former Chief Accounting Officer, exercised
the option to convert a $30,000 Note plus interest into common shares of the
Company’s stock.  The Company disputes the amount due to Ms. McCormick
under the Note.  The Company carries the full amount of the Note on
the Balance Sheet included in Convertible Debentures-Related
Party.  We are aware that Ms. McCormick has engaged an attorney to
represent her interests in connection with the matter.




ITEM
1A – RISK FACTORS




There
have been no material changes from the risk factors previously disclosed in the
Company’s Report on Form 10-K, filed with the Commission on April 15, 2009, and
investors are encouraged to review such risk factors before making an investment
in the Company.




ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES




On July
1, 2009, we issued 8,333,300 shares of our common stock upon conversion of
$83,333 of principal amount of a convertible note.  The issuance of
the common stock upon conversion of the convertible note was exempt from
registration under the Securities Act of 1933, as amended (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 July
1, 2009, we issued a total of 132,592 shares of our common stock in connection
with the exercise of two warrants to purchase 298,333 shares of our common stock
pursuant to a cashless exercise feature of the warrants.  The issuance
of the common stock in exchange for the warrants was exempt from registration
under the Securities Act, in reliance on the exemptions provided by Section 3(9)
of the Securities Act.





On July
1, 2009, we issued 833,330 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 $13,333 in consulting fees
due pursuant to a placement agent 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 August
19, 2009, we issued 1,000,000 shares of our common stock upon conversion of
$30,000 of principal amount of a 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
September 26, 2009, we issued 515,600 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
$5,156 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.





30


On
September 3, 2009, we issued 2,500,000 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
$25,000 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
September 10, 2009, we issued 2,000,000 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 $20,000 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
September 10, 2009, we granted an existing security holder warrants to purchase
1,000,000 shares of our common stock for $0.01 per share in exchange for
warrants to purchase an equal number of shares for $0.08 per share and the
holder’s agreement to exercise the new warrants for cash.  We then
issued 1,000,000 shares of our common stock to the existing security holder, who
we reasonably believe is an “accredited investor,” as such term is defined in
Rule 501 under the Securities Act, upon the exercise of the new warrants
for $10,000 in cash.  The grant of the warrants in exchange for the
existing warrants 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.  The offer and sale of the shares upon exercise of the
warrants 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
security holder 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
September 10, 2009, we issued 1,800,000 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 $108,000 in
consulting fees due pursuant to a placement agent 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.





In order
to obtain bridge loan financing for the Company with Able in June and July,
2008, Steven B. Rash, the Company’s former Chief Executive Officer pledged
12,548,369 shares of Power3 common stock and 1,500,000 shares of Power3
preferred stock that he owned personally, as collateral for the bridge loans
obtained.  During the nine months ended September 30, 2009, Able sold
the common shares and applied the net proceeds of $244,417 to retire a portion
of the principal and accrued interest on the notes.  During the three
months ended September 30, 2009, the preferred stock was converted into common
stock at a 1:1 ratio, and the resulting 1,500,000 common shares were sold by
Able, with the net proceeds of $32,142 applied to retire a portion of the
principal and accrued interest on the notes.  The net proceeds were
treated as an addition to additional paid in capital.





31


At
September 30, 2009, the Company owed 3,291,667 shares of common stock for
consulting services under the terms of a consulting agreement between the
Company and Dr. Lourdes Bosquez.  The shares are valued based on the
closing price at the date they became due.  The total value of these shares
is $58,750, which is presented as a stock payable on the balance
sheet.





At
September 30, 2009, the Company owed 500,000 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 and Director.  The shares are
valued based on the closing price on the date they became due.  The total
value of these shares is $10,000, which is presented as a stock payable on the
balance sheet.





Subsequent
to September 30, 2009, we issued 5,868,750 unrestricted shares of common stock
under our stock incentive plan to contractors for services rendered, 5,728,455
restricted shares of common stock for services rendered, and 2,000,000
restricted shares of common stock upon the exercise of warrants.





On
October 20, 2009, Bach Farms, LLC notified the Company of its intention to
exercise their warrant to acquire 4,167 shares of the Company’s common stock for
$42.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 20, 20009, Sage Capital Investments notified the Company of its
intention to exercise their warrant to acquire 62,500 shares of the Company’s
common stock for $625.  As of this date, the exercise has not been
fulfilled by the Company.





On
October 20, 2009, Mohawk Funding LLC notified the Company of its intention to
exercise their warrant to acquire 25,000 shares of the Company’s common stock
for $250.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 28, 2009, Rockmore Investment Master Fund notified the Company of its
intention for a cashless exercise of their warrant to acquire 23,756 shares of
the Company’s common stock pursuant to the cashless exercise feature of the
warrant.  As of this date, the exercise has not been fulfilled by the
Company.





On
October 29, 2009, the Company and Dr. Lourdes Bosquez, agreed to a modification
of the exercise price of an aggregate of 13,318,682 warrants to purchase common
stock previously at an exercise price of $0.04 per share to an exercise price of
$0.053 per share, and Dr. Bosquez subsequently exercised warrants to purchase
3,773,585 common shares for aggregate consideration of $200,000.





The offer
and sale of equity securities described above were made without registration
under the Securities Act in reliance on the exemptions provided by
Section 4(2) of the Securities Act.  No general solicitation or
general advertising was conducted in connection with the
issuances.  We disclosed 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 $29,482
in accrued interest.





32


We are in
default of principal and interest with respect to our 12% Note in the aggregate
principal amount of $251,000, and our 12% Note in the aggregate principal amount
of $200,000, held by Cordillera Fund L.P.





We are in
default of principal and interest with respect to our 16% Note in the aggregate
principal and interest amount of $72,176 as of September 30, 2009, held by Able
Income Fund LLC.




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




None.




ITEM
5 – OTHER INFORMATION





On July 10, 2009, the Board of Directors of the
Company appointed Helen R. Park as a director of the Company.  Ms.
Park fills the vacancy on the Board of Directors resulting from the resignation
of Steven B. Rash as a director of the Company effective September 3,
2008.





Ms. Park
has served as the Company’s Interim Chief Executive Officer since September 7,
2008.  Ms. Park also served as the Company’s Interim Chief Financial
Officer from December 12, 2008 through April 29, 2009.  Ms. Park has
an M.S. in Bio/Chemistry at Baylor College of Medicine with 40 plus years in
Science and Bio Technology business management.  She and Dr. Ira L.
Goldknopf, the President and previously the sole director of the Company,
co-founded Advanced Bio/Chem in 2000, and she served in various executive
positions, including Chief Executive Officer and Chairman of the Board with that
company through June 2004.  Ms. Park has been founder and CEO of
Bronco Technology Inc., a contracting and consulting firm for bio-technology
companies and institutions, including Bayer Services Technology, UTMD Anderson
Cancer Center, Flow Genix, UT Health Science Center, Agennix, and
Meta-Informatics, since 1994.  Ms. Park is also consulting on business
management reorganization with other bio-technology companies in the greater
Houston, Texas area.





On
September 7, 2008, the Company entered into a Consulting Agreement (the
“Agreement”) with Bronco Technology, Inc., under which Ms. Park served as the
Company’s Interim Chief Executive Officer through June 1, 2009.  Under
the terms of the Agreement, Bronco Technology was entitled to compensation for
providing the services of Ms. Park on a monthly basis with $5,000 in cash and
100,000 restricted shares of the Company’s common stock.  Effective
June 4, 2009, the Company issued Bronco Technology 2,560,908 restricted shares
of the Company’s common stock for $32,000 in cash due under the Agreement
through May 31, 2009, plus accrued interest, and 400,000 restricted shares of
the Company’s common stock for stock due under the Agreement through May 31,
2009, after which date the Consulting Agreement was amended.





On or
about November 18, 2008, Ms. Park received a convertible promissory note from
the Company with an initial principal amount of $150,000, convertible into
5,000,000 shares of the Company’s common stock, and warrants to purchase an
additional 5,000,000 shares of the Company’s common stock at $0.04 per
share.  The note and warrants were issued to Ms. Park as compensation
for services rendered by Ms. Park to the Company prior to her appointment as
Interim Chief Executive Officer.  On March 2, 2009, Ms. Park converted
the entire principal balance and accrued interest of the note into
9,571,429 shares of the Company’s common stock.





On June
1, 2009, the Company entered into an Amended and Restated Consulting Agreement
(the “Amended Agreement”) with Bronco Technology.  Under the terms of
the Amended Agreement, Bronco Technology is compensated for providing the
services of Ms. Park as the Company’s Interim Chief Executive Officer, through
May 31, 2011, with monthly cash payments of $8,334, subject to annual review by
the Company’s Board of Directors or compensation committee of the Board of
Directors, if any.  Under the Amended Agreement, Bronco Technology is
also entitled to receive cash commission payments of 1.0%, not to exceed $5,000
per month, based upon royalties received by the Company for certain of its
products through license agreements signed during the term of the Amended
Agreement.  The Amended Agreement also contains a non-disclosure and
non-use of proprietary information clause and a non-interference clause covering
the term of the agreement and for a period of five (5) years
thereafter.  Either party may terminate the Amended Agreement, either
with or without cause upon giving the other party at least thirty days
notice.





33


Ms. Park
is not a party to any arrangement or understanding with any other persons
pursuant to which she was selected as a director.





On
September 1, 2009, the Company entered into a Second Modification and
Ratification of Lease Agreement (the “Lease Modification”) with its
landlord.  Pursuant to the Lease Modification, the landlord and the
Company agreed to reduce the amount of leased space which the Company leases for
its principal executive offices, located at 3200 Research Forest Drive, The
Woodlands, Texas, from approximately 7,186 square feet to approximately 2,883
square feet; to extend the lease until June 30, 2010; and to provide for base
rent payable pursuant to the Lease Modification to be $4,296 per month during
the term of the lease.





On or
around September 10, 2009, the Company settled certain disputes it had with a
former financial consultant and the Company and former consultant agreed to
mutually release each other from any and all liability in connection with such
prior engagement in consideration for the issuance of 1,800,000 shares of our
common stock.  Additionally, in connection with the release, an
aggregate of 800,000 previously issued shares of the Company’s common stock
which were being held in escrow were returned to the Company for
cancellation.




ITEM
6 – EXHIBITS




Exhibit
      No.
                INDEX
      TO EXHIBITS10.1(1)
                Collaboration
      and Exclusive License Agreement by and between the registrant and
      Transgenomic, Inc., dated January 23, 2009 (excluding schedules and
      exhibits).10.2(1)
                Employment
      Agreement by and between the registrant and John P. Ginzler, dated as of
      May 1, 2009.10.3(1)
                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(1)
                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.





* Filed
herewith.


(1) Filed
as exhibits to the Company’s Form 10-Q Quarterly Report, filed with the
Commission on August 11, 2009, and incorporated herein by
reference.





34





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:
      November 16, 2009
                      By:
                      /s/ Helen
    ParkHelen
      ParkInterim
      Chief Executive Officer
  35