UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended:  March 31,
2010





or





 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF
  1934





For the
transition period from ___________ to ______________




Commission
File No. 000-24921





POWER3 MEDICAL PRODUCTS,
    INC.(Exact
      name of registrant as specified in its
charter)





New York
                    
                    65-0565144(State
      or other jurisdiction of
                      incorporation
      or organization)
                    
                    (IRS
      Employer
                      Identification
      No.)





3400 Research Forest Drive, Suite
      B2-3
                    The Woodlands, Texas
  77381(Address
      of Principal Executive
Offices)





(281) 466-1600(Issuer'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 1394 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   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes  x   No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
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 ̈
            Accelerated
      filer ̈Non-accelerated
      filer  ̈
            Smaller
      reporting company x(Do
      not check if a smaller reporting company)


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





Yes   ̈   No  x





APPLICABLE
ONLY TO ISSUERS INVOLVED IN


BANKRUPTCY
PROCEEDINGS DURING THE


PRECEDING
FIVE YEARS





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.





Yes   ̈   No   ̈





APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:  There were 427,797,313
shares of the issuer’s common stock, $0.001 par value per share, issued and
outstanding on May 10, 2010.





TABLE
OF CONTENTS





PagePART
      I – FINANCIAL INFORMATIONItem
      1.
                      Financial
      Statements
                      1Balance
      Sheets at March 31, 2010 (unaudited) and December 31, 2009
                      1Statements
      of Operations for the three months ended March 31, 2010 and 2009
      (unaudited)and
      the period beginning May 18, 2004 (date of entering development stage)
      through March 31, 2010 (unaudited)
                      2Statements
      of Stockholders’ Deficit for all years subsequent to May 18, 2004
      (inception)and
      the three months ended March 31, 2010 (unaudited)
                      3Statements
      of Stockholders’ Deficit – Other Equity Items for all years subsequent
      toMay
      18, 2004 (date of entering development stage) and the three months ended
      March 31, 2010 (unaudited)
                      4Statements
      of Cash Flows for the three months ended March 31, 2010 and 2009
      (unaudited)and
      the period beginning May 18, 2004 (date of entering development stage)
      through March 31, 2010 (unaudited)
                      5Notes
      to Financial Statements (unaudited)
                      6Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      17Item 4T.
                      Controls
      and Procedures
                      23PART
      II – OTHER INFORMATIONItem
      1.
                      Legal
      Proceedings
                      24Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      25Item
      3.
                      Defaults
      Upon Senior Securities
                      25Item
      6.
                      Exhibits
                      26


i


PART
I – FINANCIAL INFORMATION





Item
1.  Financial Statements.





Power3
Medical Products, Inc.
 (A
Development Stage Entity)
 Balance
Sheets
 
 March
      31,2010
                        
                        
                        December
      31,(Unaudited)
                        
                        
                        2009AssetsCash
      and equivalents
                        
                        $
                        8,130
                        
                        
                        $
                        -Other
      current assets
                        
                        
                        -
                        
                        
                        
                        -Total
      current assets
                        
                        
                        8,130
                        
                        
                        
                        -Property
      and equipment, net of accumulated depreciation of $108,264 and $107,581 at
      March 31, 2010 and December 31, 2009, respectively
                        
                        
                        -
                        
                        
                        
                        683Deposits
                        
                        
                        5,000
                        
                        
                        
                        5,000Other
      assets
                        
                        
                        100
                        
                        
                        
                        100Total
      assets
                        
                        $
                        13,230
                        
                        
                        $
                        5,783Liabilities
      and stockholder's deficitAccounts
      payable
                        
                        $
                        1,006,259
                        
                        
                        $
                        999,631Accounts
      payable – related party
                        
                        
                        124,175
                        
                        
                        
                        96,507Notes
      payable – in default
                        
                        
                        451,000
                        
                        
                        
                        451,000Notes
      payable – related parties
                        
                        
                        15,000
                        
                        
                        
                        15,000Convertible
      debentures – in default
                        
                        
                        351,381
                        
                        
                        
                        351,255Convertible
      debentures, net of unamortized discount of $-0- and $21,621 at March 31,
      2010 and December 31, 2009, respectively
                        
                        
                        50,000
                        
                        
                        
                        28,379Convertible
      debentures – related party
                        
                        
                        30,000
                        
                        
                        
                        30,000Derivative
      liabilities
                        
                        
                        3,752,729
                        
                        
                        
                        14,456,424Other
      current liabilities
                        
                        
                        649,413
                        
                        
                        
                        593,891Total
      current liabilities
                        
                        
                        6,429,957
                        
                        
                        
                        17,022,087Total
      liabilities
                        
                        
                        6,429,957
                        
                        
                        
                        17,022,087Stockholders'
      deficit:Preferred
      Stock – $0.01 par value: 50,000,000 shares authorized; 1,500,000 shares
      issued and outstanding as of March 31, 2010 and December 31, 2009,
      respectively
                        
                        
                        1,500
                        
                        
                        
                        1,500Common
      Stock – $0.001 par value: 600,000,000 shares authorized; 427,397,313 and
      434,167,000 shares issued and outstanding as of March 31, 2010 and
      December 31, 2009, respectively
                        
                        
                        427,397
                        
                        
                        
                        434,167Additional
      paid-in capital
                        
                        
                        72,393,594
                        
                        
                        
                        71,984,083Treasury
      stock
                        
                        
                        (16,000
                        )
                        
                        
                        (16,000
                        )Common
      stock payable
                        
                        
                        135,000
                        
                        
                        
                        135,000Deficit
      accumulated during development stage
                        
                        
                        (67,676,718
                        )
                        
                        
                        (77,873,554
                        )Deficit
      accumulated before entering development stage
                        
                        
                        (11,681,500
                        )
                        
                        
                        (11,681,500
                        )Total
      stockholders' deficit
                        
                        
                        (6,416,727
                        )
                        
                        
                        (17,016,304
                        )Total
      liabilities and stockholders' deficit
                        
                        $
                        13,230
                        
                        
                        $
                        5,783
 
 The
accompanying notes are an integral part of these financial
statements
  1
  Power3
Medical Products, Inc.
 (A
Development Stage Entity)
 Statements
of Operations (Unaudited)
 
 Period
      FromMay
      18, 2004For
      the Three Months Ended
                                      
                                      
                                      ThroughMarch 31,
                                      
                                      
                                      March
      31,2010
                                      
                                      
                                      2009
                                      
                                      
                                      2010Net
      revenue
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      100,000
                                      
                                      
                                      $
                                      542,249-Operating
      expenses:
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      -Employee
      compensation and benefits
                                      
                                      
                                      34,918
                                      
                                      
                                      
                                      17,557
                                      
                                      
                                      
                                      31,452,497Professional
      and consulting fees
                                      
                                      
                                      245,001
                                      
                                      
                                      
                                      80,817
                                      
                                      
                                      
                                      16,473,770Impairment
      of goodwill
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      13,371,776Other
      selling, general and administrative expenses
                                      
                                      
                                      177,742
                                      
                                      
                                      
                                      70,666
                                      
                                      
                                      
                                      2,364,063-Total
      operating expenses
                                      
                                      
                                      457,661
                                      
                                      
                                      
                                      169,040
                                      
                                      
                                      
                                      63,662,106-Loss
      from operations
                                      
                                      
                                      (457,661
                                      )
                                      
                                      
                                      (69,040
                                      )
                                      
                                      
                                      (63,119,857
                                      )Other
      income (expense):Derivative
      gain (loss)
                                      
                                      
                                      10,703,695
                                      
                                      
                                      
                                      (746,344
                                      )
                                      
                                      
                                      4,680,747Gain
      on legal settlement
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      36,764Interest
      income
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,867Gain
      (loss) on settlement of debt
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (883,734
                                      )
                                      
                                      
                                      1,582,872Interest
      expense
                                      
                                      
                                      (49,198
                                      )
                                      
                                      
                                      (177,096
                                      )
                                      
                                      
                                      (5,728,492
                                      )Mandatory
      prepayment penalty
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (420,000
                                      )Other
      income/(expense)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (194,886
                                      )Total
      other income/(expense)
                                      
                                      
                                      10,654,497
                                      
                                      
                                      
                                      (1,807,174
                                      )
                                      
                                      
                                      (35,128
                                      )Net
      income (loss)
                                      
                                      
                                      10,196,836
                                      
                                      
                                      
                                      (1,876,214
                                      )
                                      
                                      
                                      (63,154,985
                                      )Deemed
      dividend
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (34,103
                                      )
                                      
                                      
                                      (1,140,760
                                      )Net
      income (loss) attributable to common stockholders
                                      
                                      $
                                      10,196,836
                                      
                                      
                                      $
                                      (1,910,317
                                      )
                                      
                                      $
                                      (64,295,745
                                      )Net
      income (loss) per share - basic and diluted
                                      
                                      $
                                      0.02
                                      
                                      
                                      $
                                      (0.01
                                      )Weighted
      average number of shares outstanding - basic
                                      
                                      
                                      478,823,366
                                      
                                      
                                      
                                      200,466,378Weighted
      average number of shares outstanding - diluted
                                      
                                      
                                      500,029,456
                                      
                                      
                                      
                                      200,466,378
 
 The
accompanying notes are an integral part of these financial
statements
  2
  Power3
Medical Products, Inc.
 (A
Development Stage Entity)
 Statement
of Stockholders' Deficit (Unaudited)
 
 AdditionalCommon Stock
                                                        
                                                        
                                                        Preferred Stock
                                                        
                                                        
                                                        Paid-in
                                                        
                                                        
                                                        Other Equity
                                                        
                                                        
                                                        AccumulatedShares
                                                        
                                                        
                                                        Par Value
                                                        
                                                        
                                                        Shares
                                                        
                                                        
                                                        Par Value
                                                        
                                                        
                                                        Capital
                                                        
                                                        
                                                        Items (1)
                                                        
                                                        
                                                        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
                                                        )
                                                        
                                                        
                                                        2,562,751-Issued
      shares for compensation
                                                        
                                                        
                                                        27,945,000
                                                        
                                                        
                                                        
                                                        27,945
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        25,423,555
                                                        
                                                        
                                                        
                                                        (25,451,500
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Issued
      shares for services
                                                        
                                                        
                                                        4,910,000
                                                        
                                                        
                                                        
                                                        4,910
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        4,850,090
                                                        
                                                        
                                                        
                                                        (535,000
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        4,320,000Issued
      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 perferred 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 (from May 18, 2004 to December 31, 2004)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (15,236,339
                                                        )
                                                        
                                                        
                                                        (15,236,339
                                                        )Balance
      at 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
      at December 31, 2005
                                                        
                                                        
                                                        65,215,121
                                                        
                                                        
                                                        
                                                        65,215
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        57,773,506
                                                        
                                                        
                                                        
                                                        (5,079,071
                                                        )
                                                        
                                                        
                                                        (57,433,679
                                                        )
                                                        
                                                        
                                                        (4,674,029
                                                        )Issued
      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
      at 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
      at December 31, 2007
                                                        
                                                        
                                                        108,352,636
                                                        
                                                        
                                                        
                                                        108,353
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        60,191,104
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (69,083,571
                                                        )
                                                        
                                                        
                                                        (8,784,114
                                                        )Common
      stock issued for services
                                                        
                                                        
                                                        7,482,910
                                                        
                                                        
                                                        
                                                        7,483
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        584,858
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        592,341Common
      stock issued for cash
                                                        
                                                        
                                                        7,492,875
                                                        
                                                        
                                                        
                                                        7,493
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        639,911
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        647,404Common
      stock issued for conversion of debt
                                                        
                                                        
                                                        22,172,536
                                                        
                                                        
                                                        
                                                        22,173
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,568,626
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,590,799Common
      stock issued for lawsuit settlement
                                                        
                                                        
                                                        325,000
                                                        
                                                        
                                                        
                                                        325
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        30,550
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        30,875Issued
      shares for payables
                                                        
                                                        
                                                        2,133,333
                                                        
                                                        
                                                        
                                                        2,133
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        186,867
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        189,000Common
      stock held in escrow
                                                        
                                                        
                                                        2,000,000
                                                        
                                                        
                                                        
                                                        2,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        18,000
                                                        
                                                        
                                                        
                                                        (20,000
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Preferred
      stock issued for services
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,500,000
                                                        
                                                        
                                                        
                                                        1,500
                                                        
                                                        
                                                        
                                                        357,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        358,500Deemed
      dividends
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        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
      at December 31, 2008
                                                        
                                                        
                                                        149,959,290
                                                        
                                                        
                                                        
                                                        149,960
                                                        
                                                        
                                                        
                                                        1,500,000
                                                        
                                                        
                                                        
                                                        1,500
                                                        
                                                        
                                                        
                                                        63,499,938
                                                        
                                                        
                                                        
                                                        103,286
                                                        
                                                        
                                                        
                                                        (69,232,426
                                                        )
                                                        
                                                        
                                                        (5,477,742
                                                        )Common
      stock issued for conversion of debt
                                                        
                                                        
                                                        150,701,039
                                                        
                                                        
                                                        
                                                        150,701
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,154,621
                                                        
                                                        
                                                        
                                                        (82,944
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,222,378Common
      stock payable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        116,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        116,000Common
      stock issed upon exercise of warrants
                                                        
                                                        
                                                        11,789,509
                                                        
                                                        
                                                        
                                                        11,790
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        267,042
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        278,832Common
      stock issued for services
                                                        
                                                        
                                                        112,201,562
                                                        
                                                        
                                                        
                                                        112,201
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        4,403,503
                                                        
                                                        
                                                        
                                                        (14,286
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        4,501,418Common
      stock issued for cash
                                                        
                                                        
                                                        11,515,600
                                                        
                                                        
                                                        
                                                        11,516
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        73,640
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        85,156Return
      of common stock held in escrow
                                                        
                                                        
                                                        (800,000
                                                        )
                                                        
                                                        
                                                        (800
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        800
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Deemed
      dividends
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,111,054
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (1,111,054
                                                        )
                                                        
                                                        
                                                        -Release
      of common stock held in escrow
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        20,000
                                                        
                                                        
                                                        
                                                        4,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        24,000Common
      stock rescinded for debt
                                                        
                                                        
                                                        (1,200,000
                                                        )
                                                        
                                                        
                                                        (1,200
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (7,056
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (8,256
                                                        )Common
      stock contributed for debt payment
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        276,558
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        276,558Options
      issued for services
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        176,927
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        176,927Net
      loss
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (19,211,574
                                                        )
                                                        
                                                        
                                                        (19,211,574
                                                        )Balance
      at December 31, 2009
                                                        
                                                        
                                                        434,167,000
                                                        
                                                        
                                                        
                                                        434,167
                                                        
                                                        
                                                        
                                                        1,500,000
                                                        
                                                        
                                                        
                                                        1,500
                                                        
                                                        
                                                        
                                                        71,984,083
                                                        
                                                        
                                                        
                                                        119,000
                                                        
                                                        
                                                        
                                                        (89,555,054
                                                        )
                                                        
                                                        
                                                        (17,016,304
                                                        )Common
      stock issed upon exercise of warrants
                                                        
                                                        
                                                        4,425,166
                                                        
                                                        
                                                        
                                                        4,425
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        230,109
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        234,534Common
      stock issued for services
                                                        
                                                        
                                                        1,107,396
                                                        
                                                        
                                                        
                                                        1,107
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        97,100
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        98,207Vesting
      of common stock issued for services
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        70,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        70,000Common
      stock rescinded or canceled
                                                        
                                                        
                                                        (12,302,249
                                                        )
                                                        
                                                        
                                                        (12,302
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        12,302
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Net
      income
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        10,196,836
                                                        
                                                        
                                                        
                                                        10,196,836Balance
      at March 31, 2010
                                                        
                                                        
                                                        427,397,313
                                                        
                                                        
                                                        $
                                                        427,397
                                                        
                                                        
                                                        $
                                                        1,500,000
                                                        
                                                        
                                                        $
                                                        1,500
                                                        
                                                        
                                                        $
                                                        72,393,594
                                                        
                                                        
                                                        $
                                                        119,000
                                                        
                                                        
                                                        $
                                                        (79,358,218
                                                        )
                                                        
                                                        $
                                                        (6,416,727
                                                        )
 
 (1) A
more detailed description of the items comprising "Other Equity Items" is set
forth herein following this Statement of Stockholders' Deficit.
 
 The
accompanying notes are an integral part of these financial
statements
  3
  Power3
Medical Products, Inc.
 (A
Development Stage Entity)
 Statements
of Stockholders Deficit — Other Equity Items (Unaudited)
 
 Deferred
                                                            Compensation
                                                            Expense
                                                          
                                                          
                                                          Treasury
                                                            Stock
                                                          
                                                          
                                                          Stock Held
                                                            in Escrow
                                                          
                                                          
                                                          Common
                                                            Stock
                                                            Payable
                                                          
                                                          
                                                          TotalBalances
      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
                                                          )Stock
      based compensation
                                                          
                                                          
                                                          8,311,012
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          8,311,012Balance
      at December 31, 2004
                                                          
                                                          
                                                          (18,301,588
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (18,301,588
                                                          )Amortize
      deferred compensation expense
                                                          
                                                          
                                                          13,222,517
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          13,222,517Balance
      at 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
      at December 31, 2006
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Balance
      at December 31, 2007
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Stock
      held in escrow
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (20,000
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (20,000
                                                          )Common
      stock payable
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          123,286
                                                          
                                                          
                                                          
                                                          123,286Balance
      at December 31, 2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (20,000
                                                          )
                                                          
                                                          
                                                          123,286
                                                          
                                                          
                                                          
                                                          103,286Common
      stock issued for conversion of debt
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          7,056
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (90,000
                                                          )
                                                          
                                                          
                                                          (82,944
                                                          )Common
      stock payable
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          116,000
                                                          
                                                          
                                                          
                                                          116,000Common
      stock issued for services
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (14,286
                                                          )
                                                          
                                                          
                                                          (14,286
                                                          )Return
      of common stock held in escrow
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (16,000
                                                          )
                                                          
                                                          
                                                          16,000
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Release
      of common stock held in escrow
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          4,000
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          4,000Common
      stock rescinded for debt
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (7,056
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (7,056
                                                          )Balance
      at December 31, 2009
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (16,000
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          135,000
                                                          
                                                          
                                                          
                                                          119,000Balance
      at March 31, 2010
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          (16,000
                                                          )
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          135,000
                                                          
                                                          
                                                          $
                                                          119,000
 
 The
accompanying notes are an integral part of these financial
statements
  4
  Power3
Medical Products, Inc.
 (A
Development Stage Entity)
 Statements
of Cash Flows
 
 Period FromMay 18, 2004For the Three Months Ended
                      
                      
                      ThroughMarch 31,
                      
                      
                      March 31,2010
                      
                      
                      2009
                      
                      
                      2010(unaudited)Cash
      flows from operating activitiesNet
      income (loss)
                      
                      $
                      10,196,836
                      
                      
                      $
                      (1,876,214
                      )
                      
                      $
                      (63,154,985
                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:(Gain)
      loss on conversion of financial instruments
                      
                      
                      -
                      
                      
                      
                      854,988
                      
                      
                      
                      (1,579,670
                      )Impairment
      of goodwill
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      13,371,776Impairment
      of intangible assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      179,788Loss
      on previously capitalized lease
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      34,243Amortization
      of debt discounts and deferred finance costs
                      
                      
                      21,747
                      
                      
                      
                      146,532
                      
                      
                      
                      4,005,561Change
      in derivative liability, net of bifurcation
                      
                      
                      (10,703,695
                      )
                      
                      
                      746,344
                      
                      
                      
                      (3,526,846
                      )Stock
      issued for compensation and services
                      
                      
                      70,000
                      
                      
                      
                      69,071
                      
                      
                      
                      38,235,017Debt
      issued for compensation and services
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,028,927Stock
      issued for settlement of lawsuit
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      30,875Depreciation
      expense
                      
                      
                      683
                      
                      
                      
                      6,253
                      
                      
                      
                      108,265Release
      of stock held in escrow
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      24,000Other
      non-cash items
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (34,933
                      )Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      186,084Inventory
      and other assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      23,597Accounts
      payable and other liabilities
                      
                      
                      188,025
                      
                      
                      
                      (4,075
                      )
                      
                      
                      3,568,699Net
      cash used in operating activities
                      
                      
                      (226,404
                      )
                      
                      
                      (57,101
                      )
                      
                      
                      (7,499,602
                      )Cash
      flows from investing activitiesIncrease
      in property and equipment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (142,508
                      )Increase
      in other assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (179,786
                      )Net
      cash used in investing activities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (322,294
                      )Cash
      flows from financing activitiesProceeds
      from sale of common stock
                      
                      
                      -
                      
                      
                      
                      41,666
                      
                      
                      
                      2,349,327Borrowings
      on notes payable – related party
                      
                      
                      -
                      
                      
                      
                      8,256
                      
                      
                      
                      95,376Borrowings
      on notes payable
                      
                      
                      -
                      
                      
                      
                      20,000
                      
                      
                      
                      3,838,430Principal
      payments on notes payable – related party
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (47,300
                      )Principal
      payments on notes payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (122,478
                      )Proceeds
      from exercise of warrants
                      
                      
                      234,534
                      
                      
                      
                      -
                      
                      
                      
                      513,366Proceeds
      from CD, warrants and rights net of issuance cost
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,200,709Net
      cash provided by financing activities
                      
                      
                      234,534
                      
                      
                      
                      69,922
                      
                      
                      
                      7,827,430Net
      increase (decrease) in cash and equivalents
                      
                      
                      8,130
                      
                      
                      
                      12,821
                      
                      
                      
                      5,534Cash
      and equivalents, beginning of period
                      
                      
                      -
                      
                      
                      
                      8,331
                      
                      
                      
                      2,596Cash
      and equivalents, end of period
                      
                      $
                      8,130
                      
                      
                      $
                      21,152
                      
                      
                      $
                      8,130Supplemental
      disclosure of cash flow informationCash
      paid for interest
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      59,840Cash
      paid for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Schedule
      of non-cash financing activitiesStock
      for conversion of debt – related party
                      
                      
                      -
                      
                      
                      
                      661,101
                      
                      
                      
                      2,227,759Stock
      for subscriptions receivable
                      
                      
                      -
                      
                      
                      
                      170,000
                      
                      
                      
                      170,000Warrants
      exercised for subscriptions receivable
                      
                      
                      -
                      
                      
                      
                      27,166
                      
                      
                      
                      27,166Stock
      issued for common stock payable
                      
                      
                      -
                      
                      
                      
                      14,286
                      
                      
                      
                      14,286Exchange
      of debt – related party
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      214,075Exchange
      of convertible notes for stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,525,070Stock
      issued for settlement of payables
                      
                      
                      98,207
                      
                      
                      
                      55,238
                      
                      
                      
                      876,881Deemed
      dividend
                      
                      
                      -
                      
                      
                      
                      34,103
                      
                      
                      
                      1,140,760Exchange
      of convertible preferred stock for common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,380,975Preferred
      stock issued for payables
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      358,500Stock
      held in escrow
                      
                      
                      -
                      
                      
                      
                      20,000
                      
                      
                      
                      20,000Stock
      contributed for debt payment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      276,558Return
      of stock held in escrow
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      16,800Cashless
      exercise of warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      133Stock
      rescinded for debt
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      8,256Stock
      rescinded or canceled
                      
                      
                      12,302
                      
                      
                      
                      -
                      
                      
                      
                      12,302
 
 The
accompanying notes are an integral part of these  financial
statements
 
 5
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
 
 Note
1.  Description of Business
  Power3
Medical Products, Inc. (the “Company”) was incorporated in the State of Florida
as “Sheffield Acres, Inc.” on May 15, 1992, and merged into a New York
corporation named “Surgical Safety Products, Inc.” in 1994. On September 12,
2003, Surgical Safety Products, Inc. amended its Certificate of Incorporation to
change its name to “Power3 Medical Products, Inc.”  The Companybecame adevelopment stage company on May 18,
2004, when it completed the acquisition of certain intellectual property assets
from Advanced Bio/Chem, Inc. and began focusing on research and development
relating to those assets.  The Company currently focuses on the
development of its intellectual properties by focusing ondisease diagnosis, protein and biomarker
identification and early detection indicators in the areas of cancers,
neurodegenerative and neuromuscular diseases, as well as other scientific areas
of interest associated with protein biomarkers.
 
 The Company hasdeveloped a portfolio of products
including BC-SeraProTM, a proteomic blood serum test for the
early detection of breast cancer, and NuroPro®, a serum test for the detection of
neurodegenerative diseases including Alzheimer’s, Parkinson’s and ALS
diseases.  These products are designed to analyze proteins and their
mutations to assess an individual’s risk for developing disease later in life or
a patient’s likelihood of responding to a particular drug, assess a patient’s
risk of disease progression and disease recurrence, and measure a patient’s
exposure to drug therapy to ensure optimal dosing and reduced drug toxicity.Futureproducts and services are expected to
originate fromthe
Company’sinternal research
and development programs, collaborative efforts and alliances with third
parties, and acquisitions of complementary technologies and
businesses.  The Company intends to continue entering into
collaboration and licensing agreements with other biotechnology companies,
academic and research institutions, and other organizations that have the
ability to market and sell the Company’s products in return for licensing fees,
royalties and milestone payments.
  Note
2.  Basis of Presentation and Going Concern
 Basis of
Presentation
 The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and in conformity with the instructions to Form 10-Q and Article 8-03 of
Regulation S-X and the related rules and regulations of the Securities and
Exchange Commission (the “SEC”).  Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, the disclosures included in these financial
statements are adequate to make the information presented not
misleading.
  6
 POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
 The
unaudited financial statements included in this document have been prepared on
the same basis as the annual financial statements and in management’s opinion,
reflect all adjustments, including normal recurring adjustments, necessary to
present fairly the Company’s financial position, results of operations and cash
flows for the interim periods presented. The unaudited financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for the year ended December 31, 2009 included in the Company’s
Annual Report on Form 10-K.  The results of operations for the three
months ended March 31, 2010 are not necessarily indicative of the results that
the Company will have for any subsequent quarter or full fiscal
year.
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes.  Actual results could differ from
those estimates.  Certain amounts in the financial statements for 2009
have been reclassified to conform to the 2010 presentation.  These
reclassifications did not result in any change to the previously reported total
assets, net loss or stockholders’ deficit.
 
 As of
March 31, 2010, the Company’s significant accounting policies and estimates, and
applicable recent accounting policies, which are detailed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009, have not
changed materially.
  Going
Concern




The
Company’s financial statements have been prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business.  The Company has historically incurred
significant losses, which raises substantial doubt about the Company’s ability
to continue as a going concern.  The accompanying financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of this uncertainty.
  7
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
3.   Net Income (Loss) Per Share
 
 Basic
income (loss) per share is based on the weighted average number of shares of the
Company’s common stock outstanding during the applicable period, and is
calculated by dividing the reported net income (loss) for the applicable period
by the weighted average number of shares of common stock outstanding during the
applicable period.   The Company calculates diluted income (loss)
per share by dividing the reported net income (loss) for the applicable period
by the weighted average number of shares of common stock outstanding during the
applicable period as adjusted to give effect to the exercise of all potentially
dilutive warrants outstanding at the end of the period.
 
 A total
of 66,150,741 shares of common stock underlying warrants that were outstanding
on March 31, 2010 have been excluded from the computation of diluted earnings
per share for the three months ended March 31, 2010 because the exercise price
was greater than the average market price of the Company’s common stock during
the three months ended March 31, 2010. A total
of 46,461,539 shares of common stock underlying warrants that were outstanding
on March 31, 2010 have been included in the computation of diluted earnings per
share for the three months ended March 31, 2010 because the exercise price was
less than the average market price of the Company's common stock during the
three months ended March 31, 2010. Application of the treasury stock method
resulted in dilution of 21,206,090 shares of common stock, but had no effect on
net income per share.
  A total
of 80,985,078 shares of common stock underlying warrants that were outstanding
on March 31, 2009, have been excluded from the computation of diluted earnings
per share for the three months ended March 31, 2009 because they are
anti-dilutive.  As a result, basic loss per share was equal to diluted
loss per share for the three months Ended March 31, 2009.
 
 Note
4.  Property and Equipment
 
 Property
and equipment consisted of the following at March 31, 2010 and December 31,
2009:
 
 Asset
                    
                    March 31,
                      2010
                    
                    
                    December 31,
                      2009Computers
      and Related Devices
                    
                    $
                    15,884
                    
                    
                    $
                    15,884Less:
      Accumulated Depreciation
                    
                    
                    (15,884
                    )
                    
                    
                    (15,201
                    )Total
                    
                    
                    -0-
                    
                    
                    
                    683Lab
      Equipment
                    
                    
                    92,380
                    
                    
                    
                    92,380Less:  Accumulated
      Depreciation
                    
                    
                    (92,380
                    )
                    
                    
                    (92,380
                    )Total
                    
                    
                    -0-
                    
                    
                    
                    -0-Total
      Property and Equipment, Net
                    
                    $
                    -0-
                    
                    
                    $
                    683
  8
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
5.  Other Current Liabilities
 
 Other
current liabilities consisted of the following at March 31, 2010 and December
31, 2009:
 
 Liability
                    
                    March 31,
                      2010
                    
                    
                    December 31,
                      2009Accrued
      interest and interest payable
                    
                    
                    338,907
                    
                    
                    
                    312,252Accrued
      payroll taxes
                    
                    
                    22,364
                    
                    
                    
                    21,464Accrued
      compensation and salaries payable
                    
                    
                    286,331
                    
                    
                    
                    258,364Other
      accrued expenses and liabilities
                    
                    
                    1,811
                    
                    
                    
                    1,811Total
                    
                    $
                    649,413
                    
                    
                    $
                    593,891
 
 Note
6.  Derivative Liabilities
 
 The
Company’s derivative liabilities were $3,752,729 and $14,456,424 at March 31,
2010 and December 31, 2009, respectively. The Company recognized a gain of
$10,703,695 for derivative liabilities for the three months ended March 31, 2010
compared to a loss of $746,344 for derivative liabilities for the three months
ended March 31, 2009.  The derivative gain recognized during the three
months ended March 31, 2010 was due primarily to a decrease in the Company’s
stock price during 2010.
 
 The
components of derivative financial instruments on the Company’s balance sheet at
March 31, 2010 and December 31, 2009 is as follows:
 
 March 31,
                        2010
                      
                      
                      December 31,
                        2009Common
      stock warrants
                      
                      $
                      2,880,183
                      
                      
                      $
                      10,267,167Embedded
      conversion features – convertible promissory notes and
      debentures
                      
                      
                      872,546
                      
                      
                      
                      4,189,257Total
                      
                      $
                      3,752,729
                      
                      
                      $
                      14,456,424
  9
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
7.  Commitments and Contingencies
 
 In
September 2008, the Company entered into an Arbitration Agreement with Steven
Rash, the Company’s former Chief Executive Officer, in connection with his
agreement to resign as the Company’s Chief Executive Officer.  The parties
agreed to arbitrate claims for wages and other compensation due, breach of
contracts or covenants, and benefits.  The Company agreed to arbitrate
Mr. Rash’s claims for wages of $36,031 and its claims for embezzlement, fraud
and breach of contract by Mr. Rash.  As of March 31, 2010, arbitration had
not been initiated by either party.
 
 In March
2009, McLennon Law Corporation filed a law suit against the Company for breach
of contract for approximately $117,000 of accrued but unpaid attorney fees.
 As of March 31, 2010, the Company was in negotiations with McLennon to
settle its claim for unpaid attorney fees.
 
 In
September 2009, one of the Company’s employees attempted to convert a $30,000
convertible promissory note plus interest into shares of the Company’s common
stock.  The Company is disputing the amount, if any, that is due to
the employee under the note.  As of March 31, 2010, the note had not
been converted.  In December 2009, the employee filed a law suit
against the Company seeking damages and specific performance.  As of
March 31, 2010, the Company had engaged counsel and was preparing a response to
the complaint.
 
 In
February 2010, Transgenomic, Inc. (“Transgenomic”) filed a lawsuit against the
Company in the United States District Court for the District of Nebraska. 
The lawsuit contained claims for fraud, breach of contract, slander, libel, and
for a declaration of rights under a Collaboration and Exclusive License
Agreement, dated January 23, 2009, between the parties.  On April 12, 2010,
the Company filed a Partial Motion to Dismiss Transgenomic’s fraud claim. 
As of March 31, 2010, the case was pending.
  In March
2010, Rockmore Investment Master Fund LTD (“Rockmore”) filed a lawsuit against
the Company in the Supreme Court for the State of New York.  The
lawsuit contained claims of breach of contract and specific
performance.  As of March 31, 2010, the case was
pending.
  10
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
8.  Common Stock and Preferred Stock
 
 The
Company’s authorized capital consisted of 600,000,000 shares of common stock,
$0.001 par value per share, at March 31, 2010 and December 31, 2009,
respectively, and 50,000,000 shares of preferred stock, $0.001 par value per
share, at March 31, 2010 and December 31, 2009, respectively.  There
were 427,397,313 and 434,167,000 shares of common stock outstanding at March 31,
2010 and December 31, 2009, respectively, and 1,500,000 shares of preferred
stock outstanding at March 31, 2010 and December 31, 2009,
respectively.
 
 In
January 2010, the Company issued 409,906 shares of common stock to a consultant
for consulting services.  The shares were valued at the closing price
of the Company’s common stock on the date the consultant agreed to receive the
shares for total consideration of $65,175, all of which was recognized as
expense during the three months ended March 31, 2010.
  In March
2010, the Company issued 500,000 shares of common stock to a consultant for
consulting services.  The shares were valued at the closing price of
the Company’s common stock on the date the consultant agreed to receive the
shares for total consideration of $23,750, all of which was recognized as
expense during the three months ended March 31, 2010.
  In March
2010, the Company issued 197,490 shares of common stock to a consultant for
consulting services.  The shares were valued at the closing price of
the Company’s common stock on the date the consultant agreed to receive the
shares for total consideration of $9,282, all of which was recognized as expense
during the three months ended March 31, 2010.
  During
the three months ended March 31, 2010, the Company rescinded and canceled a
total of 12,302,249 shares of common stock that had
been issued under restricted stock awards that had terminated in accordance
with the terms of the awards.
  Note
9.  Stock Options and Warrants
 
 The Company did not issue any stock
options or warrants during the three months ended March 31, 2010 and the year
ended December 31, 2009, and no stock options were outstanding at March 31, 2010
and December 31, 2009.  Warrants exercisable into a total of
112,612,280 and 117,037,446 shares of the Company’s common stock were
outstanding on March 31, 2010 and December 31, 2009,
respectively.  The weighted average exercise price of the warrants
outstanding on March 31, 2010 and December 31, 2009 was $0.05.  The
Company estimates the fair value of its warrants on the date of grant by using
the Black-Scholes pricing model in accordance with the provisions of ASC
718.  Under the Black-Scholes pricing model, the Company used the
following weighted-average assumptions to determine the fair value of the
warrants issued: a dividend yield of zero percent, an expected volatility of
241%, a risk-free interest rate of 1.14% and a remaining contractual life of 3.5
years.
  11
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
 During
the three months ended March 31, 2010, the Company issued a total of 4,425,166
shares of common stock to warrant holders upon the exercise of outstanding
warrants for total cash proceeds of $234,534.  The exercise price of
the warrants exercised was $0.053 per share.
 
 A summary
of the warrant activity for the three months ended March 31, 2010 is set forth
below.
 
 Weighted-AverageExerciseShares
                    
                    
                    PriceOutstanding,
      December 31, 2009
                    
                    
                    117,037,446
                    
                    
                    $
                    0.05Granted
                    
                    
                    -0-
                    
                    
                    $
                    —Exercised
                    
                    
                    (4,425,166
                    )
                    
                    $
                    0.05Expired/Canceled
                    
                    
                    -0-
                    
                    
                    $
                    —Outstanding,
      March 31, 2010
                    
                    
                    112,612,280
                    
                    
                    $
                    0.05Exercisable,
      December 31, 2009
                    
                    
                    117,037,446
                    
                    
                    $
                    0.05Exercisable,
      March 31, 2010
                    
                    
                    112,612,280
                    
                    
                    $
                    0.05
 
 Quarter Ended
                          
                          Range of
                            ExercisePrices
                          
                          
                          Number
                            Outstanding
                          
                          
                          Weighted-
                            Average
                            Remaining
                            Contractual
                            Life (In Years)
                          
                          
                          Weighted-
                            Average
                            Exercise
                            PriceMarch
      31, 2010
                          
                          $0.01
      – $3.00
                          
                          
                          
                          112,612,280
                          
                          
                          3.5
                          
                          
                          $
                          0.05
  12
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
10.  Promissory Notes and Debentures
 
 The
carrying values of the Company’s notes payable, net of unamortized discounts,
amounted to $446,000 at March 31, 2010 and December 31, 2009, respectively, as
follows.
  March 31,
                    2010
                  
                  
                  December 31,
                    2009Notes
      Payable – in Default
                  
                  $
                  451,000
                  
                  
                  $
                  451,000Notes
      Payable – Related Party
                  
                  
                  15,000
                  
                  
                  
                  15,000Total
      Notes Payable, Net of Discount
                  
                  $
                  466,000
                  
                  
                  $
                  466,000
 
 The
carrying values of the Company’s convertible debentures, net of unamortized
discounts, amounted to $431,381 and $409,634 at March 31, 2010 and December 31,
2009, respectively, as follows.
 
 March 31,
                    2010
                  
                  
                  December 31,
                    2009Convertible
      Debentures
                  
                  $
                  50,000
                  
                  
                  $
                  50,000Less:
      Unamortized Discount
                  
                  
                  -0-
                  
                  
                  
                  (21,621
                  )Total
                  
                  
                  50,000
                  
                  
                  
                  28,379Convertible
      Debentures – in Default
                  
                  
                  351,381
                  
                  
                  
                  351,255Convertible
      Debentures – Related Party
                  
                  
                  30,000
                  
                  
                  
                  30,000Total
      Convertible Debentures, Net of Unamortized Discount
                  
                  $
                  431,381
                  
                  
                  $
                  409,634
  13
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
11.  Acquisition of StemTroniX
 
 On
February 9, 2010, the Company entered into an Agreement and Plan of Merger (the
“Merger Agreement”) by and among the Company, Power3 Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”),
and StemTroniX, Inc., a Texas corporation (“StemTroniX”), pursuant to which
Merger Sub will merge with and into StemTroniX, the separate corporate existence
of Merger Sub will cease, and StemTroniX will continue as the surviving company
and a wholly-owned subsidiary of the Company (the “Merger”).
 
 Subject
to the terms and conditions of the Merger Agreement, which has been approved by
the boards of directors of both the Company and StemTroniX, if the Merger is
completed, each outstanding share of StemTroniX common stock will be converted
into the right to receive fourteen and sixth-tenths (14.60) shares of the
Company’s common stock (the “Exchange Ratio”), subject to certain adjustments as
provided in the Merger Agreement.
 
 The
Merger Agreement contains customary representations and warranties of the
Company and StemTroniX, covenants of StemTroniX to conduct its business in
the ordinary course until the Merger is completed, and covenants of
StemTroniX to not take certain actions during such period.  StemTroniX
has also agreed to not solicit proposals relating to business combination
transactions with other parties or enter into discussions concerning any
proposals for business combination transactions with other parties.
 
 Consummation
of the Merger is subject to certain customary conditions, including, among
others, the approval of the Merger by the shareholders of StemTroniX, the
approval of the issuance of the Company’s common stock in connection with the
Merger by the shareholders of the Company, the approval of an amendment to the
certification of incorporation of the Company by the shareholders of the Company
to increase the number of shares of common stock authorized for issuance to that
number of shares necessary to ensure that an adequate number of shares is
available for issuance to the shareholders of StemTroniX, the receipt of any
required governmental approvals and expiration of applicable waiting periods,
the accuracy of the representations and warranties of the Company and StemTroniX
(generally subject to a material adverse effect standard), and material
compliance by the Company and StemTroniX with their respective obligations under
the Merger Agreement.
 
 The
Merger Agreement contains certain termination rights of the Company and
StemTroniX, including the right to terminate the Merger Agreement if the Merger
is not completed by June 30, 2010.
  14
  POWER3
MEDICAL PRODUCTS, INC.
 (A
Development Stage Entity)
 Notes to
Financial Statements (Unaudited)
 March 31,
2010
  Note
12.  Subsequent Events
 
 In April
2010, the Company issued 400,000 shares of common stock to a consultant in full
payment of outstanding invoices for services rendered.
  In April
2010, Neogenomics, Inc. (“Neogenomics”) filed a lawsuit against the Company in
the Supreme Court of the State of New York.  The lawsuit contained
claims for failure to repay the principal amount of, and accrued interest under,
a Convertible Debenture, dated April 17, 2009, issued by the Company in favor of
Neogenomics.  The Company has engaged counsel and is currently
preparing a response to the complaint.
  In April
2010, Lucas Associates, Inc. filed a lawsuit against the Company in the District
Court of Montgomery County, Texas.  The lawsuit contained claims for
breach of contract, quantum meruit and fraud related to allegations that the
Company failed to pay them a finder’s fee in connection with the hiring of John
Ginzler as our Chief Financial Officer in 2009.  The Company has
engaged counsel currently preparing a response to the complaint.
  In May 2010, the Company elected to
terminate the Merger Agreement.  The Company did not incur any
penalties in connection with its decision to terminate the Merger
Agreement.


15


DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS





This
report contains “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  All statements other than statements of historical facts
included or incorporated by reference in this report, including, without
limitation, statements regarding our future financial position, business
strategy, budgets, projected revenue and costs, and plans and objectives of
management for future operations, are forward-looking statements.  In
addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as “may,” “will,” “expects,” “intends,”
“plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative
thereof or any variation thereon or similar terminology or
expressions.




These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from results proposed in such
statements.  Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to have been correct.  Important factors
that could cause actual results to differ materially from our expectations
include, but are not limited to:





·
            our
      ability to fund future growth and implement our business
      strategy;




·
            our
      dependence on a limited number of business partners for substantially all
      of our revenue;




·
            projections
      of our future revenue, results of operations and financial
      condition;




·
            anticipated
      deployment, capabilities and uses of our products and our product
      development activities and product
innovations;




·
            the
      importance of proteomics as a major focus of biology
    research;




·
            competition
      and consolidation in the markets in which we
  compete;




·
            existing
      and future collaborations and
partnerships;




·
            the
      utility of biomarker discoveries;




·
            our
      belief that biomarker discoveries may have diagnostic and/or therapeutic
      utility;




·
            our
      ability to comply with applicable government
  regulations;




·
            our
      ability to expand and protect our intellectual property
      portfolio;




·
            the
      condition of the securities and capital
markets;




·
            general
      economic and business conditions, either nationally or internationally or
      in the jurisdictions in which we are doing
  business;




and
statements of assumption underlying any of the foregoing, as well as any other
factors set forth herein under “Item 2.  Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
below and “Item
1A.  Risk Factors” of our Annual Report on Form 10-K for our
fiscal year ended December 31, 2009.  All subsequent written and oral
forward-looking statements attributable to us, or persons acting on our behalf,
are expressly qualified in their entirety by the foregoing.  Except as
required by law, we assume no duty to update or revise our forward-looking
statements.


16


Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.





This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this report contain forward-looking statements
that involve risks and uncertainties.  All forward-looking statements
included in this report are based on information available to us on the date
hereof, and, except as required by law, we assume no obligation to update any
such forward-looking statements.  Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including those set forth under “Item 1A. Risk Factors” of
our Annual Report on Form 10-K for our fiscal year ended December 31, 2009 and
elsewhere in this report.  The following should be read in conjunction
with our financial statements beginning on page 1 of this report.




Overview




We are a
leading bio-technology company focused on the development and marketing of novel
diagnostic products through the analysis of proteins.  Our business is
focused on the development of novel diagnostic tests in the fields of cancer and
neurodegenerative diseases such as amytrophic lateral sclerosis (commonly known
as ALS or Lou Gehrig’s disease), Alzheimer’s disease and Parkinson’s
disease. We also address clinical questions related to early disease
detection, treatment response, monitoring of disease progression, prognosis and
others through collaborations with leading academic and research
institutions. We apply proprietary methodologies to discover and identify
protein biomarkers associated with diseases. We also use advanced protein
separation methods to identify and resolve variants of specific biomarkers for
developing a procedure to measure a property or concentration of an assay and
commercializing novel diagnostic tests. By discovery and development of
protein-based disease biomarkers, we have developed tools for diagnosis,
prognosis, early detection and identification of new target drugs in cancer and
neurodegenerative diseases.





We
have developed a portfolio of products including BC-SeraProTM, a
proteomic blood serum test for the early detection of breast cancer for which we
have completed Phase I clinical trials, and NuroPro®, a serum
test for the detection of neurodegenerative diseases including Alzheimer’s,
Parkinson’s and ALS diseases for which we are currently engaged in Phase II
clinical trials.  These products are designed to analyze proteins and their
mutations to assess an individual’s risk for developing disease later in life or
a patient’s likelihood of responding to a particular drug, assess a patient’s
risk of disease progression and disease recurrence, and measure a patient’s
exposure to drug therapy to ensure optimal dosing and reduced drug toxicity.
Armed with this risk response assessment information, individuals can take
action to prevent or delay the onset of disease and physicians can ensure that
patients receive the most appropriate treatment for their disease.




Recent
Developments





On May 6,
2010, we exercised our right to terminate the Agreement and Plan of Merger (the
“Merger Agreement”), dated February 9, 2010, by and among us, Power3 Acquisition
Corp., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”),
and StemTroniX, Inc., a Texas corporation (“StemTroniX”), pursuant to which
Merger Sub was going to merge with and into StemTroniX, the separate corporate
existence of Merger Sub was going to cease, and StemTroniX was going to continue
as the surviving company and our wholly-owned subsidiary (the
“Merger”).


17


Strategy





Currently,
we are continuing to develop and commercialize proteomic and related biomarker
tests that will assist providers and payers in determining the most appropriate
therapeutic intervention for a particular patient. These tests are developed
based on our know-how and expertise, in partnership with thought leaders and
leading healthcare institutions, and intellectual property that we have
developed on our own, licensed from others, or acquired from other parties. Our
tests are available to patients by physician’s prescription to providers located
primarily in the United States and may be performed in our CLIA-certified
laboratory or partnered with other test providers.





We intend
to complete Phase II clinical trials for NuroPro®and
begin commercialization of NuroPro® during
2010, and to complete Phase II clinical trials for BC-SeraProTM during
2010.  We also intend to develop additional diagnostic products
utilizing the proteomic research and results that we have achieved and for which
we have filed patent applications with the United States Patent and Trademark
Office.  By utilizing the intellectual property that we have in our
possession, building on the intellectual property portfolio through additional
clinical trials, and acquiring complementary intellectual property from other
bio-technology companies, we will have the ability to successfully create,
market and sell a diverse diagnostic product offering based on our proteomic
research.





Our goal
during 2010 is to enter into collaboration and licensing agreements with other
leading bio-technology companies, academic and research institutions, like the
Baylor College of Medicine, who have the resources and expertise to engage in
successful commercialization campaigns of our products.  Through these
agreements, we will generate revenue through a combination of licensing fees,
royalties and milestone payments that we receive from our collaboration and
licensing partners.





2010
Outlook





We expect sales of our BC-SeraProTM and
NuroPro®
diagnostic products to increase during 2010 as we complete Phase II clinical
studies on these products.  We also expect to develop several
additional diagnostic products during 2010.  As a result, we expect
revenue to increase as we enter into additional collaboration and licensing
agreements with other bio-technology companies, academic and research
institutions and governmental agencies. We intend to reduce our liabilities by
retiring our outstanding debt, which will decrease substantially, if not
eliminate, the derivative liabilities that we have been incurring for the past
few years.  The combination of increased revenue and reduced debt,
coupled with significant capital-raising initiatives that we plan to complete
during 2010, will provide us with the assets and operating results necessary to
grow at an exponential rate for the foreseeable future.


18


Critical
Accounting Policies





For
information regarding our critical accounting policies, please refer to the
discussion provided in our Annual Report on Form 10-K for our fiscal year ended
December 31, 2009 under the caption “Item 6.  Management’s
Discussion and Analysis of Financial Condition and Results of Operations –
Critical Accounting Policies” and our Notes to Financial Statements
included therein.





Recent
Accounting Pronouncements





For
information regarding recent accounting pronouncements applicable to our
business, please refer to the discussion provided in our Annual Report on Form
10-K for our fiscal year ended December 31, 2009 under the caption “Item 6.  Management’s
Discussion and Analysis of Financial Condition and Results of Operations –
Recent Accounting Pronouncements” and our Notes to Financial Statements
included therein.





Comparison
of the Three-Month Periods Ended March 31, 2010 and 2009





Net
Revenue





Net revenue consists primarily of
licensing fees, royalties and milestone payments that we receive from our
licensing partners.  We generated revenue of $100,000 for the three
months ended March 31, 2009.  We did not generate any revenue for the
three months ended March 31, 2010.  The decrease in revenue resulted
primarily from our decision to terminate the Collaboration and Exclusive License
Agreement with Transgenomic, Inc. in January 2010.  We expect
licensing fees, royalties and milestone payments generated from our
BC-SeraProTM and
NuroPro®
diagnostic products to increase during 2010 as we complete Phase II clinical
studies on these products.  As a result, we expect revenue to increase
as we enter into additional collaboration and licensing agreements with other
bio-technology companies, academic and research institutions and governmental
agencies.





Operating
Expenses





Operating expenses consist primarily of
employee compensation and benefits, professional and consulting fees, and other
selling, general and administrative expenses.





Employee Compensation and
Benefits.  Employee compensation and benefits consists of all
salaries and other cash compensation, equity-based compensation, employee
benefits and the related payroll taxes.  Employee compensation expense
increased $17,361 to $34,918 for the three months ended March 31, 2010 from
$17,557 for the three months ended March 31, 2009.  The increase of
$17,361 was due primarily to an increase of $17,221 for salary and equity-based
compensation expenses associated with an increase in the number of individuals
who we employed during the three months ended March 31, 2010.  We
expect employee compensation expense to increase over the next 12 months as we
continue to retain additional executive management personnel, lab technicians
and other employees in connection with the growth of our
business.


19


Professional
Fees.  Professional fees consist of fees paid to our
independent accountants, lawyers, laboratory and technology consultants and
other professionals and consultants.  Professional fees increased
$164,184 to $245,001 for the three months ended March 31, 2010 from $80,817 for
the three months ended March 31, 2009.  The increase of $164,184 was
due primarily to an increase of $145,023 for the amount of expense recognized in
connection with equity-based compensation paid to service providers and
consultants for various services.  We expect professional fees to
increase over the next 12 months as we incur additional legal, accounting,
laboratory and technology fees in connection with the general expansion of our
business and operations.





Other Selling, General and
Administrative Expenses.  Other selling, general and
administrative expenses consist of selling and marketing expenses, lab services
and supplies, clinical validation studies, computer hardware and system costs,
bank service charges, filing fees and dues, non-employee customer service
representative expense, rent expense, financial printer costs, transfer agent
costs, the costs of investor relations campaigns and activities, postage and
delivery expenses, severance expenses, general business expenses and
miscellaneous general and administrative expenses.  Other general and
administrative expenses increased $107,076 to $177,742 for the three months
ended March 31, 2010 from $70,666 for the three months ended March 31,
2009.  The increase of $107,076 resulted primarily from increases of
$26,344 for lab service expenses, $22,441 for administrative fees and $16,719
for insurance, partially offset by decreases in other miscellaneous general and
administrative expenses.  We expect other general and administrative
expenses to increase over the next 12 months as we continue to incur expenses
for clinical validation studies, lab supplies, selling and marketing expenses,
rent, computer hardware and systems, and other miscellaneous items associated
with the general operation and growth of our business.





Interest
Expense





Interest expense consists of the
interest and discount amortization costs that we incur on the debt obligations
that we have.  Interest and amortization expense decreased $127,898 to
$49,198 for the three months ended March 31, 2010 from $177,096 for the three
months ended March 31, 2009.  The decrease of $127,898 was due
primarily to the retirement during 2009 of many of the debt obligations that
were outstanding during the three months ended March 31, 2009.  We
expect interest expense to decrease over the next 12 months as we continue to
retire our remaining debt obligations.





Derivative Gain /
Loss





Derivative
gain / loss consists of the non-operating, non-cash income or expense resulting
from changes in the fair value of the derivative instruments contained in the
convertible promissory notes and associated stock warrants that were outstanding
at March 31, 2010 and 2009, respectively.  We recognized a derivative
gain of $10,703,695 for the three months ended March 31, 2010 compared to a
derivative loss of $746,344 for the three months ended March 31,
2009.  The difference of $11,450,039 was due primarily to the decrease
in the trading price of our common stock between January 1, 2010 and March 31,
2010 compared to the increase in the trading price of our common stock between
January 1, 2009 and March 31, 2009.  While future derivative gain /
loss is largely dependent upon the trading price of our common stock, we expect
future derivative gains and losses to be smaller in amount as our convertible
promissory notes are retired or converted into shares of common stock, and as
the associated stock warrants are exercised or expire by their
terms.


20


Gain / Loss on Settlement of
Debt





Gain / loss on settlement of debt
consists of the gains and losses that we have recognized in connection with the
retirement of outstanding debt and payment of outstanding invoices and results
when we issue shares of common stock having an aggregate value less than (in the
case of gains) or greater than (in the case of losses) the outstanding principal
amount of the note and accrued interest or the applicable invoice.  We
recognized a loss on the settlement of debt of $883,734 for the three months
ended March 31, 2009.  We did not recognize any gain or loss on the
settlement of debt for the three months ended March 31, 2010.  The
difference of $883,734 was due primarily to our decision to pay off a
significant amount of our outstanding debt obligations and accrued interest, and
numerous outstanding invoices, during 2009 by issuing shares of our common stock
having an aggregate value greater than the outstanding principal amount of the
applicable note and accrued interest or the applicable invoice.  While
we may continue to incur losses on the settlement of debt in the future as we
continue to pay off outstanding debt and invoices with shares of our common
stock, we expect any such losses to decrease as the amount of outstanding debt
continues to decrease.





Net Income /
Loss





We
generated net income of $10,196,836 for the three months ended March 31, 2010
compared to a net loss of $1,910,317 for the three months ended March 31,
2009.  The difference of $12,107,153 was due primarily to a difference
of $11,450,039 resulting from the derivative gain recognized during 2010
compared to the derivative loss recognized during 2009, a difference of $883,734
resulting from losses from the extinguishment of debt recognized during 2009,
and a decrease of $127,898 for interest expense.  This was partially
offset by a decrease of $100,000 for net revenue, and increases of $164,184 for
professional fees and $107,076 for other selling, general and administrative
expenses.  We expect to generate net losses during the remainder of
2010 as we continue to build our business.  However, we expect these
losses to decrease in the future as we generate additional revenue through
collaboration and licensing partners and as we continue to retire our
outstanding debt obligations.




Liquidity
and Capital Resources





Since our
inception, we have funded our operations primarily through private sales of
equity securities and the use of short- and long-term debt.





Net cash
used by operating activities was $226,404 for the three months ended March 31,
2010 compared to $57,101 for the three months ended March 31,
2009.  The $169,303 increase in cash used by operating activities was
due primarily to a difference of $12,107,153 between the net income generated in
2009 and the net loss incurred during 2008 and an increase of $188,025 in
accounts payable and other liabilities.  This was partially offset by
a difference of $10,196,836 for changes in the amount of our derivative
liability and decreases of $854,988 for loss on settlement of debt and $124,785
for amortization of debt discounts and deferred finance costs.


21


We did
not have any cash flows from investing activities during the three months ended
March 31, 2010 and 2009.





Net cash
provided by financing activities was $234,534 for the three months ended March
31, 2010 compared to $69,922 for the three months ended March 31,
2009.  The $164,612 increase in cash provided by financing activities
was due primarily to an increase of $234,534 for proceeds from the exercise of
warrants, partially offset by decreases of $41,666 for proceeds from the sale of
common stock and $20,000 for proceeds from the issuance of debt.





Our
primary sources of capital over the past 12 months are set forth
below.





In June
2009, we issued 6,000,000 shares of common stock to an accredited investor for
total cash proceeds of $30,000.





In June
2009, we issued 500,000 shares of common stock to an accredited investor for
total cash proceeds of $5,000.





In August
2009, we issued 515,600 shares of common stock to two accredited investors for
total cash proceeds of $5,156.





In August
2009, we issued a convertible promissory note and a warrant to acquire shares of
common stock to an accredited investor for consideration of
$25,000.  The note is for a principal amount of $25,000, is
convertible into 2,500,000 shares of common stock, has an interest rate of 8%
and was due February 26, 2010.  The warrant is exercisable into
1,000,000 shares of common stock and has an exercise price of $0.01 that may be
subject to adjustment depending upon the trading price of our common
stock.





In
September 2009, we issued 2,500,000 shares of common stock to an accredited
investor for total cash proceeds of $25,000.





In
September 2009, we issued 2,000,000 shares of common stock to an accredited
investor for total cash proceeds of $20,000.





In
September 2009, we issued a convertible promissory note and a warrant to acquire
shares of common stock to an accredited investor for consideration of
$25,000.  The note is for a principal amount of $25,000, is
convertible into 2,500,000 shares of common stock, has an interest rate of 8%
and was due March 3, 2010.  The warrant is exercisable into 1,000,000
shares of common stock and has an exercise price of $0.01 that may be subject to
adjustment depending upon the trading price of our common stock.





During
the period beginning January 1, 2009 and ending March 31, 2010, we issued a
total of 16,214,675 shares of common stock to warrant holders upon the exercise
of outstanding warrants at exercise prices ranging between $0.01 and $0.25 per
share for total cash proceeds of $513,366.


22


To date, our capital needs have been
met primarily through the issuance of convertible promissory notes and
debentures, sales of equity securities and proceeds received upon the exercise
of warrants held by our security holders.  We do not currently
maintain a line of credit or term loan with any commercial bank or other
financial institution.  We have used the proceeds from the exercise of
warrants and our private offerings of securities to pay virtually all of the
costs and expenses we have incurred.  These costs and expenses were
comprised of operating expenses, which consisted of the employee compensation
expenses, professional fees and other general and administrative expenses
discussed above.





We
believe that our current cash resources will not be sufficient to sustain our
operations for the next 12 months.  We will need to obtain additional
cash resources within the next 12 months to enable us to pay our ongoing costs
and expenses as they are incurred and finance the growth of our
business.  We intend to obtain these funds through internally
generated cash flows from operating activities, proceeds from the issuance of
equity securities and proceeds from the exercise of outstanding
warrants.  The issuance of additional equity would result in dilution
to our existing shareholders.  We have not made arrangements to obtain
additional financing and we can provide no assurance that additional financing
will be available in an amount or on terms acceptable to us, if at
all.  If we are unable to obtain additional funds when they are needed
or if such funds cannot be obtained on terms favorable to us, we may be unable
to execute upon our business plan or pay our costs and expenses as they are
incurred, which could have a material, adverse effect on our business, financial
condition and results of operations.





Off-Balance
Sheet Arrangements





As of March 31, 2010, we did not have
any relationships with unconsolidated entities or financial partners, such as
entities often referred to as structured finance or special purpose entities,
that had been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.  As
such, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such
relationships.





Item
4T.  Controls and Procedures.





As of March 31, 2010, we carried out
the evaluation of the effectiveness of our disclosure controls and procedures
required by Rule 13a-15(e) under the Exchange Act under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer.  Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of March 31,
2010, our disclosure controls and procedures were effective to provide
reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is: (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and (ii) accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.


23


There has
been no change in our internal control over financial reporting identified in
connection with this evaluation that occurred during our fiscal quarter ended
March 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





PART
II – OTHER INFORMATION





Item
1.  Legal Proceedings.





In March
2009, McLennon Law Corporation filed a law suit against us for breach of
contract for approximately $117,000 of accrued but unpaid attorney fees.
 We are currently in negotiations with McLennon to settle its claim for
unpaid attorney fees.





In
September 2009, one of our employees attempted to convert a $30,000 convertible
promissory note plus interest into shares of our common stock.  We are
disputing the amount, if any, that is due to the employee under the
note.  As of March 31, 2010, the note had not been
converted.  In December 2009, the employee filed a law suit against us
seeking damages and specific performance.  We have engaged counsel and
are preparing a response to the complaint.





In
February 2010, Transgenomic, Inc. (“Transgenomic”) filed a lawsuit against us in
the United States District Court for the District of Nebraska.  The lawsuit
contained claims for fraud, breach of contract, slander, libel, and for a
declaration of rights under a Collaboration and Exclusive License Agreement,
dated January 23, 2009, between the parties.  We have engaged counsel and
on April 12, 2010, we filed a Partial Motion to Dismiss Transgenomic’s fraud
claim.  We are currently preparing a response to the
complaint.




In March
2010, Rockmore Investment Master Fund LTD filed a lawsuit against us in the
Supreme Court for the State of New York.  The lawsuit contained claims
of breach of contract and specific performance related to allegations that we
failed to repay a promissory note and issue shares upon the exercise of
warrants.  We have engaged counsel and are currently preparing a
response to the complaint.




In April
2010, Neogenomics, Inc. (“Neogenomics”) filed a lawsuit against us in the
Supreme Court of the State of New York.  The lawsuit contained claims
for failure to repay the principal amount of, and accrued interest under, a
Convertible Debenture, dated April 17, 2009, issued by us in favor of
Neogenomics.  We have engaged counsel and are currently preparing a
response to the complaint.




In April
2010, Lucas Associates, Inc. filed a lawsuit against us in the District Court of
Montgomery County, Texas.  The lawsuit contained claims for breach of
contract, quantum meruit and fraud related to allegations that we failed to pay
them a finder’s fee in connection with the hiring of John Ginzler as our Chief
Financial Officer in 2009.  We have engaged counsel and are currently
preparing a response to the complaint.


24


Item  2.  Unregistered
Sales of Equity Securities and Use of Proceeds.





During
the three months ended March 31, 2010, we sold the following securities without
registration under the Securities Act of 1933, as amended (the “Securities
Act”):




In
January 2010, we issued 409,906 shares of common stock to a consultant for
consulting services.  These securities were issued to an accredited
investor in a private placement transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act directly by us without engaging in any advertising or general solicitation
of any kind and without payment of underwriting discounts or commissions to any
person.





In March
2010, we issued 500,000 shares of common stock to a consultant for consulting
services.  These securities were issued to an accredited investor in a
private placement transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act directly by us
without engaging in any advertising or general solicitation of any kind and
without payment of underwriting discounts or commissions to any
person.





In March
2010, we issued 197,490 shares of common stock to a consultant for consulting
services.  These securities were issued to an accredited investor in a
private placement transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act directly by us
without engaging in any advertising or general solicitation of any kind and
without payment of underwriting discounts or commissions to any
person.





During
the three months ended March 31, 2010, we issued a total of 4,425,166 shares of
common stock to warrant holders upon the exercise of outstanding warrants for
total cash proceeds of $234,534.  These securities were issued to a
limited number of accredited investors in private placement transactions exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act directly by us without engaging in any advertising or
general solicitation of any kind and without payment of underwriting discounts
or commissions to any person.





Item
3.  Defaults Upon Senior Securities.





In August
2009, we issued a convertible promissory note and a warrant to acquire shares of
common stock to an accredited investor for consideration of
$25,000.  The note is for a principal amount of $25,000, is
convertible into 2,500,000 shares of common stock, has an interest rate of 8%
and was due February 26, 2010.  We failed to repay this note on the
due date.  As a result, the note went into default and is accruing
interest at the default interest rate of 8% per year.





In
September 2009, we issued a convertible promissory note and a warrant to acquire
shares of common stock to an accredited investor for consideration of
$25,000.  The note is for a principal amount of $25,000, is
convertible into 2,500,000 shares of common stock, has an interest rate of 8%
and was due March 3, 2010.  We failed to repay this note on the due
date.  As a result, the note went into default and is accruing
interest at the default interest rate of 8% per year.


25


Item
6.  Exhibits.





The following exhibits are included
herein:




Exhibit No.
                  
                  Exhibit31.1
                  
                  Certification
      of Chief Executive Officer of the registrant required by Rule 13a-14(a)
      under the Securities Exchange Act of 1934, as amended31.2
                  
                  Certification
      of Chief Financial Officer of the registrant required by Rule 13a-14(a)
      under the Securities Exchange Act of 1934, as amended32.1
                  
                  Certification
      of Chief Executive Officer and Chief Financial Officer of the registrant
      required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as
      amended


26


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





POWER3
      MEDICAL PRODUCTS, INC.Date:  May
      17, 2010
            /s/  Helen R.
  ParkHelen
      R. ParkChief
      Executive Officer


27




EXHIBIT
INDEX




Exhibit
                    
                    Exhibit
  Description31.1
                    
                    Certification
      of Chief Executive Officer required by Rule 13a-14(a) under the Securities
      Exchange Act of 1934, as amended31.2
                    
                    Certification
      of Chief Financial Officer required by Rule 13a-14(a) under the Securities
      Exchange Act of 1934, as amended32.1
                    
                    Certification
      of Chief Executive Officer and Chief Financial Officer required by Rule
      13a-14(b) under the Securities Exchange Act of 1934, as
      amended