**U.S.
      Securities and Exchange Commission**


**Washington,
      D.C. 20549**




**Form 10-KSB**




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




For
      the
      fiscal year ended December 31, 2007




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




For
      the
      transition period from _______________ to ________________




**COMMISSION
      FILE NO. 0-24921**




**Power3
      Medical Products, Inc.**


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





**New
                York**
            
            **65-0565144**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**3400
                Research Forest Drive, Suite B2-3**
              **Woodlands,
                Texas**
              (Address
                of principal executive offices)
            
            **77381**
              (Zip
                Code)





**Issuer’s
      Telephone Number: (281) 466-1600**





**Securities
      registered under Section 12(b) of the Exchange Act: None**





**Securities
      registered under Section 12(g) of the Exchange Act:**


**Common
      stock, $.001 par value**


(Title
      of
      class)




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




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB  ̈




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




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




Revenues
      for the issuer’s fiscal year ended December 31, 2007 were $122,224. The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant, computed by reference to the closing price
      of
      such stock on the Over-the-Counter (OTC) Bulletin Board administered by the
      National Association of Securities Dealers (“NASDAQ”) on December 31, 2007 was
      $18,008,127. For purposes of this calculation, affiliates include directors,
      executive officers and current employees.





The
      number of shares outstanding of the registrant’s common stock, par value $.001
      per share, as of March 19, 2007, was 121,065,289 shares **.**




**Documents
      incorporated by reference** :
      None.













**TABLE
      OF CONTENTS**




**PART
                I**ITEM
                1.
            DESCRIPTION
                OF BUSINESS
            3ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            12ITEM
                3.
            LEGAL
                PROCEEDINGS
            13ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            14**PART
                II**ITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            14ITEM
                6.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            15ITEM
                7.
            FINANCIAL
                STATEMENTS
            18-42ITEM8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND
                FINANCIAL DISCLOSURE
            42ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            43ITEM
                8B.
            OTHER
                INFORMATION
            44**PART
                III**ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS;COMPLIANCE
                WITH SECTION 16(a) OF THE EXCHANGE ACT
            45ITEM
                10.
            EXECUTIVE
                COMPENSATION
            48ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            50ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
            51ITEM
                13.
            EXHIBITS
            52ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            57




1




**FORWARD
      –LOOKING STATEMENT**




This
      Report contains certain forward-looking statements of the intentions, hopes,
      beliefs, expectations, strategies, and predictions of Power3 Medical Products,
      Inc. (“Power3” or the “Company”) or its management with respect to future
      activities or other future events or conditions within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended. These statements are usually identified by
      the
      use of words such as “believes,” “will,” “anticipates,” “estimates,” “expects,”
“projects,” “plans,” “intends,” “should,” “could,” or similar expressions. These
      statements are based on certain assumptions and analyses made by the Company’s
      management in light of its experience and its perception of historical trends,
      current conditions, expected future developments and other factors believed
      appropriate. Readers are cautioned that these forward-looking statements are
      only predictions and that the Company’s business is subject to significant risks
      and uncertainties, including, without limitation:




The
      Company’s history of operating losses;




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




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




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




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




Development
      by competitors of new or competitive products or services;




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




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




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




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




2




**PART
      I**


*Except
      for historical information, the matters set forth in this report include
      forward-looking statements that are subject to risks and uncertainties that
      could cause actual results to differ materially from those set forth herein.
      Power3 Medical Products, Inc. refers you to cautionary information and risk
      factors contained elsewhere herein and in other documents filed with the
      Securities and Exchange Commission (“SEC”) from time to
      time.*


**Item
      1. Description of Business**




**Overview
      of Corporate History**




Power3
      Medical Products, Inc. (the “Company” or “Power3”) was incorporated in the State
      of Florida on May 15, 1992 and merged into a New York Corporation in 1994,
      under the name of Sheffield Acres, Inc. Power3 and its wholly owned
      subsidiaries, C5 Health, Inc. (“C5”), which was officially dissolved in the
      State of Delaware and in the State of Florida effective December 31, 2003
      and Power3 Medical, Inc., a Nevada Corporation, were engaged in sales,
      distribution and services for the healthcare industry. On September 12,
      2003 Surgical Safety Products, Inc. amended its Certificate of Incorporation
      to
      (a) declare a 1:50 reverse split of its common stock; (b) increase its
      authorized capital to 150,000,000 shares of common stock and 50,000,000 shares
      of preferred stock; and (c) change its name to Power3 Medical Products,
      Inc.




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




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




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




**Series B
      Preferred Stock**




Pursuant
      to two employment agreements with two officers, the Company has agreed to issue
      to such officers an aggregate of 3,000,000 shares of Series B Preferred
      Stock. On September 6, 2007, the Company filed the Certificate of Amendment
      necessary to designate the Series B Preferred Stock and the powers,
      designations and relative rights of the Series B Preferred Stock and has
      not issued the shares of the Series B Preferred Stock. The Company intends
      to issue such shares of the Series B Preferred Stock to the two officers
      during calendar year 2008.




**Scientific
      Developments**




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




Power3’s
      scientific team is currently headed by its CLIA Laboratory Director and Director
      of Biochemistry, Dr. Essam A. Sheta and its Director of Proteomics, Dr. Ira
      L.
      Goldknopf. Drs. Sheta and Goldknopf are pioneers in the science of proteomics,
      protein biochemistry and cancer cell signaling and have made significant
      biochemical and proteomic discoveries. The scientific team at Power3 has
      leveraged these significant insights and has made progress in the discovery
      of
      unique disease protein footprints by the use of biomarkers in breast cancer,
      neurodegenerative diseases, and drug resistance to chemotherapeutic
      agents.




3




**PRODUCT
      CANDIDATES**


The
      Company plans to target the protein-based diagnostic and drug targeting markets
      utilizing the Company’s portfolio of proprietary disease biomarkers. In the area
      of neurodegenerative diseases and breast cancer, the Company has completed
      research and clinical validation studies involving over 2,000 patient samples
      and is utilizing biostatistical analysis to monitor appropriate panels of
      biomarkers for diagnostic sensitivity, specificity, positive predictive value,
      and negative predictive value. By testing patient body fluids and tissues,
      such
      as serum, nipple aspirate fluid, and bone marrow aspirate, the Company has
      discovered unique snapshots of protein patterns in over 2,000 patient samples
      that cover a broad range of diseases including:




·
            Cancers
                such as breast, leukemia, bladder, stomach, and esophageal;
                and




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




The
      Company’s discovery platform uses proprietary methodologies, trade secrets, and
      accepted proteomic technologies that are optimized and validated for
      reproducible discovery and analysis of disease specific biomarkers in clinical
      patient samples. Following sample preparation, a 2D Gel Electrophoresis system
      is used for the separation of proteins. The gels are stained, digitally scanned
      and the digital images are analyzed with unprecedented reproducibility and
      sensitivity for quantitative differences of the protein biomarkers in the
      disease vs. control samples. The significance of these differences is evaluated
      using advanced biostatistical analysis to generate statistical models for the
      disease and control sample groups. This statistical model is then applied to
      new
      samples and used to predict their diagnosis. Biomarkers of interest are removed
      from the gel matrix and analyzed by fingerprinting on a liquid chromatograph
      -
      tandem mass spectrometer. This information is then cross-referenced on a
      worldwide database to identify the protein of origin. This process requires
      a
      great deal of proteomics experience and expertise to make the correct accurate
      identification. In addition, all of the procedures used in Power3’s diagnostic
      tests are scalable. The Company’s proteomics platform delivers significant
      discoveries exhibiting validated, reproducible, and reliable biomarkers over
      a
      broad quantitative range and linearity for use in diagnostic proteomic
      assays.




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




Power3
      has transitioned from a company focused on research and development to one
      that
      is demonstrating “proof of concept” of its technology as it enters the
      commercialization stage for its technology, products and services. The Company
      is engaged in the process of developing a portfolio of products including
      BC-SeraProTM, a proteomic blood serum test for early diagnosis of breast cancer,
      NuroPro®, a proteomic blood serum test for detection of neurodegenerative
      diseases including Alzheimer’s, Parkinson’s and ALS diseases.




**DEVELOPMENT
      OF BC-SeraProTM, A PROTEOMICS BREAST CANCER SCREENING TEST**




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




BC-SeraProTM
      is a proteomic test for the diagnosis of breast cancer. This test is
      designed to measure the quantitative expression level of 22
      protein biomarkers in the serum that differentiate between breast
      cancer patients and control subjects. The level of the biomarkers from the
      patient’s serum sample is compared to  Power3 Medical Products’
patient database.  Statistical analysis by linear
      discriminant function will analyze the biomarker levels of the patient
      sample and assign a probability score for the diagnosis of the patient sample.
      The probability score is ranged from 0.0 to 1.0.  Results of the
      BC-SeraProTM test should not be considered a stand alone diagnosis nor a
      guarantee but are intended to be used in conjunction with other breast cancer
      diagnostic tools.




This
      test
      was developed and its performance characteristics determined by the Power3
      Medical Products laboratories.  It has not been cleared or approved by the
      U.S. Food and Drug Administration.  The FDA has determined that such
      clearance or approval is not necessary.  This test is performed solely at
      the Power3 Medical Products’ laboratory and is used for clinical purposes. 
It should not be regarded as investigational or for research.  Power3’s
      laboratory is certified under the Clinical Laboratory Improvement Amendment
      of
      1988 (“CLIA”) as qualified to perform high complexity clinical
      testing.




4


Because
      early breast cancer is asymptomatic, the only way to detect it is through
      screening. Mammography is currently the widely accepted method for breast cancer
      screening. However, most women who have an abnormal mammogram do not have
      cancer.




Mammography
      often leads to identification of a “probably benign” lesion or an uninformative
      mammography. Clinicians may be reluctant to refer such a patient for a biopsy;
      they may also be reluctant to do nothing. Often such patients are referred
      for
      frequent repeat mammography examinations.




The
      availability of an accurate and minimally-invasive test would avoid such
      repeated mammogram exams, with their attendant discomfort, inconvenience, x-ray
      exposure, and emotional stress. In such cases, BC-SeraProTM with 80% sensitivity
      and 87% specificity in study results, could exclude malignancy at higher
      accuracy than mammography. As well, BC-SeraProTM is unlikely to not identify
      cancer in those women who have it.




BC-SeraProTM
      is then an ideal diagnostic test to evaluate breast cancer abnormalities found
      by mammogram or breast examination. The test would distinguish women who should
      have a biopsy from those who can safely avoid one. BC-SeraProTM could detect the
      disease at a point when treatment is more effective, less expensive, or
      both.




Currently,
      Power3 continues its blood serum breast cancer biomarker discovery program
      using
      blood serum samples collected from clinical validation sites, in collaboration
      with Dr. Alan Hollingsworth at the Mercy Woman’s Center in Oklahoma City, OK and
      Dr. Leroy Leeds at Obstetrics & Gynecological Associates, PA in Houston, TX. The
      Company believes that there are many advantages to a simple blood test over
      other types of breast cancer diagnostics, such as mammography, not the least
      of
      which is the ready acceptance by patients to having blood drawn.




Power3
      has completed the development program for BC-SeraProTM and is moving forward with
      a strategy of providing a test that is utilitarian, accurate, and inexpensive.
      Detection of a patient's protein biomarker profile can now be employed to detect
      abnormal and pathological states reflected in the serum proteome. Application
      of
      this test will have a future impact on how breast disease will be diagnosed,
      monitored, and managed and is intended to be used in conjunction with
      mammography, breast MRI and other diagnostic tools used in the detection of
      breast cancer.


**How
      BC-SeraProTM Works**




BC-SeraProTM
      is a blood serum test designed to diagnose breast cancer in individuals. The
      test is based on proteomic technology in which a blood serum sample drawn from
      a
      patient will monitor the concentration of each protein biomarker residing in
      a
      panel of blood serum protein biomarkers to determine if a patient has breast
      cancer. The biomarkers in the panel have been selected for their ability to
      discriminate breast cancer patients from non-cancerous patients. Power3’s
      statistical model evaluates the quantitative information of the protein
      biomarkers and automatically assigns a probability score. The probability score
      indicates to the physician that the patient “has cancer” or is “cancer-free.”
The score reflects how strongly the patient sample fits the biostatistical
      model
      and if the patient should be recommended for further follow-up by the clinician.




Blood
      serum collection is a routine procedure performed by a clinician. A small sample
      of blood is drawn from a vein. When a blood sample is collected and stored
      in a
      tube without anticoagulant, it forms a clot after 30-60 minutes. The liquid
      portion remaining is the blood serum. This serum sample is then frozen and
      transported to the Power3 Medical CLIA certified laboratory, utilizing
      pre-approved carriers/delivery services, where sample preparation and analysis
      begins.




**Financial
      Advisory House**




On
      October 1, 2007, Power3 entered into a Distributor Agreement (the
“Agreement”) with Financial Advisory House (“FAH”) to launch BC-SeraProTM in
      twelve Middle East countries. The Agreement with FAH’s Medical Equipment
      Suppliers division, a Bahrain-based medical instrument distribution company,
      allows for the marketing and distribution of the BC-SeraProTM breast cancer
      diagnostic test for resale to clinics and physicians in Saudi Arabia, Oman,
      Qatar, Kuwait, Syria, Jordan, Lebanon, Iraq, Bahrain, Yemen, Egypt and the
      United Arab Emirates before the end of 2008. The test will be analyzed in
      Power3’s Houston based, CLIA (Clinical Laboratory Improvement Amendment)
      certified proteomic laboratory.




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




5


During
      the third quarter, in conjunction with the Middle East BC-SeraProTM product
      launch, the Company has initiated a 100 patient prospective double-blinded
      research/validation study. The results of this study are expected to be
      completed and published in the third quarter of 2008. The publishing of these
      results will precede the US launch of BC-SeraProTM. The Company has received
      study samples for the validation study and are currently being analyzed in
      the Company’s CLIA certified laboratory.





DEVELOPMENT
      OFNuroPro®,
      A
      PROTEOMIC NEURODEGENERATIVE DIAGNOSTIC SCREENING
      TEST





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




The
      members of the Company’s scientific team have developed a method for the
      differential diagnosis of neurodegenerative diseases utilizing blood serum,
      which was co-developed with neurologist, Dr. Stan Appel, now Chair of Neurology
      and Co-Director of Methodist Neurological Institute in Houston. With this test,
      which involves monitoring the concentration of 59 differentially expressed
      proteins, the Company has identified groups of unique markers that appear to
      distinguish normal patients from those with motor neuron, cognitive, and other
      neurological disorders, from the analysis of over 850 blood serum
      samples.




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




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




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




**How
      NuroPro®Works**




The NuroPro® test has
      the potential to become the first diagnostic test available for the detection
      of
      neurodegenerative diseases.




NuroPro®
      is a series of three separate and distinct blood serum tests designed to
      diagnose Alzheimer’s, Parkinson’s or Lou Gehrig’s disease (ALS) in individuals.
      The test is based on proteomic technology, in which a blood serum sample is
      drawn from a patient, and monitors the concentration of selected biomarkers
      residing in a panel of blood serum protein biomarkers that determines if a
      patient has a neurodegenerative disease, such as Alzheimer’s, Parkinson’s or Lou
      Gehrig’s disease (ALS). The biomarkers in the panel have been selected for their
      ability to discriminate diseased from non-diseased patients. Power3’s
      statistical model evaluates the quantitative information of the protein
      biomarkers and automatically assigns a probability score. The probability score
      indicates to the physician that the patient has a neurological disease or is
      disease-free. The score reflects how strongly the patient sample fits the
      biostatistical model and if the patient should be recommended for further
      follow-up by the clinician.




6




Blood
      serum collection is a routine procedure performed by a clinician. A small sample
      of blood is drawn from a vein. When a blood sample is collected and stored
      in a
      tube without anticoagulant, it forms a clot after 30-60 minutes. The liquid
      portion remaining is the blood serum. This serum sample is then frozen and
      transported to the Power3 Medical CLIA certified laboratory, utilizing
      pre-approved carriers/delivery services, where sample preparation and analysis
      begins. ****




**NEURODEGENERATIVE
      RESEARCH/CLINICAL VALIDATION STUDIES**




**University
      of Thessaly School of Medicine / Dr. Katerina Markopoulou**




On
      November 11, 2006, University of Thessaly School of Medicine in Larissa, Greece
      signed a research agreement with Power3 focusing on the proteomic discovery
      of
      biomarkers for Parkinson’s disease. The collaboration will also extend to cover
      other neurodegenerative diseases including Alzheimer’s disease and ALS
      (Amyotrophic Lateral Sclerosis - Lou Gehrig's disease). According to the
      agreement, The University of Thessaly will provide Power3 with clinically
      confirmed samples of neurodegenerative disease, including age and gender matched
      controls. The Principal Investigator is Katerina Markopoulou, MD PhD with the
      Department of Neurology.




Power3
      will use its existing proprietary and patent-pending technologies to analyze
      the
      samples, seeking new protein biomarkers for the early detection of
      neurodegenerative diseases to add to its portfolio. The initial shipments of
      Parkinson’s disease and control subject samples were received in May and October
      2007 and have been analyzed in the Company’s CLIA certified
      laboratory.




The
      collaboration will also extend to cover other neurodegenerative diseases
      including Alzheimer's disease and ALS (Amyotrophic Lateral Sclerosis - Lou
      Gehrig's disease).




Discriminant
      analysis was used to analyze protein quantities. ****** Discriminant
      analysis identifies sets of linearly independent functions that will
      successfully classify individuals into a well-defined collection of groups
      (i.e.
      disease groups). The statistical model assumes a multivariate normal
      distribution for the set of biomarkers identified from each disease group.
      The
      outcome of the discriminant analysis is a collection of linear functions that
      maximize the ability to separate individuals into diseased and non-diseased
      groups.




In
      general, if there are *m* biomarkers, there will be a maximum of ( *m* –
1, *g* –
1)
      discriminant functions, where *g* is the
      number of disease groups. The discriminant functions themselves are linearly
      independent. Thus, *m* –
1
      discriminant functions provide incremental and non-redundant discriminant
      ability.




Also
      used
      within discriminant analysis was stepwise discriminant analysis, which evaluates
      the performance of a discriminant criterion by estimating    error
      rates (probabilities of misclassification) in the classification of future
      observations. These error-rate estimates include error-count estimates and
      posterior probability error-rate estimates.




Given
      a
      classification variable and several quantitative variables, a stepwise
      discriminant analysis is performed to select a subset of the quantitative
      variables for use in discriminating among the classes. The set of variables
      that
      make up each class is assumed to be multivariate normal with a common covariance
      matrix.




Results
      of the 37 samples received to-date from The University of Thessaly are depicted
      below. Additional samples have been received from The University of Thessaly
      and
      will be analyzed during the second quarter of 2008.




7




**Figure
      III:**




figure




Figure
      III is a canonical discriminant analysis of all samples. The canonical plot
      shows great separation between the Control and Parkinson’s samples.




**Table
      III:**




**Using
      All Markers – (59 Biomarkers)**




**Classified
      into Diagnosis**





**From
                Diagnosis**
            
            **Control**
            
            **PD****Control**
            
            
            42
              100
            %
            
            0
              0**PD**
            
            
            1
              1.50
            %
            
            68
              98.50
            %**100%
                Sensitivity & 100% Specificity In
                Triplicates**




Table
      III
      reflects results using discriminant analysis with all 59
      biomarkers.




8




**Table** **IV** **:**




**Markers
      Selected by StepDisc – (16 Biomarkers)**




**Classified
      into Diagnosis**





**From
                  Diagnosis**
              
              **Control**
              
              **PD****Control**
              
              
              41
                97.60
              %
              
              1
                2.30
              %**PD**
              
              
              6
                8.70
              %
              
              63
                91.30
              %**100%
                  Sensitivity & 100% Specificity In
                  Triplicates**




Table
      IV
      reflects results using discriminant analysis with the StepDisc. StepDisc has
      chosen 16 biomarkers to run discriminant analysis with the Parkinson’s samples.




**Marwan
      N. Sabbagh / Cleo Roberts Center of Clinical Research at the Sun Health Research
      Institute**




On
      October 12, 2007, Power3 appointed Dr. Marwan N. Sabbagh to the Company's
      Scientific Advisory Board. Dr. Sabbagh, a national leader in
      neurodegenerative disease, will collaborate with Power3 in a 300 patient
      validation study of blood serum samples using Power3's NuroPro® diagnostic
      screening test.




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




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




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




In
      February 2008, the Company commenced a 300 patient clinical validation study
      of
      its NuroPro® diagnostic test for Alzheimer’s disease, Parkinson’s disease.
      Power3 has received the initial samples from the clinical validation study
      and
      the samples are scheduled for analysis in March 2008.




The
      clinical validation study will be a blinded study of Power3’s NuroPro®
diagnostic test, which is a blood test for the detection of Alzheimer’s and
      Parkinson’s disease, with Dr. Marwan Sabbagh as the Principle Investigator at
      the Cleo Roberts Center of Clinical Research at the Sun Health Research
      Institute. The study includes one hundred Alzheimer’s disease patients, one
      hundred Parkinson’s disease patients and one hundred controls.




The
      Parkinson’s disease patients in the clinical validation study will augment the
      Parkinson’s disease validation study presently ongoing with the Research
      Institute of Thessaly in Greece led by Katerina Markopoulou, the Principal
      Investigator.




9




**Contract
      Research Organization with NeoGenomics**




On
      April 4, 2007 Power3 announced a collaboration agreement with NeoGenomics,
      Inc. (NGNM) of Fort Myers, Florida, to form a joint venture Contract Research
      Organization (CRO), whose mission will be commercialization of Power3's
      portfolio of Intellectual Property. The efforts will center on blood-based
      tests
      using the 543 biomarkers Power3 has discovered from a broad range of diseases
      including breast cancer, Alzheimer's disease, Parkinson's disease and ALS,
      as
      well as the further development of diagnostic tests and other services. In
      addition, NeoGenomics agreed to purchase a convertible debenture for $200,000
      and acquired options to purchase common stock of the Company during 2007. Under
      the terms of the Agreement, Power3 agrees to issue, and NeoGenomics agrees
      to
      purchase, a convertible debenture in the principal amount of $200,000. The
      convertible debenture will be convertible into common shares of the Company
      at
      $0.20 per share; however, the conversion price can be reset at any time and
      from
      time to time, in accordance with paragraphs 7 and 9 of the Agreement. The
      debenture shall accrue interest at 6% per annum, payable quarterly, and the
      principal amount of the debenture shall be due and payable two years after
      closing.




In
      addition, in consideration of NeoGenomics, Inc.’s commitment to purchase the
      debenture and form the joint venture, Power3 signed a Letter of Intent with
      an
      expiration date of November 16, 2007 granting, to Neogenomics, Inc., an
      irrevocable option (the “First Option”) to purchase, in one or a series
      of
      transactions, voting convertible preferred stock that is convertible into such
      number of shares of common stock of Power3, after taking into account all
      outstanding First Option Preferred Stock, on an as-converted basis.




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




Currently,
      Power3 and NeoGenomics are in discussion to revise the expired Letter of Intent
      between the respective organizations.




**Competition**




The
      industry in which the Company operates is intensely competitive and subject
      to
      significant change with respect to technology for diagnosis and treatment of
      disease. Existing or future biotechnology, biomedical, pharmaceutical and other
      companies, government entities and universities may create developments that
      accomplish similar functions to the Company’s technologies in ways that are less
      expensive, receive faster regulatory approval or receive greater market
      acceptance than the Company’s potential products. The Company expects that
      competition in the biomarker discovery field will be based primarily on each
      product’s efficacy, stability, timing of entry of the product into the market,
      cost, and acceptance by health care providers and health care
      payers.




The
      Company’s competitors have, in general, been in existence for considerably
      longer than the Company has, and may have greater capital resources and access
      to capital, greater internal resources for activities in research and
      development, clinical testing and trials, production and distribution, and
      existing collaborative relationships with third parties.




The
      existing market for biomarker discovery platforms and processes for Alzheimer’s
      disease alone has been estimated to be in excess of $4 billion in the U.S.
      based
      on a study prepared by Frost & Sullivan. There are several other companies
      engaged in the research of proteomics and its application to biomarker discovery
      capabilities. Some of these companies include:




Celera
      Genomics, which is engaged in proteomics, bioinformatics and genomics to
      identify and develop drug targets and discover and develop new
      therapeutics;




Ciphergen
      Biosystems, which is active in biomarker discovery assay development and
      characterization;




Europroteome,
      which applies proteomics to human epithelial cancers to identify cancer specific
      protein expression patterns for clinical applications;




Matritech,
      which is a developer of proteomics-based diagnostic products for the early
      detection of cancer;




Myriad
      Genetics, which is focused on the development of therapeutic and diagnostic
      products using genomic and proteomic technologies;




10




WITA
      Proteomics, which focuses on the potential role of proteins from specific
      cellular sources under particular conditions and analysis of the presence of
      modified proteins and the strategic use of this information for drug development
      and diagnostic use; and




Provista
      Life Sciences, which is developing blood serum protein biomarker diagnostic
      tests for breast cancer and Alzheimer’s disease.




**Intellectual
      Property**




During
      the year ended December 31, 2007, Power3 filed 3 Utility and 2 Provisional
      Patent Applications with the U.S. Patent and Trademark Office. The Company
      also
      filed one Utility patent application in the first quarter of 2008. One
      Provisional and one Utility application are for a number of the Company's
      identified blood serum protein biomarkers, part of Power3's clinically validated
      biomarker panel for early detection and differential diagnosis of
      neurodegenerative diseases, including Alzheimer’s, Parkinson’s, and Lou Gehrig’s
      (ALS) diseases. Two Utility patent applications are for individual biomarkers
      which demonstrated unique specificities for Parkinson's disease. When used
      in
      combination with other Parkinson's biomarkers in our diagnostic panel, they
      increase the accuracy of diagnostic specificity to distinguish Parkinson's
      patients from other similar neurological disorders. One Utility patent
      application is for a group of isoforms of a protein that demonstrated unique
      capabilities to indicate a drug target for and to distinguish patients with
      Chronic Myelogenous Leukemia who will be resistant to the chemotherapeutic
      drug
      imatinib mesylate. One Provisional patent application is for a group of
      biomarkers in blood serum for detection of breast cancer.




The
      blood
      serum protein biomarkers in these patent applications are identified with
      sufficiently detailed molecular characterization to specify which protein
      isoforms or variants are the actual biomarkers. With the biomarker proteins
      fully characterized, and with Power3’s quality controls in place, consistent and
      significant differences in the concentration of select groups of these protein
      biomarkers in the blood of patients and age matched normal and disease controls,
      reflect meaningful indicators of disease processes, processes that also differ
      between diseases with similar symptoms.




In
      these
      patent filings, utilizing the patent pending technologies specified in previous
      patent application filings, we have demonstrated significant differences in
      blood serum concentrations between patients for objective differential diagnosis
      that also provides a rational basis for disease specific mechanism
      discrimination between:




§
            Similar
                neurodegenerative diseases: Alzheimer’s disease vs. Lou Gehrig’s disease
                (ALS) vs. Parkinson’s disease; Alzheimer’s disease vs. non-Alzheimer’s
                dementias vs. Parkinson’s disease




§
            Sporadic
                vs. familial neurodegenerative diseases: sporadic vs. familial Lou
                Gehrig’s disease (ALS)




§
            Early
                vs. more advanced neurodegenerative diseases and breast
                cancer;




§
            Drug
                sensitive vs. resistant cancer: Chronic Myelogenous Leukemia
                (CML)




These
      biomarkers provide the capacity for objective blood tests for early, rapid,
      sensitive, and specific diagnoses of neurodegenerative diseases which will
      be a
      substantial benefit to physicians and patients who now rely on subtleties in
      symptoms. By the time such symptoms become clear enough to diagnose, the patient
      has often suffered substantial irreversible neurological damage. Differences
      in
      these highly characterized protein biomarkers also provide the types of
      information that can be employed in the monitoring of patients for potential
      drug response, disease severity and progression, as well as for potential new
      drug targets.




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




For
      2007,
      Power3 filed 3 Utility Patents and 2 Provisional Patents. In February 2008,
      the
      neurodegenerative disease provisional patent was refiled with the United States
      Patent and Trademark Office as a Utility Patent.




11




**Patent Application**
            
            **Application**
              **Date**
            
            **Type**
              **of Patent**11/897,078:
                A Protein as a Biomarker of Parkinson’s Disease
            
            8/29/07
            
            US
                Utility11/899,212:
                A Protein as a Biomarker of Parkinson’s Disease
            
            9/5/07
            
            US
                Utility11/731,019:
                Proteins as Biomarkers for Indication and Targeting of Resistance
                and
                Sensitivity to an ABL Kinase Inhibitor in Patients with Chronic
                Myelogenous Leukemia
            
            3/29/07
            
            US
                Utility60/901,468:
                Ten (10) Protein Biomarkers for Diagnosis and Early Detection of
                Breast
                Cancer
            
            2/14/07
            
            US
                Provisional60/901,467:
                Forty Seven (47) Protein Biomarkers for Neurodegenerative Diseases
            
            2/14/07
            
            US
                Provisional12/069,807:
                Forty Seven (47) Protein Biomarkers for Neurodegenerative
                Diseases
            
            2/13/08
            
            US
                Utility




The
      number of pending patent applications as of the quarter ended December 31,
      2007,
      is 14 as follows:




**Qty**
            
            **Type
                of Patent**2
            
            Breast
                Cancer8
            
            Neurodegenerative3
            
            Drug
                Resistance1
            
            Biomarker
                Discover Process




**Investor
      Relations/Public Relations**




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




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




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




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




**Item
      2. Description of Property**




The
      Company does not own any real estate. The Company conducts its operations from
      premises with a five year escalating lease expiring August 1, 2009 consisting
      of
      approximately 7,200 square feet in The Woodlands, Texas.




At
      this
      facility the Company maintains its executive offices and conducts development
      and product prototyping activities. The Company expects this space will be
      adequate for its needs for the remainder of the lease term. The escalating
      rent
      schedule follows:




12




**Months**
            
            **Monthly Base Rent**June
                1, 2004 to August 1, 2004
            
            $
            0September
                1, 2004 to August 1, 2005
            
            $
            5,988September
                1, 2005 to August 1, 2006
            
            $
            6,587September
                1, 2006 to August 1, 2007
            
            $
            8,084September
                1, 2007 to August 1, 2008
            
            $
            8,983September
                1, 2008 to August 1, 2009
            
            $
            9,581





**Item
      3** **.**  **Legal
      Proceedings**




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




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




On
      May 19, 2005, Quinn Capital Consulting, Inc. filed suit against Power3
      and Steven B. Rash claiming breach of contract regarding payment for services
      claimed to be provided to Power3, with payment to have been made by issue of
      500,000 shares to Quinn Capital, which Power3 later cancelled or otherwise
      converted. This financial obligation is recorded in the obligations of the
      Company as of December 31, 2006. In February, 2007, the Company and Quinn
      Capital reached a settlement agreement in this matter. The company issued
      500,000 common shares to Quinn Capital and agreed to pay $75,000, over time,
      as
      settlement of any and all claims in this matter. The remaining amount accrued
      on
      this settlement as of year ended December 31, 2007 is $40,000




On
      September 12, 2005, Focus Partners LLC filed suit against David Zazoff and
      Power3 alleging that Power3 breached its agreement with Focus Partners in that
      it failed to issue stock to the Plaintiff according to the terms of their
      agreement, that the stock in question was issued to Zazoff and that Zazoff
      later
      sold the stock in question for $480,000. On October 3, 2007, this case was
      dismissed against Power3 resulting in Power3 not paying costs to any
      party.




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




In
      October 2007 Winstead filed suit against the Company for approximately $17,000
      in attorney fees. In March 2008 a settlement was reached. The fees have been
      reduced to $9,000 and a payout schedule has been agreed upon.




On
      October 24, 2007, the Company settled an outstanding accounts payable with
      a vendor. A settlement agreement and release of all claims was agreed upon.
      The
      Company’s accounts payable was reduced by $67,638. The settlement agreement and
      release of all claims can be found as an exhibit to the Company’s quarter ended
      September 30, 2007 10-QSB.




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




13




On
      March
      12, 2008,
      all
      matters involving the dispute over the taking, by an ex-employee, of
      certain trade secrets, defamation and tortious interference with Power3's
      contractual relations with other parties, and a pendent wage claim for severance
      pay, were resolved. The Company has agreed to pay the ex-employee $35,000 and
      issue to the ex-employee 325,000 shares of the Company’s common stock with
      restrictions.




In
      June,
      2005, Charles Caudle et al filed a lawsuit in Harris County, Texas, against
      Industrial Enterprises of America, Inc. formerly Advanced BioChem, Power3 and
      the officers and directors of both companies. The suit alleged that against
      Industrial Enterprises of America, Power3 and the officers and directors of
      Power3, were liable to Charles Caudle et al for damages resulting from funds
      loaned to Industrial Enterprises of America and which were subsequently
      converted into common stock of Industrial Enterprises of America. On August
      10,
      2007 a settlement was reached between Industrial Enterprises of America,
      formerly Advanced BioChem, Charles Caudle et. al. and Power3 and the Company
      will not incur any financial obligations or loss whatsoever from this
      action.




In
      October of 2006, Trinity Financing filed a lawsuit against the Company claiming
      default on a promissory note dated December 9, 2005. As security for the Note,
      Steven Rash and Ira Goldknopf pledged their personal restricted shares of the
      Company’s stock. As a result of the alleged default in payment of the Note,
      Trinity Financing seeks to have the restrictive legend removed so the shares
      may
      be sold by Trinity Financing in satisfaction of the loan. The Company denied
      the
      material allegations and asserted three counterclaims against Trinity Financing.
      The company asserted that the Note, as well as a prior promissory note executed
      in favor of Trinity Financing, are usurious. The matter was settled February
      4,
      2008 with the removal of the restrictive legend, and the return by Trinity
      Financing to Ira Goldknopf 1,700,000 pledged shares.




On
      August
      13, 2007, Gryphon Master Fund LP and GSFF Master Fund, LP filed a lawsuit
      against the Company claiming a breach of a Securities Purchase Agreement,
      Convertible Debentures, and Registration Rights Agreement. The plaintiffs
      claimed the Company failed to timely obtain an effective registration statement
      for the shares issued to the plaintiffs and refused to recognize anti-dilution
      rights of the plaintiffs. The Company denies the material allegations of the
      complaint and asserts numerous affirmative defenses. Power3 intends to
      vigorously defend this action.




**Item****4.****Submission
      of Matters to a Vote of Security Holders**




No
      matters were submitted to the security holders for a vote during the year ended
      December 31, 2007.





PART
      II





**Item
      5. Market for Common Equity and Related Stockholder Matters**





**Market
      Information**




During
      2004, the Company’s common stock was traded on the OTC Bulletin Board under the
      symbol “PWRM.” From June 2005 to September 2007, the Company’s common stock
      was quoted on the Pink Sheets. On September 26, 2007 Power3 announced that
      its
      common stock began trading on the Over-the-Counter (OTC) Bulletin Board under
      the symbol PWRM.OB, as reported previously. The high and low bid information
      for
      each quarter for the years ended December 31, 2007 and 2006, as reported by
      National Quotation Bureau, Inc., are as follows:




**Quarter**
            
            **High
                Bid**
            
            **Low
                Bid**First
                Quarter 2008
            
            $
            0.16
            
            $
            .08First
                Quarter 2007
            
            $
            0.22
            
            $
            0.06Second
                Quarter 2007
            
            $
            0.29
            
            $
            0.13Third
                Quarter 2007
            
            $
            0.19
            
            $
            0.15Fourth
                Quarter 2007
            
            $
            0.17
            
            $
            0.12First
                Quarter 2006
            
            $
            0.42
            
            $
            0.10Second
                Quarter 2006
            
            $
            0.33
            
            $
            0.14Third
                Quarter 2006
            
            $
            0.16
            
            $
            0.09Fourth
                Quarter 2006
            
            $
            0.13
            
            $
            0.05




14




Prices
                listed through March 31, 2008




The
      quotations above reflect inter-dealer prices, without adjustment for retail
      markup, markdown or commissions and may not reflect actual
      transactions.




**Holders**




As
      of
      December 31, 2007, there were 1,150 shareholders of record of the Company’s
      common stock.




**Dividends**




The
      Company has not paid or declared any dividends on its common stock for the
      last
      three fiscal years and does not anticipate paying cash dividends in the
      foreseeable future. There are no limitations on the ability of the Company
      to
      declare dividends, except those set forth in § 510 of the New York Business
      Corporation Laws which prohibits dividends if the Company is insolvent or would
      be made insolvent by the declaration of a dividend and all dividends must be
      made out of surplus only.





**Recent
      Sales of Unregistered Securities; Use of Proceeds from Registered
      Securities**





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





**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation**




Revenues
      from operations for the year ended December 31, 2007 were $122,224 compared
      to
      $300,000 for the year ended December 31, 2006. The decrease in revenues was
      primarily a result of selling less blood serum samples to Biosite to be used,
      by
      Biosite, in the development and testing of antibodies. The Company has not
      incurred any cost of goods sold for the years ended December 31, 2007 or
      December 31, 2006.




Operating
      expenses were $3,008,304 for 2007 as compared to operating expenses for 2006
      of
      $6,905,153, a decrease of $3,896,849. The decrease in operating expenses was
      primarily due to a significant reduction in employee stock compensation expense
      in 2007, compared to 2006.




Employee
      compensation and benefits were $1,675,495 in 2007 compared to $6,041,029 in
      2006
      a decrease of $4,365,534. The decrease is primarily a result of significant
      vesting of stock awards in 2006.




Occupancy
      and equipment expenses were $142,080 in 2007 as compared to $134,593 in 2006.
      The increase is primarily due to an increase in utilities and repairs during
      2007.




Derivative
      loss amounted to $1,712,956 during the year ended December 31, 2007. This is
      a
      significant change from the gain of $1,194,129 during the year ended December
      31, 2006. The loss is primarily due to reset provisions in the remaining
      instruments that were triggered by warrant exercise price reductions. Also,
      our
      common stock price has improved in this period also driving the difference.
      The
      Company generally does not use derivative financial instruments to hedge
      exposures to cash-flow risks or market-risks that may affect the fair values
      of
      its financial instruments. However, certain other financial instruments, such
      as
      warrants and embedded conversion features that are indexed to our common stock,
      are classified as liabilities when either (a) the holder possesses rights to
      net-cash settlement or (b) physical or net-share settlement is not within our
      control. In such instances, net-cash settlement is assumed for financial
      accounting and reporting, even when the terms of the underlying contracts do
      not
      provide for net-cash settlement. Such financial instruments are initially
      recorded at fair value and subsequently adjusted to fair value at the close
      of
      each reporting period. The Company has recorded fair value adjustments to our
      derivative financial instruments, which will result in charges or credits to
      our
      income, until we require the ability to settle these instruments with our common
      stock.




15




Interest
      expense amounted to $2,185,740 and $1,008,866 for the years ended December
      31,
      2007 and 2006, respectively. Interest expense increased due to the interest
      rates increasing on overdue financial instruments and the accretion of discounts
      associated with our embedded derivatives.





The
      above
      matters resulted in net loss decreasing from $6,415,969 in 2006 to $5,216,288
      in
      2007. The decrease in net loss in 2007 was primarily due to gains on conversion
      of financial instruments.




**Liquidity
      and Capital Resources**




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




Net
      cash
      used in operating activities amounted to $2,083,548 for the year ended December
      31, 2007, compared to $1,156,147 for the year ended December 31, 2006. The
      change in net cash used in operating activities during 2007 was primarily due
      to
      changes in the fair value of derivative liabilities, a reduced net loss,
      amortization of deferred finance cost and debt discount, higher overhead and
      legal and consulting fees, as compared to December 31, 2006.




Net
      cash
      provided by financing activities was $2,171,694 for the year ended December
      31,
      2007, as compared to $1,195,350 for the year ended December 31, 2006. This
      change is primarily due to borrowings, capital raises through investor stock
      purchases, and proceeds from the exercise of warrants.




As
      of
      December 31, 2007, the Company’s principal source of liquidity was $125,679 in
      cash.




Other
      current assets for the year ended December 31, 2007 amounted to $23,247 as
      compared to $0 at December 31, 2006. In the past the Company has purchased
      items
      as needed. This increase is primarily due to an increase in inventory resulting
      from the Company making a bulk purchase.




**Plan
      of Operation and Cash Requirements**




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




Absent
      a
      source of revenues, the Company will require funding in order to carry out
      its
      business plan until such time as it is able to generate sustained revenues.
      The
      Company’s current cash requirements are approximately $180,000 per month and the
      Company anticipates that it will require approximately $2,150,000 for the twelve
      months ended December 31, 2008, to continue its development activities,
      undertake and perform clinical validation studies, continue its marketing
      efforts and maintain its administrative infrastructure, as follows:




**Estimated
      Expenditures Required**


**During
      Next Twelve Months**





General
                and administrative
            
            $
            1,800,000Patent
                filings and intellectual property
            
            
            100,000Capital
                expenditures and research agreements
            
            
            250,000Total
            
            $
            2,150,000




16




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




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




**Deemed
      Dividend**





On
      September 7, 2007 in consideration for consulting services provided by a certain
      warrant holder, the Company reduced the exercise price of warrants to acquire
      3,999,999 shares of the Company’s common stock held by the warrant holder from
      $0.08 to $0.06.





As
      a
      result of the above reduction in warrant exercise price, the Company recorded
      a
      non-cash deemed dividend of $17,635.





The
      amount of the deemed dividend was estimated to be equal to the incremental
      fair
      value conveyed to the debt holders via the reduction of the exercise price
      of
      the warrants determined as provided in paragraph 51 of SFAS 123R utilizing
      the
      Black-Scholes valuation model.




**Off-Balance
      Sheet Arrangements**




At
      December 31, 2007, the only off balance sheet agreements in place for the
      Company were a lease in effect for its office space, leases in effect for phone
      equipment, leases in effect for lab equipment and employment agreements entered
      with its three principal officers.




17





Item
      7.
      Financial Statements.







**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**FINANCIAL
      STATEMENTS**


**AS
      OF DECEMBER 31, 2007 AND 2006**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**and
      the period from May 18, 2004 (inception) through December 31,
      2007**





PageReports
                of Independent Registered Public Accounting Firm
            19Balance
                Sheets as of December 31, 2007 and 2006
            21Statements
                of Operation for the years ended December 31, 2007 and 2006 and the
                period
              from
                May 18, 2004 (inception) through December 31, 2007
            22Statements
                of Stockholders’ Deficit for all periods since Company entered development
                stage
            23Statements
                of Cash Flows for the years ended December 31, 2007 and 2006 and
                the
                period
              from
                May 18, 2004 (inception) through December 31, 2007
            27Notes
                to Financial Statements
            29





18




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors


Power3
      Medical Products, Inc.


(A
      Development Stage Company)


The
      Woodlands, Texas




We
      have
      audited the accompanying balance sheet of Power3 Medical Products, Inc. as
      of
      December 31, 2007 and the related consolidated statements of operations,
      stockholders' equity (deficit) and cash flows for the year then ended. The
      financial statements for the period May 18, 2004 (inception) through December
      31, 2006, were audited by other auditors whose reports expressed unqualified
      opinions on those statements. The financial statements for the period May 18,
      2004 (inception) through December 31, 2006, include total revenues and net
      loss
      of $304,000 and $48,787,175, respectively. Our opinion on the statements of
      operations, stockholders' equity (deficit) and cash flows for the period May
      18,
      2004 (inception) through December 31, 2006, insofar as it relates to amounts
      for
      prior periods through December 31, 2006, is based solely on the reports of
      other
      auditors. These financial statements are the responsibility of Power3's
      management. Our responsibility is to express an opinion on these financial
      statements based on our audits.




We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Power3 Medical Products, Inc as
      of
      December 31, 2007 and the results of its operations and cash flows for the
      periods described above in conformity with accounting principles generally
      accepted in the United States of America.




The
      accompanying financial statements have been prepared assuming that Power3 will
      continue as a going concern. As discussed in Note 2 to the financial statements,
      Power3 has suffered recurring losses from operations which raises substantial
      doubt about its ability to continue as a going concern. Management's plans
      regarding those matters also are described in Note 2. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.




/s/
      McElravy, Kinchen & Associates, PC




www.mkacpas.com


Houston,
      Texas




April
      11,
      2008




19




**Report
      of Independent Registered Public Accounting Firm**


To
      the
      Board of Directors


Power3
      Medical Products, Inc


(A
      development stage company)


The
      Woodlands, Texas





We
      have
      audited the accompanying balance sheet of Power3 Medical Products, Inc (the
      “Company”) as of December 31, 2006 and the related statements of
      operations, stockholders’ deficit, and cash flows for the years then ended.
      These financial statements are the responsibility of the Company’s management.
      Our responsibility is to express an opinion on these financial statements based
      on our audit.





We
      conducted our audit in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company, as of December 31,
      2006 and the results of its operations and its cash flows for the year then
      ended in conformity with accounting principles generally accepted in the United
      States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 3 to the financial
      statements, the Company has suffered recurring losses from operations, has
      negative cash flow from operations, and has an accumulated deficit, which raises
      substantial doubt about its ability to continue as a going concern. Management’s
      plans regarding these matters also are described in Note 3. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





/s/
      Malone & Bailey, PC


Malone
      & Bailey, PC


www.malone−bailey.com


Houston,
      Texas


July
      9,
      2007




20





**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**BALANCE
      SHEETS**


**AS
      OF DECEMBER 31, 2007 AND 2006**





**December
                31,**
              **2007**
            
            **December 31,**
              **2006****ASSETS**CURRENT
                ASSETSCash
                and Cash Equivalents
            
            $
            125,679
            
            $
            40,602Other
                Current Assets
            
            
            23,247
            
            
            —TOTAL
                CURRENT ASSETS
            
            
            148,926
            
            
            40,602OTHER
                ASSETSDeferred
                Finance Costs, net of amortization of $176,952 and $50,813 at December
                31,
                2007 and 2006, respectively
            
            
            127,197
            
            
            253,336Intellectual
                Property
            
            
            —
            
            
            179,786Furniture,
                Fixtures and Equipment, net of accumulated depreciation of $98,960
                and
                $85,316 at December 31, 2007 and 2006, respectively
            
            
            5,799
            
            
            16,374Deposits
            
            
            21,598
            
            
            5,900**TOTAL
                ASSETS**
            
            $
            303,520
            
            $
            495,998**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**CURRENT
                LIABILITIESAccounts
                Payable
            
            $
            969,387
            
            $
            899,177Notes
                Payable – in default, net of amortization of $0 and $94,678 at December
                31, 2007 and 2006, respectively
            
            
            451,000
            
            
            777,822Notes
                Payable
            
            
            50,000Notes
                Payable to Related Parties
            
            
            1,934,816
            
            
            1,428,346Convertible
                Debentures-in default, net of amortization of $1,178,865 and $1,139,866
                at
                December 31, 2007 and 2006, respectively
            
            
            645,190
            
            
            360,417Other
                Current Liabilities
            
            
            1,242,936
            
            
            1,517,808Derivative
                Liabilities
            
            
            3,794,305
            
            
            1,281,348**TOTAL
                LIABILITIES**
            
            
            9,087,634
            
            
            6,264,918**STOCKHOLDERS’
                DEFICIT**Preferred
                Stock - $0.01 par value 50,000,000 shares authorized: none issued
                or
                outstanding
            
            
            —
            
            
            —Common
                Stock-$0.001 par value: 150,000,000 shares authorized; 108,352,636
                and
                71,370,955 shares issued and outstanding as of December 31, 2007
                and 2006,
                respectively
            
            
            108,353
            
            
            71,370Additional
                Paid-In Capital
            
            
            60,191,104
            
            
            58,009,358Deficit
                Accumulated Before Entering Development Stage
            
            
            (11,681,500
            )
            
            (11,681,500
            )Deficit
                Accumulated During Development Stage
            
            
            (57,402,071
            )
            
            (52,168,148
            )TOTAL
                STOCKHOLDERS’ DEFICIT
            
            
            (8,784,114
            )
            
            (5,768,920
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT**
            
            $
            303,520
            
            $
            495,998





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




21





**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**STATEMENTS
      OF OPERATIONS**


**YEARS
      ENDED DECEMBER 31, 2007 AND 2006**


**and
      the period from May 18, 2004 (inception) through December 31,
      2007**





**2007**
            
            **2006**
            
            **Period from**
              **May 18, 2004**
              **through**
              **December**
              **31,2007****REVENUES**:Sales
            
            $
            122,224
            
            $
            300,000
            
            $
            426,224TOTAL
                REVENUE
            
            
            122,224
            
            
            300,000
            
            
            426,224**OPERATING
                EXPENSES**:Employee
                compensation and benefits
            
            
            1,675,495
            
            
            6,041,029
            
            
            30,007,990Professional
                and consulting fees
            
            
            723,251
            
            
            562,764
            
            
            9,340,827Impairment
                of goodwill
            
            
            —
            
            
            —
            
            
            13,371,776Impairment
                of intangible assets
            
            
            179,788
            
            
            —
            
            
            179,788Occupancy
                and equipment
            
            
            142,080
            
            
            134,593
            
            
            532,404Travel
                and entertainment
            
            
            113,995
            
            
            72,872
            
            
            342,492Write
                off lease
            
            
            —
            
            
            34,243
            
            
            34,243Other
                selling, general andadministrative
                expenses
            
            
            173,695
            
            
            59,652
            
            
            461,618TOTAL
                OPERATING EXPENSES
            
            
            3,008,304
            
            
            6,905,153
            
            
            54,271,138**LOSS
                FROM OPERATIONS**
            
            
            (2,886,080
            )
            
            (6,605,153
            )
            
            (53,844,914
            )**OTHER
                INCOME AND (EXPENSE)**:Derivative
                gain(loss)
            
            
            (1,712,956
            )
            
            1,194,129
            
            
            2,607,863Gain
                on legal settlement
            
            
            18,889
            
            
            —
            
            
            18,889Interest
                income
            
            
            5,025
            
            
            792
            
            
            7,291Mandatory
                prepayment penalty
            
            
            —
            
            
            —
            
            
            (420,000
            )Other
                income (expense)
            
            
            —
            
            
            3,129
            
            
            (196,176
            )Gain
                on conversion of financial
              instruments
            
            
            1,544,574
            
            
            —
            
            
            1,544,574Interest
                expense
            
            
            (2,185,740
            )
            
            (1,008,866
            )
            
            (3,720,990
            )TOTAL
                OTHER INCOME (EXPENSE)
            
            
            (2,330,208
            )
            
            189,184
            
            
            (158,549
            )**NET
                LOSS**
            
            
            (5,216,288
            )
            
            (6,415,969
            )
            
            (54,003,463
            )Deemed
                dividend
            
            
            (17,635
            )
            
            —
            
            
            (17,635
            )**NET
                LOSS ATRIBUTABLE TO COMMON STOCKHOLDERS**
            
            $
            (5,233,923
            )
            $
            (6,415,969
            )
            $
            (54,021,098
            )**NET
                LOSS PER SHARE****BASIC
                AND DILUTED**
            
            $
            (0.06
            )
            $
            (0.09
            )Weighted
                average number of sharesoutstanding
            
            
            89,736,470
            
            
            71,207,912





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





22





**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**STATEMENT
      OF STOCKHOLDERS' DEFICIT**


**FROM
      INCEPTION TO DECEMBER 31, 2007**


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




23




**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**STATEMENT
      OF STOCKHOLDERS' DEFICIT (CONTINUED)**


**FROM
      INCEPTION TO DECEMBER 31, 2007**





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




24




**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**


**STATEMENT
      OF STOCKHOLDERS' DEFICIT (CONTINUED)**


**FROM
      INCEPTION TO DECEMBER 31, 2007**


**Common Stock**
              
              **Preferred
                  Stock**
              
              **Additional**
                **Paid
                  In**
              
              **Deferred**
                **Compensation**
              
              **Retained****Shares**
              
              **Par Value**
              
              **Shares**
              
              **Par Value**
              
              **Capital**
              
              **Expense**
              
              **Earnings**
              
              **Equity****Balances,
                  December 31, 2006**
              
              
              **71,370,955**
              ****
              **$**
              **71,370**
              ****
              ****
              **—**
              ****
              **$**
              **—**
              ****
              **$**
              **58,009,358**
              ****
              **$**
              **—**
              ****
              **$**
              **(63,849,648**
              **)**
              **$**
              **(5,768,920**
              **)**Issued
                  shares on January 2, 2007 for services
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on January 23, 2007 for conversion
              
              
              1,000,000
              
              
              1,000
              
              
              
              
              
              
              
              
              59,000
              
              
              
              
              
              
              
              
              60,000Issued
                  shares on January 30, 2007 for services
              
              
              500,000
              
              
              500
              
              
              
              
              
              
              
              
              42,000
              
              
              
              
              
              
              
              
              42,500Issued
                  shares on March 14, 2007 for conversion
              
              
              3,000,000
              
              
              3,000
              
              
              
              
              
              
              
              
              157,000
              
              
              
              
              
              
              
              
              160,000Issued
                  shares on April 13, 2007 for services
              
              
              160,000
              
              
              160
              
              
              
              
              
              
              
              
              35,040
              
              
              
              
              
              
              
              
              35,200Issued
                  shares on April 13, 2007 for services
              
              
              300,000
              
              
              300
              
              
              
              
              
              
              
              
              65,700
              
              
              
              
              
              
              
              
              66,000Issued
                  shares on April 30, 2007 for conversion
              
              
              713,708
              
              
              714
              
              
              
              
              
              
              
              
              (119,866
              )
              
              
              
              
              
              
              
              (119,152
              )Issued
                  shares on May 11, 2007 for conversion
              
              
              157,895
              
              
              158
              
              
              
              
              
              
              
              
              (53,974
              )
              
              
              
              
              
              
              
              (53,816
              )Issued
                  shares on May 16, 2007 for warrants exercised
              
              
              833,333
              
              
              834
              
              
              
              
              
              
              
              
              65,834
              
              
              
              
              
              
              
              
              66,668Issued
                  shares on May 16, 2007 for conversion
              
              
              833,333
              
              
              833
              
              
              
              
              
              
              
              
              49,167
              
              
              
              
              
              
              
              
              50,000Issued
                  shares on May 16, 2007 for conversion
              
              
              713,708
              
              
              714
              
              
              
              
              
              
              
              
              (119,894
              )
              
              
              
              
              
              
              
              (119,180
              )Issued
                  shares on May 16, 2007 for conversion
              
              
              4,127,000
              
              
              4,127
              
              
              
              
              
              
              
              
              243,332
              
              
              
              
              
              
              
              
              247,459Issued
                  shares on May 16, 2007 for conversion
              
              
              359,595
              
              
              360
              
              
              
              
              
              
              
              
              (111,235
              )
              
              
              
              
              
              
              
              (110,875
              )Issued
                  shares on May 16, 2007 for conversion
              
              
              178,427
              
              
              178
              
              
              
              
              
              
              
              
              (29,973
              )
              
              
              
              
              
              
              
              (29,795
              )Issued
                  shares on May 17, 2007 for conversion
              
              
              11,970
              
              
              12
              
              
              
              
              
              
              
              
              (1,531
              )
              
              
              
              
              
              
              
              (1,519
              )Issued
                  shares on May 17, 2007 for conversion
              
              
              71,370
              
              
              71
              
              
              
              
              
              
              
              
              (9,130
              )
              
              
              
              
              
              
              
              (9,059
              )Issued
                  shares on June 1, 2007 for conversion
              
              
              200,000
              
              
              200
              
              
              
              
              
              
              
              
              11,800
              
              
              
              
              
              
              
              
              12,000Issued
                  shares on June 7, 2007 for conversion
              
              
              5,900,231
              
              
              5,900
              
              
              
              
              
              
              
              
              346,662
              
              
              
              
              
              
              
              
              352,562Issued
                  shares on June 13, 2007 for services
              
              
              400,000
              
              
              400
              
              
              
              
              
              
              
              
              79,600
              
              
              
              
              
              
              
              
              80,000Issued
                  shares on June 13, 2007 for cash
              
              
              1,750,000
              
              
              1,750
              
              
              
              
              
              
              
              
              298,250
              
              
              
              
              
              
              
              
              300,000Issued
                  shares on June 13, 2007 for cash
              
              
              1,500,000
              
              
              1,500
              
              
              
              
              
              
              
              
              348,500
              
              
              
              
              
              
              
              
              350,000Placement
                  agent fees
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (58,500
              )
              
              
              
              
              
              
              
              (58,500
              )Stock
                  received
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              100
              
              
              
              
              
              
              
              
              100Unreturned
                  shares
              
              
              5,000
              
              
              5
              
              
              
              
              
              
              
              
              4,495
              
              
              
              
              
              
              
              
              4,500Issued
                  shares on August 3, 2007 for conversion
              
              
              3,793,301
              
              
              3,793
              
              
              
              
              
              
              
              
              115,202
              
              
              
              
              
              
              
              
              118,995Issued
                  shares on August 23, 2007 for conversion
              
              
              174,035
              
              
              174
              
              
              
              
              
              
              
              
              10,212
              
              
              
              
              
              
              
              
              10,386Issued
                  shares on August 23, 2007 for conversion
              
              
              588,235
              
              
              588
              
              
              
              
              
              
              
              
              22,451
              
              
              
              
              
              
              
              
              23,039Issued
                  shares on September 7, 2007 for warrants exercised
              
              
              3,999,999
              
              
              4,000
              
              
              
              
              
              
              
              
              236,000
              
              
              
              
              
              
              
              
              240,000Issued
                  shares on October 31, 2007 for warrants exercised
              
              
              437,500
              
              
              438
              
              
              
              
              
              
              
              
              34,562
              
              
              
              
              
              
              
              
              35,000Issued
                  shares on November 9, 2007 for conversion
              
              
              442,416
              
              
              442
              
              
              
              
              
              
              
              
              37,189
              
              
              
              
              
              
              
              
              37,631Issued
                  shares on November 15, 2007 for cash
              
              
              700,000
              
              
              700
              
              
              
              
              
              
              
              
              55,300
              
              
              
              
              
              
              
              
              56,000Issued
                  shares on November 19, 2007 for cash
              
              
              250,000
              
              
              250
              
              
              
              
              
              
              
              
              19,750
              
              
              
              
              
              
              
              
              20,000Issued
                  shares on November 20, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000
  25
  Issued
                  shares on November 20, 2007 for cash
              
              
              62,500
              
              
              63
              
              
              
              
              
              
              
              
              4,937
              
              
              
              
              
              
              
              
              5,000Issued
                  shares on November 20, 2007 for cash
              
              
              15,000
              
              
              15
              
              
              
              
              
              
              
              
              1,185
              
              
              
              
              
              
              
              
              1,200Issued
                  shares on November 26, 2007 for cash
              
              
              12,500
              
              
              13
              
              
              
              
              
              
              
              
              987
              
              
              
              
              
              
              
              
              1,000Issued
                  shares on November 27, 2007 for cash
              
              
              12,500
              
              
              13
              
              
              
              
              
              
              
              
              987
              
              
              
              
              
              
              
              
              1,000Issued
                  shares on November 27,2007
                  for cash
              
              
              12,500
              
              
              13
              
              
              
              
              
              
              
              
              987
              
              
              
              
              
              
              
              
              1,000Issued
                  shares on November 27,2007
                  for cash
              
              
              6,250
              
              
              6
              
              
              
              
              
              
              
              
              494
              
              
              
              
              
              
              
              
              500Issued
                  shares on November 27,2007
                  for cash
              
              
              37,500
              
              
              38
              
              
              
              
              
              
              
              
              2,962
              
              
              
              
              
              
              
              
              3,000Issued
                  shares on November 27,2007
                  for cash
              
              
              300,000
              
              
              300
              
              
              
              
              
              
              
              
              23,700
              
              
              
              
              
              
              
              
              24,000Issued
                  shares on November 27,2007
                  for cash
              
              
              300,000
              
              
              300
              
              
              
              
              
              
              
              
              23,700
              
              
              
              
              
              
              
              
              24,000Issued
                  shares on November 27,2007
                  for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on November 30, 2007 for cash
              
              
              200,000
              
              
              200
              
              
              
              
              
              
              
              
              15,800
              
              
              
              
              
              
              
              
              16,000Issued
                  shares on November 30, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on November 30, 2007 for cash
              
              
              300,000
              
              
              300
              
              
              
              
              
              
              
              
              23,700
              
              
              
              
              
              
              
              
              24,000Issued
                  shares on December 5, 2007 for cash
              
              
              150,000
              
              
              150
              
              
              
              
              
              
              
              
              11,850
              
              
              
              
              
              
              
              
              12,000Issued
                  shares on December 5, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on December 5, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on December 5, 2007 for cash
              
              
              250,000
              
              
              250
              
              
              
              
              
              
              
              
              19,750
              
              
              
              
              
              
              
              
              20,000Issued
                  shares on December 5, 2007 for cash
              
              
              3,750
              
              
              4
              
              
              
              
              
              
              
              
              296
              
              
              
              
              
              
              
              
              300Issued
                  shares on December 6, 2007 for services
              
              
              350,000
              
              
              350
              
              
              
              
              
              
              
              
              52,150
              
              
              
              
              
              
              
              
              52,500Issued
                  shares on December 14, 2007 for cash
              
              
              6,250
              
              
              6
              
              
              
              
              
              
              
              
              494
              
              
              
              
              
              
              
              
              500Issued
                  shares on December 14, 2007 for cash
              
              
              3,750
              
              
              4
              
              
              
              
              
              
              
              
              296
              
              
              
              
              
              
              
              
              300Issued
                  shares on December 14, 2007 for cash
              
              
              28,750
              
              
              29
              
              
              
              
              
              
              
              
              2,271
              
              
              
              
              
              
              
              
              2,300Issued
                  shares on December 14, 2007 for cash
              
              
              4,375
              
              
              4
              
              
              
              
              
              
              
              
              346
              
              
              
              
              
              
              
              
              350Issued
                  shares on December 18, 2007 for cash
              
              
              6,250
              
              
              6
              
              
              
              
              
              
              
              
              494
              
              
              
              
              
              
              
              
              500Issued
                  shares on December 18, 2007 for cash
              
              
              6,250
              
              
              6
              
              
              
              
              
              
              
              
              494
              
              
              
              
              
              
              
              
              500Issued
                  shares on December 18, 2007 for cash
              
              
              6,250
              
              
              6
              
              
              
              
              
              
              
              
              494
              
              
              
              
              
              
              
              
              500Issued
                  shares on December 18, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Issued
                  shares on December 31, 2007 for cash
              
              
              1,000,000
              
              
              1,000
              
              
              
              
              
              
              
              
              79,000
              
              
              
              
              
              
              
              
              80,000Issued
                  shares on December 31, 2007 for cash
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              7,900
              
              
              
              
              
              
              
              
              8,000Deemed
                  dividend
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              17,635
              
              
              
              
              
              (17,635
              )Net
                  loss for year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,216,288
              )
              
              (5,216,288
              )**Balances
                  , December 31, 2007**
              
              
              **108,352,636**
              ****
              **$**
              **108,353**
              ****
              ****
              **—**
              ****
              **$**
              **—**
              ****
              **$**
              **60,191,104**
              ****
              **$**
              **—**
              ****
              **$**
              **(69,083,571**
              **)**
              **$**
              **(8,784,114**
              **)**




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




26




**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage** **Enterprise)**


**STATEMENTS
      OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2007 AND 2006**


**and
      the period from May 18, 2004 (inception) through December 31,
      2007**





**2007**
            
            **2006**
            
            **Period
                from**
              **May
                18, 2004 through December 31,2007**Operating
                activities:Net
                loss
            
            $
            (5,216,288
            )
            $
            (6,415,969
            )
            $
            (54,003,463
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Gain
                on conversion of financial instruments
            
            
            (1,544,574
            )
            
            —
            
            
            (1,544,574
            )Impairment
                of goodwill
            
            
            —
            
            
            —
            
            
            13,371,776Impairment
                of intangible assets
            
            
            179,788
            
            
            —
            
            
            179,788Loss
                on previously capitalized lease
            
            
            —
            
            
            34,243
            
            
            34,243Amortization
                of debt discounts and deferred finance costs
            
            
            2,112,288
            
            
            271,908
            
            
            2,526,742Change
                in derivative liability, net of bifurcation
            
            
            1,712,956
            
            
            (637,129
            )
            
            (1,453,962
            )Stock
                based compensation
            
            
            288,700
            
            
            5,096,078
            
            
            32,656,045Depreciation
                expense
            
            
            13,644
            
            
            20,134
            
            
            98,960Other
                non cash items
            
            
            —
            
            
            —
            
            
            (34,933
            )Changes
                in operating assets and liabilities:Prepaid
                expenses and other current assets
            
            
            (38,845
            )
            
            1,845
            
            
            169,937Accounts
                payable and other liabilities
            
            
            408,783
            
            
            472,743
            
            
            2,614,808Net
                cash used in operating activities
            
            
            (2,083,548
            )
            
            (1,156,147
            )
            
            (5,384,633
            )Investing
                Activities:Capital
                expenditures, net
            
            
            (3,069
            )
            
            —
            
            
            (139,002
            )Increase
                in other assets
            
            
            —
            
            
            —
            
            
            (179,786
            )Net
                cash used in investing activities
            
            
            (3,069
            )
            
            —
            
            
            (318,788
            )Financing
                Activities:Proceeds
                from borrowings under notes payable, net
            
            
            875,000
            
            
            970,350
            
            
            3,028,430Proceeds
                from sale of common stock
            
            
            941,950
            
            
            225,000
            
            
            1,616,767Principal
                payments on long term debt
            
            
            —
            
            
            —
            
            
            (32,478
            )Borrowing
                on debt related party
            
            
            30,376
            
            
            —
            
            
            30,376Principal
                payments on notes payable related party
            
            
            (17,300
            )
            
            —
            
            
            (17,300
            )Proceeds
                from CD, warrants and rights net of issuance cost
            
            
            341,668
            
            
            —
            
            
            1,200,709Net
                cash provided by financing activities
            
            
            2,171,694
            
            
            1,195,350
            
            
            5,826,504Net
                change in cash and cash equivalents
            
            
            85,077
            
            
            39,203
            
            
            123,083Cash
                and cash equivalents, beginning of period
            
            
            40,602
            
            
            1,399
            
            
            2,596Cash
                and cash equivalents, end of period
            
            $
            125,679
            
            $
            40,602
            
            $
            125,679




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


27




**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage** **Enterprise)**


**STATEMENTS
      OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2007 AND 2006**


**and
      the period from May 18, 2004 (inception) through December 31,
      2007**





**2007**
            
            **2006**
            
            **Period
                from**
              **May 18,
                2004**
              **through**
              **December
                31,**
              **2007**Supplemental
                disclosures of cash flow informationCash
                paid for:Interest
            
            
            —
            
            
            —
            
            
            59,840Income
                taxes
            
            
            —
            
            
            —
            
            
            —Non-cash
                transactions:Restatement
                of notes payable to notes payable related parties
            
            
            —
            
            
            1,201,346
            
            
            1,393,346Exchange
                of convertible notes for stock
            
            
            1,559,804
            
            
            
            
            
            1,559,804Stock
                Issued for Settlement of Payables
            
            
            —
            
            
            —
            
            
            6,697Deemed
                dividend
            
            
            17,635
            
            
            —
            
            
            17,635Exchange
                of convertible preferred stock forcommon
                stock 3,000,324 shares
            
            
            —
            
            
            —
            
            
            3,380,975





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





28




**POWER3
      MEDICAL PRODUCTS, INC.**


**(A
      Development Stage Enterprise)**




**NOTES
      TO FINANCIAL STATEMENTS** ****




***Note
      1. ORGANIZATION, PRINCIPLE ACTIVITIES AND BASIS OF
      PRESENTATION*** ****




Power3
      Medical Products, Inc. (the “Company” or “Power3”) was incorporated in the State
      of Florida on May 15, 1992 and merged into a New York Corporation in 1994,
      under
      the name Sheffield Acres, Inc. Power3 and its wholly owned subsidiaries, C5
      Health, Inc. (C5), which was officially dissolved in the State of Delaware
      and
      the State of Florida effective December 31, 2003 and Power3 Medical, Inc.,
      a
      Nevada Corporation, now known as Tenthgate, Inc., were engaged in product
      development, sales, distribution and services for the healthcare industry.
      On
      September 12, 2003, Surgical Safety Products, Inc. amended its Certificate
      of
      Incorporation to (a) declare a 1:50 reverse split of its common stock; (b)
      increase its authorized capital to 150,000,000 shares of common stock and
      50,000,000 shares of preferred stock; and (c) change its name to Power3 Medical
      Products, Inc. All references to the number of shares in the accompanying
      financial statements and notes thereto have been adjusted to reflect the stock
      split as if it occurred on January 1, 2004.




Prior
      to
      May 17, 2004, the Company had one direct subsidiary, Tenthgate, Inc.
      (“Tenthgate”), a Nevada corporation formerly known as Power3 Medical, Inc. Prior
      to this date, Tenthgate was accounted for, by Power3, as a wholly-owned
      subsidiary, operating as a “development stage company”, under the cost method.
      As part of the transaction which involved the acquisition of substantially
      all
      the assets and certain liabilities from Advanced BioChem, now known as
      Industrial Enterprises of America, it was agreed that Power3 would distribute
      the shares of its subsidiary, Tenthgate, to its then existing shareholders
      . To
      fulfill this obligation, the shares of Tenthgate were transferred to a trustee
      for distribution to the shareholders of Power3 as of May 17, 2004. Tenthgate
      was
      spun off because the management of Power3, in place prior to May 17, 2004,
      desired to continue to own and eventually operate this subsidiary. At the time
      of the spin-off, Tenthgate was granted the rights to market a product line
      that
      had previously been marketed by Power3, but which the company had decided to
      abandon. Tenthgate had not been an operating company, and their management
      has
      apparently abandoned any plans to market the product as evidenced by their
      SEC
      filings, specifically their amended 10-QSB filed for the quarterly period ending
      January 31, 2005, wherein they specifically state that they are a “development
      stage company.” The prior operations of the company, which are reflected in the
      Company’s previous financial statements, prior to May 18, 2004, i.e. occurring
      prior to reentering the development stage, were the operations the Company
      had
      decided to abandon and which were transferred to the prior shareholders under
      the control of prior management. Any activities since May 17, 2004, are not
      consolidated with Power3 because Power3 does not now own or control the
      operations or activities of Tenthgate, nor are their activities associated
      with
      Power3 in any manner whatsoever.




In
      2003,
      Power3 was an operating company, marketing devices to aid surgical procedures.
      Prior to May 18, 2004, the products had received only minor market acceptance
      and sales had slowed to the point that Power3 was searching for other products
      and markets to increase its presence in the healthcare industry. In early 2004,
      Power3 became aware of a biotech company that appeared to have a set of assets
      and intellectual properties that it required to more effectively pursue its
      business model. That company, named Advanced BioChem, doing business as ProteEx,
      provided contract-for-fee lab services analyzing protein biomarkers. At the
      conclusion of negotiations with Advanced BioChem, Power3 entered into an Asset
      Purchase Agreement dated May 18, 2004, whereby it purchased substantially all
      the assets and intellectual properties of Advanced BioChem, and assumed certain
      liabilities, as scheduled in the agreement, from Advanced BioChem. After the
      transaction, certain employees from Advanced BioChem became employees of Power3
      and were later issued employment agreements by Power3. As consideration in
      the
      Asset Purchase Agreement, Power3 issued 15,000,000 shares of common stock to
      Advanced BioChem.




Power3
      Medical Products, Inc. did not continue the business activity of Advanced
      BioChem and never conducted any contract-for-fee lab service work. Subsequent
      to
      the asset purchase, the business model of Power3 was significantly changed,
      the
      Company entered into the development stage and began to commercialize the
      intellectual property it acquired in the transaction, with its focus in the
      early detection, monitoring and targeting of diseases through the analysis
      of
      proteins. Power3’s new developmental stage objective, and activity, is to
      develop its intellectual properties by focusing on disease 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.




29




Coincident
      with the asset purchase transaction on May 18, 2004, the previous management
      of
      Power3 resigned and left the employ of the Company. Immediately thereafter,
      two
      employees of Advanced BioChem were granted employment agreements by Power3.
      These two employees were Steven B. Rash as President and CEO and Dr. Ira
      Goldknopf as Chief Scientific Officer.




As
      a
      development stage company, Power3 is primarily engaged in commercializing its
      intellectual properties in the area of diagnosis and treatment of breast cancer,
      ALS, Alzheimer’s disease and Parkinson’s disease.




The
      accompanying financial statements of Power3 at December 31, 2007, have been
      prepared pursuant to the rules and regulations of the Securities and Exchange
      Commission.




***Note
      2.*** **** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES***





Basis
      of Presentation





The
      financial statements of Power3 Medical Products have been prepared in accordance
      with generally accepted accounting principles in the United States of America
      (GAAP). Certain prior period amounts have been reclassified to conform to the
      December 31, 2007 presentation. In the opinion of management, all adjustments,
      consisting of normal recurring adjustments, necessary for a fair presentation
      of
      financial position and the results of operations for the periods presented
      have
      been reflected herein.





Fair
      Value of Financial Instruments





Statement
      of Financial Accounting Standards (SFAS) 107, "Disclosures
      About Fair Value of Financial Instruments," ** requires
      disclosure of fair value information about financial instruments when it is
      practicable to estimate that value. The carrying amount of Power3’s cash,
      accounts payables, and accrued expenses approximates their estimated fair values
      due to the short term maturities of those financial instruments. The fair value
      of related party transactions is not determinable due to their related party
      nature.





Credit
      Risk





Power3
      does not require collateral from its customers with respect to accounts
      receivable but performs periodic credit evaluations of such customer's financial
      conditions. Power3 determines any required allowance by considering a number
      of
      factors including lengths of time accounts receivable are past due and Power3's
      previous loss history. Power3 provides reserves for accounts receivable when
      they become uncollectible, and payments subsequently received on such
      receivables are credited to the allowance for doubtful accounts.





Power3’s
      cash may exceed FDIC protection levels at different points throughout the year;
      management believes the risk associated with this possible exposure is minimal.
      Power3 was within FDIC protection limits at December 31, 2007 and 2006,
      respectively.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues and expenses, as well as certain financial statement disclosures.
      While
      management believes that the estimates and assumptions used in the preparation
      of the financial statements are appropriate, actual results could differ from
      these estimates.




30




Furniture,
      Fixtures and Lab Equipment





Furniture,
      fixtures and lab equipment are stated at cost. Major additions are capitalized,
      while minor additions and maintenance and repairs, which do not extend the
      useful life of an asset, are expensed as incurred. Depreciation and amortization
      are accounted for using the straight-line method over the assets’ estimated
      useful lives.




Debt
      Discounts and Deferred Finance Costs





Debt
      discounts and deferred finance costs are being amortized through periodic
      charges to interest expense over the maximum term of the related financial
      instrument using the effective interest method. Total amortization of debt
      discounts and deferred financing costs amounted to $2,112,288 and $271,908
      during the years ended December 31, 2007 and 2006, respectively.





Patents





Costs
      incurred for patent applications are capitalized and will be expensed over
      the
      life of the patent upon approval of the patent. If patent applications are
      unsuccessful, cost associated with these patents is expensed immediately.





Long-Lived
      Assets





Statement
      of Financial Accounting Standards (SFAS) 144, "Accounting for the Impairment
      or
      Disposal of Long-Lived Assets” requires that long-lived assets, including
      certain identifiable intangibles, be reviewed for impairment whenever events
      or
      changes in circumstances indicate that the carrying value of the assets in
      question may not be recoverable.





Statement
      of Financial Accounting Standards (SFAS) 142 “Accounting for Intangible Assets”
provides that some intangible assets are not subject to periodic amortization,
      but are evaluated at least annually for impairments. During March 2008
      management had reassessed the future cash flow and concluded that the prior
      expectations do not appear to be obtainable. This updated analysis
      resulted in management’s decision to impair intangible assets completely, as of
      December 31, 2007, resulting in impairment losses of $179,788 during the year
      ended December 31, 2007.





Accounting
      for Derivative Instruments





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




Lattice
      Valuation Model





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




31




Black−Scholes
      Valuation Model





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





Net
      Loss Per Share





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





Stock
      Based Compensation





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





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




As
      of
      December 31, 2007, the Company has not granted options to employees.





Income
      Taxes





Power3
      utilizes the asset and liability method in accounting for income taxes. Under
      this method, deferred tax assets and liabilities are recognized for operating
      loss and tax credit carry forwards and for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases. Deferred tax
      assets and liabilities are measured using enacted tax rates expected to apply
      to
      taxable income in the year in which those temporary differences are expected
      to
      be recovered or settled. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in the results of operations in the period
      that includes the enactment date. A valuation allowance is recorded to reduce
      the carrying amounts of deferred tax assets unless it is more likely than not
      that the value of such assets will be realized.





Research
      and Development





Research
      and development costs, which approximated $109,899 and $40,867 for the years
      ended December 31, 2007 and 2006, respectively, are expensed as incurred.




32




Cash
      Equivalents





For
      purposes of the statements of cash flows, Power3 considers all highly liquid
      debt instruments purchased with an original maturity of 90 days or less to
      be
      cash equivalents. As of December 31, 2007 and 2006 there were no cash
      equivalents.





Revenue
      Recognition





Power3’s
      revenue recognition policy is consistent with the criteria set forth in Staff
      Accounting Bulletin 104-Revenue Recognition in Financial Statements (SAB 104)
      for determining when revenue is realized or realizable and earned. In accordance
      with the requirements of SAB 104 the Company recognizes revenue when (1)
      persuasive evidence of an arrangement exists, (2) delivery has occurred, (3)
      the
      seller’s price is fixed or determinable, and (4) collectability is reasonably
      assured.





Recently
      Issued Accounting Pronouncements





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





***Note
      3.*** **** ***GOING
      CONCERN*** ****





As
      shown
      in the accompanying financial statements, Power3 incurred net losses chargeable
      to common shareholders of $5,233,923 and $6,415,969 in fiscal 2007 and 2006,
      respectively, and has an accumulated deficit of $8,784,114 as of December 31,
      2007. These conditions create an uncertainty as to Power3's ability to continue
      as a going concern. Management is trying to raise additional capital through
      various funding arrangements. The financial statements do not include any
      adjustment that might be necessary if Power3 is unable to continue as a going
      concern.





***Note
      4. EQUIPMENT***





Equipment
      consisted of the following at December 31, 2007 and 2006:





Description
            
            Life
            
            2007
            
            2006Computers
                & Related Devices
            
            
            5
                years
            
            $
            12,377
            
            $
            11,294Less:
                Accumulated Depreciation
            
            
            
            
            
            (9,113
            )
            
            (6,248
            )$
            3,264
            
            $
            5,046Lab
                Equipment
            
            
            5
                years
            
            $
            92,382
            
            $
            90,396Less:
                Accumulated Depreciation
            
            
            
            
            
            (89,847
            )
            $
            (79,068
            )2,535
            
            
            11,328Total
                Equipment Net of Depreciation
            
            
            
            
            $
            5,799
            
            $
            16,374




***Note
      5. OTHER CURRENT LIABILITIES***





Other
      liabilities and accrued expenses consisted of the following at December 31,
      2007
      and 2006:





2007
            
            2006Accrued
                rent
            
            $
            49,103
            
            $
            60,054Accrued
                interest
            
            
            447,647
            
            
            733,274Liquidated
                damages
            
            
            —
            
            
            24,000Prepayment
                penalty
            
            
            145,000
            
            
            420,000Accrued
                payroll taxes
            
            
            6,021
            
            
            58,408Accrued
                liabilities
            
            
            9,516
            
            
            111,999Salaries
                payable
            
            
            56,899
            
            
            110,073Common
                stock payable
            
            
            48,750
            
            
            —Preferred
                stock payable
            
            
            480,000
            
            
            —$
            1,242,936
            
            $
            1,517,808




33




***Note
      6*** **.** ***INCOME
      TAXES***





During
      2007 and 2006, Power3 incurred net losses and, therefore, had no tax liability.
      The net deferred tax asset generated by the loss carry forward has been fully
      reserved. The cumulative net operating loss carry forward is approximately
      $16,812,667 and $14,165,749 at December 31, 2007 and 2006, respectively and
      will
      expire in the years 2019 through 2027.




At
      December 31, 2007 the deferred tax assets consisted of the
      following:




Net
                Operating loss
            
            $
            5,716,307Less:
                Valuation allowance
            
            $
            (5,716,307
            )Net
                Deferred tax asset
            
            $
            —




***Note
      7*** **.** ***RELATED
      PARTY TRANSACTIONS***





In
      order
      to obtain bridge loan financing for the Company, Steven B. Rash, Chief Executive
      Officer of Power3, and Dr. Ira Goldknopf, Director of Proteomics of Power3,
      have
      both pledged 9,914,500 and 8,753,000 shares of Power3 common stock they owned
      personally, as collateral for the bridge loans obtained. In certain instances,
      these bridge loan providers have sold pledged shares they were holding as
      collateral for the notes to pay back the notes payable. The amounts obtained
      from the sale of pledged shares have been reported to the Company by the
      lenders. The Company owed Steven B. Rash notes payable, for the amounts of
      his
      pledged shares that have been sold, in the amount of $924,456 and $608,342
      at
      December 31, 2007 and 2006, respectively. The Company owed Dr. Ira Goldknopf
      notes payable, for the amounts of his pledged shares that have been sold, in
      the
      amount of $975,360 and $785,004 at December 31, 2007 and 2006, respectively.




During
      2007 and 2006, the following notes were issued to Steven B. Rash: $90,682 on
      January 2, 2007, maturing on July 2, 2007, at 6% interest; $242,732 on May
      8,
      2007, maturing on November 8, 2007, at 6% interest; $40,515 on January 20,
      2006,
      maturing on June 19, 2006, at 6% interest; 50,000 on March 1, 2006, maturing
      on
      June 1, 2006, at 6% interest; $11,500 on September 5, 2006, maturing on
      September 5, 2007, at 6% interest; $315,010 on September 30, 2006, maturing
      on
      March 30, 2007, at 6% interest; $5,800 on October 27, 2006, maturing on October
      26, 2007, at 6% interest; and $94,341 on December 31, 2006, maturing on June
      30,
      2007, at 6% interest.





During
      2007 and 2006, the following notes were issued to Dr. Ira Goldknopf: $18,135
      on
      September 30, 2006, maturing on March 30, 2007, at 6% interest; $5,387 on
      September 30, 2006, maturing on March 30, 2007, at 6% interest; $304,734 on
      September 30, 2006, maturing on June 30, 2007 at 6% interest; $89,400 on March
      2, 2006, maturing on June 2, 2006, at 6% interest; $106,117 on December 31,
      2006, maturing on December 31, 2007, at 6% interest; $4,180 on January 2, 2007
      maturing on July 2, 2008, at 6% interest; $36,176 on May 8, 2007, maturing
      on
      November 8, 2008, at 6% interest; $150,000 on December 28, 2007, maturing on
      December 27, 2008 at 6% interest.





During
      2005, Michael Rosinski, a previous employee of the Company, loaned the Company
      $35,000 at 6% interest. The loan remains outstanding, is in default and is
      carried on the balance sheet.





Amounts
      owed to Steven B. Rash, Dr. Ira Goldknopf and Michael Rosinski total $1,934,816
      and $1,428,346 at December 31, 2007 and 2006, respectively.





34





***Note
      8. OTHER COMMITMENTS AND CONTINGENCIES***




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




On
      March
      12, 2008, all matters involving an ex-employee, of certain trade secrets,
      defamation and tortious interference with Power3's contractual relations with
      other parties, and a pendent wage claim for severance pay, were resolved. In
      settlement of this lawsuit, 325,000 shares were issued on March 26, 2008 and
      payment of $35,000 will be made to the ex-employee no later than April 30,
      2008.
      As of December 31, 2007 the Company has accrued $35,000 salaries payable and
      $48,750 stock payable.




Warrants:





Warrants
      have been issued to various investors and others in connection with financing
      arrangements and for services. A summary table of the warrants outstanding
      is as
      follows:





2007
            
            2006Weighted
            
            
            
            WeightedAverage
            
            
            
            AverageExercise
            
            
            
            ExerciseWarrants
            
            Price
            
            Warrants
            
            PriceOutstanding
                at beginning of year
            
            
            14,499,996
            
            $
            .40
            
            
            5,383,333
            
            $
            .95Cancelled
            
            
            550,000
            
            $
            .20
            
            
            —
            
            $
            —Granted
            
            
            20,213,955
            
            $
            .10
            
            
            9,116,663
            
            $
            .08Exercised
            
            
            5,270,832
            
            $
            .08
            
            
            —
            
            $
            —Outstanding
                at end of year
            
            
            28,893,119
            
            $
            .12
            
            
            14,499,996
            
            $
            .40Exercisable
                at the end of the year
            
            
            28,893,119
            
            $
            .12
            
            
            14,499,996
            
            $
            .40




35




The
      following table summarizes information about the Company’s warrants outstanding
      at December 31, 2007:




ExercisePrice
            
            Number
              Outstanding
            
            Weighted
              Average
              Remaining
              Contractual
              Life
                (in
              years)$.08
            
            
            15,179,162
            
            
            3$.10
            
            
            9,713,958
            
            
            2$.14
            
            
            1,666,666
            
            
            5$.20
            
            
            833,333
            
            
            2$.25
            
            
            1,000,000
            
            
            5$.98
            
            
            300,000
            
            
            1$1.00
            
            
            100,000
            
            
            Ind$3.00
            
            
            100,000
            
            
            228,893,119
            
            
            3





***Note
      9. FINANCING ARRANGEMENTS***




**Securities
      Purchase Agreement—Convertible Debentures**




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




On
      October 28, 2004, the Company issued the Purchasers the first $1,000,000 in
      aggregate principal amount of such debentures at the initial closing under
      the
      Agreement. Effective January 26, 2005, the Company issued and sold, to a
      sub-group of the original investors, a second tranche of $400,000 aggregate
      principal amount of debentures. Subject to the conditions set forth in the
      Agreement, all purchasers are required to purchase the remaining $1,600,000
      in
      aggregate principal amount of such debentures at the final closing, which is
      to
      occur on or before the fifth trading day after the effective date of the
      registration statement. The Company is currently in default under the Agreement
      and the previously issued debentures and related registration rights agreement,
      and therefore the conditions of the Agreement will not be satisfied or otherwise
      met on a timely basis. Consequently, there are no assurances that the Purchasers
      will purchase all or any portion of the remaining $1,600,000 aggregate principal
      amount of debentures. The $1,400,000 aggregate principal amount of debentures
      that were issued October 28, 2004 and January 26, 2005 are due and
      payable in accordance with their original terms in full three years after the
      date of issuance and bear interest
      at a default rate of 18%. The debentures are convertible into shares of common
      stock at the following conversion price, which varies relative to the Company’s
      trading stock price, as follows: $0.90 per share, provided however if the lesser
      of (i) 75% of the average of the 5 consecutive Closing Prices immediately prior
      to the Effective Date, as defined in the Securities Purchase Agreement, and
      (ii)
      the Closing Price on the Effective Date (the lesser of (i) and (ii) being
      referred to as the “Effective Date Price”) is less than the Conversion Price,
      the Conversion Price shall be reduced to equal the Effective Date
      Price.




Under
      the
      Agreements, the Purchasers also received warrants to purchase an aggregate
      of up
      to 2,500,000 and 333,333 shares of common stock for tranche one and two,
      respectively, and additional investment rights to purchase up to an additional
      $2,500,000 of convertible debentures. The warrants are exercisable at a price
      of
      $0.08 per share, subject to adjustment, including anti-dilution
      protection . The
      additional investment rights are exercisable at a price equal to the principal
      amount of the debentures to be purchased, for (1) a period of nine months
      following the effective date of the registration statement to be filed pursuant
      to the Registration Rights Agreement, or (2) a period of 18 months from the
      date
      of issuance of the additional investment rights, whichever is shorter. The
      rights debentures will have the same terms as the debentures described above,
      except that the conversion price will be equal to $1.08.




36




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




Of
      the
      $1,400,000 Convertible Debentures mentioned above the Company settled $884,990
      and $0 at December 31, 2007 and 2006, respectively, resulting in a balance
      of
      $515,010 and $1,400,000 at December 31, 2007 and 2006, respectively. As a result
      of negotiations with the purchasers the default penalty has been reduced to
      $145,000 as of December 31, 2007.




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




In
      addition, in consideration of NeoGenomics, Inc.’s commitment to purchase the
      debenture and form the joint venture, Power3 signed a Letter of Intent with
      an
      expiration date of November 16, 2007 granting, to Neogenomics, Inc., an
      irrevocable option (the “First Option”) to purchase, in one or a series of
      transactions, voting convertible preferred stock that is convertible into such
      number of shares of common stock of Power3, after taking into account all
      outstanding First Option Preferred Stock, on an as-converted basis.




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




Currently,
      Power3 and NeoGenomics are in discussion to revise the expired Letter of Intent
      between the respective organizations.




Power3
      has converted several notes and plans to continue doing so. In some instances,
      Power3 has offered terms of conversion lower than the original agreement
      including raising the strike price of warrants attached to these instruments.
      As
      a result of this additional consideration, upon conversion the Company has
      recorded a $1,544,574 gain on the conversion of notes during the year ended
      December 31, 2007. The change in the conversion terms represented greater than
      10% of the principal value of the notes and as a result extinguishment
      accounting has been applied consistent with EITF 96-19.




As
      a
      result of the above notes, Power3 has determined that the conversion feature
      of
      the convertible debentures and the warrants issued with the convertible
      debentures are embedded derivative instruments pursuant to Statement of
      Financial Accounting Standards (SFAS) 133, “Accounting for Derivative
      Instruments and Hedging Activities,” as amended. Under the provisions of EITF
      Issue No. 00−19, “Accounting for Derivative Financial Instruments Indexed
      to, and Potentially Settled in, a Company’s Own Stock,” the accounting treatment
      of these derivative financial instruments requires that the Company record
      the
      derivatives at their fair values as of the inception date of the note agreements
      and at fair value as of each subsequent balance sheet date as a liability.
      Any
      change in fair value is recorded as non-operating, non-cash income or expense
      at
      each balance sheet date. The Company estimates fair value of warrants using
      the Black-Scholes
      option pricing model and the conversion feature of their notes using the
      binomial lattice model. The estimates inherent within these models directly
      affect the reported amounts of the derivative instrument
      liabilities.




37




**Deemed
      Dividend**




As
      part
      of Power3’s attempt to induce exercise the strike price of several warrants was
      reduced resulting in a deemed dividend of $17,635 consistent with EITF 98-5.
      The
      deemed dividend was valued using the Black-Scholes model immediately
      before  and
      after
      the inducement consistent with paragraph 51 of SFAS 123R.




**Convertible
      Debentures, Warrants and Additional Investment Rights:**




The
      carrying values of the Company’s convertible debentures amounted to $645,190 and
      $360,417, at December 31, 2007 and December 31, 2006, respectively.




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





**Derivative
                Liabilities:**
            
            **2007**
            
            **2006**Common
                stock warrants
            
            $
            1,563,183
            
            $
            875,783Embedded
                conversion feature
            
            
            1,205,719
            
            
            186,480Additional
                investment rights
            
            
            642,792
            
            
            183,056Other
                derivative instruments
            
            
            382,611
            
            
            36,029$
            3,794,305
            
            $
            1,281,348





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




**Other
      Notes, Preferred Stock and Warrants:**




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




The
      proceeds from the Trinity financing were allocated first to the warrants, based
      upon their fair values, with the balance of $103,100 allocated to the notes.
      The
      allocation of proceeds to the fair value to the warrants was performed because,
      as discussed in the previous section, share settlement is not within
      management’s control. Such amount was initially classified as a derivative
      liability. The resulting note discount is being amortized through periodic
      charges to interest expense using the effective method over the life of the
      notes. Amortization of note discount amounted to $60,522 and $68,499 during
      the
      year ended December 31, 2007 and December 31, 2006, respectively. The
      Company did not make its required debt service payments in March and
      April 2006. The first Trinity note was paid in full during 2006. On
      October 3, 2007 a settlement agreement was reached with Trinity to pay off
      the second Trinity note. The agreement states that Trinity is to retain
      1,300,000 shares from which the legend will be removed. The shares are to be
      sold in payment of the outstanding debt. If the sale of the 1,300,000 shares
      yields less than $150,000, Power3 is to pay the difference in cash. The value
      of
      the shares is in excess of the amount owed; therefore, Power3 has not accrued
      any additional liability.




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




**Notes
      Payable in Default and to Related Parties**




The
      Company is in default under the provisions of its October 2004 Securities
      Purchase Agreement, and accompanying registration rights agreement and
      debentures. The default stems from the Company’s inability to obtain
      effectiveness of the registration statement on Form SB-2, as amended (File
      No. 333-122227) filed pursuant to the registration rights agreement. The
      registration statement was withdrawn on June 20, 2007. During the year
      ended December 31, 2007, the Company has settled with a number of its
      Convertible Debenture Holders as previously mentioned above.




38




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




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




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




During
      2006, the payoff of Company notes payable from the sale of personally pledged
      shares resulted in the Company entering into Notes Payable with Steven B. Rash,
      Chairman and CEO of the Company and Dr. Ira Goldknopf, Director of Proteomics
      of
      the Company, in the amount of $517,166 and $523,773 respectively. At the end
      of
      the year 2006, the total Notes Payable due Mr. Rash for all such
      transactions were $608,342 and the total Notes Payable due Dr. Goldknopf for
      such transactions were $785,004. These notes, along with the note payable to
      Mike Rosinski in the amount of $35,000, brings the total Notes Payable to
      related parties, as of December 31, 2006, to $1,428,346.




During
      2007, the payoff of Company notes payable from the sale of personally pledged
      shares, resulted in the Company entering into Notes Payable with Steven B.
      Rash,
      Chairman and CEO of the Company and Dr. Ira Goldknopf, Director of Proteomics
      of
      the Company, in the amount of $333,414 and $190,356 respectively. At the end
      of
      the year 2007, the total Notes Payable due Mr. Rash for all such
      transactions were $924,456 and the total Notes Payable due Dr. Goldknopf for
      such transactions were $975,360. These notes, along with the note payable to
      Mike Rosinski in the amount of $35,000, brings the total Notes Payable to
      related parties, as of December 31, 2007, to $1,934,816 as
      follows:


**2007**
              
              **2006****Notes
                  payable in default:**Cordillera
                  I
              
              $
              251,000
              
              $
              251,000Cordillera
                  II
              
              $
              200,000
              
              $
              200,000Trinity
              
              $
              —
              
              $
              155,500Discount
                  on Trinity Note
              
              $
              —
              
              $
              (94,678
              )****Fife
              
              $
              —
              
              $
              266,000**Totals**
              
              $
              451,000
              
              $
              777,822**Notes
                  payable:**Kazanowski
              
              $
              50,000
              
              $
              —$
              50,000
              
              $
              —**Notes
                  payable - related parties:**Rash
              
              $
              924,456
              
              $
              608,342Goldknopf
              
              $
              975,360
              
              $
              785,004Rosinski
              
              $
              35,000
              
              $
              35,000**Totals**
              
              $
              1,934,816
              
              $
              1,428,346
 
 39




***Note
      10. OTHER SIGNIFICANT EQUITY TRANSACTIONS***




**Deemed
      distribution:**


****


During
      the 2 nd Quarter
      of 2004, the Company issued 15,000,000 shares of common stock as consideration
      for a set of assets and liabilities purchased from Advanced BioChem in the
      asset
      purchase transaction of May 18, 2004.  Because this transaction was
      between individuals and entities considered to be related parties, under the
      rules of the SEC, the assets are recorded at historical cost and the amount
      in excess of historical cost is considered to be a deemed distribution to the
      shareholders. As part of that transaction, the Company recorded a deemed
      distribution of $ 13,371,776 as the difference between the market value of
      the
      stock at $0.90 per share on the date of the agreement ($13,500,000) and
      $128,224, debt in excess of the assets received in the transaction.




During
      the 4 th Quarter
      of 2004, the Company converted Series A Preferred Stock owned by former
      management of the Company to common shares, per the terms of the Series A
      Preferred Stock held by these individuals (Novak, Gray and Leonard).  As
      part of that transaction the Company recorded a deemed distribution of
      $3,380,975, the market value of the common shares issued at the date of issue
      of
      the common shares.  Since both of these deemed distributions occurred after
      May 18, 2004, the date the Company entered the development stage, the total
      of these two deemed distributions ($16,752,751) is included in the deficit
      accumulated during the development stage in the balance sheet of the
      Company.





**Deemed
      dividend:**




As
      part
      of Power3’s attempt to induce exercise the strike price of several warrants was
      reduced resulting in a deemed dividend of $17,635 consistent with EITF 98-5.
      The
      deemed dividend was valued using the Black-Scholes model immediately
      before  and
      after
      the inducement consistent with paragraph 51 of SFAS 123R.




**Sales
      of common stock during 2004:**





The
      Company did not sell any common stock for cash during 2004.





**Sales
      of common stock during 2005:**





The
      Company did not sell any common stock for cash during 2005.





**Sales
      of common stock during 2006:**





On
      January 6, 2006, 500,000 shares of common stock were sold to a private investor
      to raise $57,500.





On
      February 3, 2006, 1,114,286 shares of common stock were sold to private
      investors to raise $82,500.





On
      March
      8, 2006, 400,000 shares of common stock were sold to private investors to raise
      $40,000.





On
      March
      9, 2006, 400,000 shares of common stock were sold to private investors to raise
      $40,000.





On
      June
      8, 2006, 38,460 shares of common stock were sold to a private investor to raise
      $5,000.




**Stock
      Issued during 2006 under the 2004 Stock Compensation Plan:**




During
      2006, 2,449,990 shares of common stock of the Company were issued to attorneys
      and consultants as compensation for services rendered. The estimated fair value
      of these shares was recorded as general and administrative expense of $314,314
      based upon the closing price of Power3’s stock at the measurement
      date.




During
      2005, 140,000 shares of common stock were returned from a former employee and
      those shares were re-issued to a new employee. In addition, 850,000 shares
      were
      issued, under the 2004 Stock Compensation Plan, to attorneys for legal
      services.





40




**Sales
      of common stock during the year ended December 31, 2007:**




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




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




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




On
      November 15, 2007 700,000 shares of common stock were sold to private investors
      to raise $56,000.




On
      November 19, 2007 250,000 shares of common stock were sold to private investors
      to raise $20,000.




On
      November 20, 2007 177,500 shares of common stock were sold to private investors
      to raise $14,200.




On
      November 26, 2007 12,500 shares of common stock were sold to private investors
      to raise $1,000.




On
      November 27, 2007 768,750 shares of common stock were sold to private investors
      to raise $61,500.




On
      November 30, 2007 600,000 shares of common stock were sold to private investors
      to raise $48,000.




On
      December 5, 2007 603,750 shares of common stock were sold to private investors
      to raise $48,300.




On
      December 14, 2007 49,375 shares of common stock were sold to private investors
      to raise $3,950.




On
      December 18, 2007 118,750 shares of common stock were sold to private investors
      to raise $9,500.




On
      December 31, 2007 1,100,000 shares of common stock were sold to private
      investors to raise $88,000.




**Shares
      issued for services during the year ended December 31,
      2007:**




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




On
      January 2, 2007, 100,000 shares were issued for services. The Company
      estimated the fair value of this transaction to be $8,000 based upon the closing
      stock price of the Company’s stock at the measurement date.




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




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




**Shares
      issued for debt during the year ended December 31, 2007:**




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




On
      December 6, 2007, 350,000 shares were issued for debt. The Company estimated
      the
      fair value of this transaction to be $52,500 based upon the closing stock price
      of the Company’s stock at the measurement date.




**Shares
      issued for conversion of debt during the year ended December 31,
      2007:**




26,265,224
      shares of common stock were issued for the conversion of convertible notes
      as
      discussed in Note 9 above resulting in a gain on extinguishment of debt of
      $ 1,544,574 .




**Shares
      issued for exercise of warrants during the year ended December 31,
      2007:**




5,270,832
      shares of common stock were issued for the exercise of warrants resulting in
      cash receipts of $341,667.




41




***Note
      11. SUBSEQUENT EVENTS***




On
      January 7, 2008, a total of 2,000 shares of common stock were issued to four
      employees in recognition of receiving the 3rdAnnual
      Chairman’s Circle of Excellence Award.




On
      January 16, 2008, 231,250 shares of common stock were issued for cash to private
      investors in the amount of $18,500. ****




Two
      executive level employees were hired with the following compensation: 500,000
      options convertible into common stock vesting January 18, 2008 (have not been
      issued to-date); 20,000 options convertible into common stock based on
      performance; 10,000 options convertible into common stock based on performance;
      commission on revenues; and commission on equity capital raised.




On
      February 8, 2008, 5,706,667 shares of common stock were issued for conversion
      of
      debt in the amount of $342,400. ****




On
      February 12, 2008, 3,612,625 shares of common stock were issued for cash to
      private investors in the amount of $289,010. ****




On
      February 14, 2008, 200,000 shares of common stock were issued for cash to
      private investors in the amount of $20,000. ****




On
      February 25, 2008, 1,150,000 shares of common stock were issued for cash to
      private investors in the amount of $115,000.




On
      March
      12, 2008, 374.000 shares of common stock were issued for cash to private
      investors in the amount of $37,400.




On
      March
      26, 2008, 325,000 shares of common stock were issued in settlement of a dispute
      with a former employee as mentioned above. ****




On
      April
      3, 2008, 1,250,000 shares of common stock were issued for cash to private
      investors in the amount of $100,000.




**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**




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




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




On
      August 10, 2007, Power3 executed an engagement letter with McElravy,
      Kinchen & Associates, P.C. ("MKA") to assume the role of its new certifying
      accountant. MKA has been asked to perform the quarterly reviews of Power3 for
      the quarters ended June 30, 2007 and September 30, 2007 and the audit for
      the year ended December 31, 2007.




42




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




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




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




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




Other
      than the changes described above, there were no changes in the Company’s
      internal control over financial reporting that occurred during the Company’s
      fiscal year ended December 31, 2007 that have materially affected, or are
      reasonably likely to materially affect, the Company’s internal controls over
      financial reporting.




**Item** **8A.** **Controls
      and Procedures**




**Evaluation
      of Disclosure Controls and Procedures**




The
      Company’s Chief Executive Officer and Chief Accounting Officer have
      evaluated the effectiveness of the Company’s disclosure controls and procedures
      (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
      the
      fiscal period ending December 31, 2007 covered by this Annual Report
      on Form 10-KSB. Based upon such evaluation, the Chief Executive Officer and
      Chief Accounting Officer have concluded that, as of the end of such period,
      the
      Company’s disclosure controls and procedures were not effective as required
      under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion
      is
      based upon the number and magnitude of the year end adjusting
      entries .




**Management’s
      Report on Internal Control Over Financial Reporting**




Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
      Act) of the Company. Internal control over financial reporting is a process
      designed to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with accounting principles generally accepted in the United States
      of
      America.




The
      Company’s internal control over financial reporting includes those policies and
      procedures that (i) pertain to the maintenance of records that, in
      reasonable detail, accurately and fairly reflect the transactions and
      dispositions of the assets of the company; (ii) provide reasonable
      assurance that transactions are recorded as necessary to permit preparation
      of
      financial statements in accordance with accounting principles generally accepted
      in the United States of America, and that receipts and expenditures of the
      Company are being made only in accordance with authorizations of management
      and
      directors of the Company; and (iii) provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of the Company’s assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




Management,
      under the supervision of the Company’s Chief Executive Officer and Chief
      Accounting Officer, conducted an evaluation of the effectiveness of internal
      control over financial reporting. Based on this evaluation, management concluded
      that the Company’s internal control over financial reporting was not effective
      as of December 31, 2007. For quarter ended September 30, 2007 deficiencies
      related to expense recognition and disclosure control deficiencies related
      to
      transactions involving equity issuances and derivatives were identified. The
      adjustment to expense and the footnote disclosure deficiencies were detected
      by
      our independent auditors during the review process and were appropriately
      corrected, recorded and disclosed on Form 10-QSB for the three and nine
      month period ended September 30, 2007. Following a review of the deficiencies,
      management determined that we had incorrectly accounted for equity issuances
      and
      derivative valuations during such period. As a result, management concluded
      that
      our disclosure controls and procedures were not effective. Management concluded
      that the following three deficiencies were identified in our control
      process:




43




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




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




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




·
            There
                is deficiency in segregation of duties due to the small size of the
                Company.




This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the SEC that permit us to provide
      only management’s report in this Annual Report on Form 10-KSB.




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




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




**Changes
      in Internal Control Over Financial Reporting**




No
      change
      in the Company’s internal control over financial reporting occurred during the
      quarter ended December 31, 2007, that materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.




**Item
      8B. Other Information**




None. ****





44




**PART
      III**




**Item
      9. Directors, Executive Officers, Promoters, and Control Persons; Compliance
      with Section 16(a) of the Exchange Act**




**Directors,
      Executive Officers, Promoters and Control Persons**




Set
      forth
      below is certain information concerning each of the Company’s directors,
      executive officers and significant employees. All directors of the Company
      hold
      office until the next annual meeting of shareholders or until their successors
      have been elected and qualified. The officers of the Company are appointed
      by
      the board of directors and hold office until their death, resignation or removal
      from office. The Company’s directors, executive officers, significant employees,
      and their ages, positions held and duration as such is as follows:




Name
            
            Position Held
              with the Company
            
            Age
            
            Date First Elected
              or AppointedSteven
                B. Rash
            
            Chief
                Executive Officer and Director
            
            60
            
            May
                18, 2004Ira
                L. Goldknopf
            
            Director
                of Proteomics and Director
            
            62
            
            May
                18, 2004Marion J. McCormick
            
            Chief
                Accounting Officer
            
            44
            
            July
                27, 2007




Certain
      additional information concerning the individuals named above is set forth
      below. This information is based on information furnished by each director,
      executive officer and significant employee.




Steven
      B.
      Rash joined the Company in May 2004 as Chairman of the Board of Directors and
      Chief Executive Officer. Mr. Rash served as Chairman of the Board of
      Directors and Chief Executive Officer of Advanced BioChem, Inc. from September
      2003 to May 2004. Prior to that time he was an independent consultant from
      February 2003 until September 2003. In April 2001, Mr. Rash was employed as
      a
      consultant to Global Water Technologies, Inc. and was hired as President and
      interim CFO of the Company in January 2002 and retained that position until
      February 2003. From April 2000 until April 2001, he was an independent
      consultant. From June 1995 until March 2000, Mr. Rash was employed as President
      and CEO of American BioMed, Inc., a publicly traded medical device company.
      Mr.
      Rash has a B.S. in Business Administration from the University of Delaware
      and
      an M.B.A. from Southern Illinois University.




Ira
      L.
      Goldknopf, Ph.D. joined the Company in May 2004 as Chief Scientific Officer
      and
      Director. From August 2000 until May 2004, Dr. Goldknopf was Chief Scientific
      Officer of Advanced BioChem, which he co-founded in 2000. From August 1997
      until
      August 2000, Dr. Goldknopf was a biotechnology consultant. Dr. Goldknopf has
      a
      B.A. in Chemistry from Hunter College and a Ph.D. in Biochemistry from Kansas
      State University. Dr. Goldknopf spent ten years on the faculty of Baylor College
      of Medicine and is the author of over 70 publications and a principal inventor
      of the Company’s intellectual property. Dr. Goldknopf also serves on the
      Company’s Scientific Advisory Board.





Marion
      J.
      McCormick joined the Company in July 2007 as Chief Accounting Officer. Mrs.
      McCormick was a staff auditor for Malone & Bailey, PC from September of 2006
      to April of 2007. Prior to that time Mrs. McCormick established and ran the
      accounting department for MRSB, Ltd. from October 2005 until September 2006.
      Mrs. McCormick has a B.S.B Accounting from the University of
      Phoenix.





There
      are
      no family relationships among any of the directors or executive officers of
      the
      Company. Except as disclosed below with respect to the amended and restated
      employment agreements of Messrs. Rash and Goldknopf, no arrangement or
      understanding exists between any director or executive officer and any other
      person pursuant to which any director or executive officer was elected to serve.





None
      of
      the Company’s directors, executive officers, promoters or control persons has
      been involved in any of the following events during the past five
      years:




·
            any
                bankruptcy petition filed by or against any business of which such
                person
                was a general partner or executive officer either at the time of
                the
                bankruptcy or within two years prior to that
                time;




·
            any
                conviction in a criminal proceeding or being subject to a pending
                criminal
                proceeding (excluding traffic violations and other minor
                offenses);




·
            being
                subject to any order, judgment or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities or banking activities;
                or




·
            being
                found by a court of competent jurisdiction (in a civil action), the
                SEC or
                the Commodity Futures Trading Commission to have violated a federal
                or
                state securities or commodities law, and the judgment has not been
                reversed, suspended or vacated.




The
      board
      of directors has not established an audit committee or any committee performing
      similar functions. Consequently, the Company does not have an audit committee
      financial expert as defined in Item 401(3) of Regulation S-B. Management
      believes that in light of the Company’s current size and its status as a company
      with no operations, the establishment of an audit committee and the retention
      of
      an audit committee financial expert is not necessary at this time and is
      cost-prohibitive. The Company also does not have a standing nominating committee
      of its board of directors or any committee performing a similar
      function.




45




**Scientific
      Advisory Board******




The
      Company’s Scientific Advisory Board provides assistance in the research and
      development of the Company’s products. Unlike members of the Company’s Board of
      Directors, members of the Scientific Advisory Board, other than Dr. Goldknopf,
      are not involved in the management or operations of the Company. As of December
      31, 2007, the members of the Scientific Advisory Board are as
      follows:




Dr.
      Stanley H. Appel, M. D. is Professor and Chair of Neurology at the Methodist
      Hospital Neurological Institute, Professor of Neurology at Baylor College of
      Medicine, Director of the Vicki Appel MDA/ALS Clinic, and past-Director of
      the
      Alzheimer’s disease Research Center at Baylor College of Medicine in Houston,
      Texas. He also serves as the Director of the Jerry Lewis Neuromuscular Research
      Center. Dr. Appel is a leading authority on degenerative neurological diseases,
      such as Parkinson’s, Alzheimer’s and ALS. Specifically, Dr. Appel focuses on the
      importance of neurotrophic factors and immune mechanisms, including the role
      of
      inflammatory cytokines in these diseases. He has served as an Advisory Board
      member of the Alzheimer’s disease and Related Disorders Association and as a
      Council member of the American Society of Neurochemistry.




Dr.
      Zouhair Atassi, Ph. D. is the current Robert A. Welch Chair of Chemistry and
      the
      Professor of Biochemistry and Molecular Biology at Baylor College of Medicine,
      Houston, Texas. After completing his Ph.D. in Chemistry, University of
      Birmingham, England, Dr. Atassi started his career in 1960 as Postdoctoral
      Research Fellow in Chemistry at the University of Birmingham. Dr. Atassi was
      the
      2003 President of the Institute of Immunobiology and he is the current
      Editor-in-Chief for The Protein Journal, Protein Reviews and Critical Reviews
      in
      Immunology. Dr. Atassi has published 14 books and several volumes in
      Immunochemistry of Proteins and Immunobiology of Proteins and Peptides. He
      has
      given more than 150 lectures in national and international conferences and
      more
      than 180 invited seminars in U.S. and foreign universities and research
      institutions. In addition Dr. Atassi has more than several hundred scientific
      publications and has been awarded five United States patents between 1996 and
      2000.




Dr.
      Ira
      L. Goldknopf, Ph. D. began his scientific career over 30 years ago, pioneering
      the field that is now known as Proteomics. More than a decade before the start
      of the Human Genome Project, Dr. Goldknopf made the earliest proteomic discovery
      at Baylor College of Medicine with Harris Busch, the isolation, identification,
      and sequencing of a new protein from a two-dimensional gel, Protein A24. During
      the course of these investigations, he discovered that protein A24 was the
      first
      known conjugate of two very important proteins, Histone H2A, a part of the
      subunit structure that packages DNA in the cell nucleus, and Ubiquitin. Through
      the work of Dr. Goldknopf and many others (over 9,000 publications in the
      ensuing years) - including Drs. Avram Hershko, Aaron Ciechanover, and Alex
      Varshavsky, who shared the 2000 Lasker Award for their achievements - the
      Ubiquitin Conjugation System is now known to play a major role in the management
      of the inventories of proteins in the cell, cell proliferation, programmed
      cell
      death, and most, if not all, major regulatory functions in health and disease
      at
      the cellular level.




Dr.
      Thomas E. Watts, M. D. received his M.D. in 1975 from Baylor College of
      Medicine. Dr. Watts is board certified, from American Board of Family Practice
      since 1972 and practiced medicine at Blue Earth Medical Center in Minnesota
      from
      1975 to 1996 and is now practicing at the Kelsey-Seybold Clinic, The Woodlands,
      Texas. As a physician with more than 30 years of practice experience, Dr. Watts
      provides the Company with insights from the perspective of the end user of
      the
      Company’s products.




Dr.
      Alan
      B. Hollingsworth, M. D. received his M.D. with Distinction from the University
      of Oklahoma, College of Medicine in 1975 where he served as First Vice-President
      of Alpha Omega Alpha Honor Medical Society. In addition to his general surgery
      residency at the University of Oklahoma, he completed a one-year fellowship
      in
      surgical pathology at U.C.L.A. In the 1980s, he joined the first wave of
      surgeons who chose to limit their practices to breast cancer. He was the
      Founding Medical Director of the University of Oklahoma Institute for Breast
      Health in 1993 where he held the G. Rainey Williams Chair of Surgical Breast
      Oncology. Currently, he serves as Medical Director of Mercy Women’s Center
      (Mercy Health Center, Oklahoma City) and Medical Director, Breast MRI of
      Oklahoma. His interest in breast cancer risk assessment led to the publication
      of the first lay book on the subject, The Truth About Breast Cancer Risk
      Assessment, and he served as lead author for the multi-institutional consensus
      paper published in the American Journal of Surgery by the national breast cancer
      risk assessment working group.




46




Marwan
      Sabbagh M.D. is the founding director of the Cleo Roberts Center for Clinical
      Research under the umbrella of the Sun Health Research Institute. Opened in
      2000, the Center, with Dr. Sabbagh as the principle investigator, has conducted
      more than 50 Clinical trials and studies on Alzheimer’s and Parkinson’s
      diseases, as well as prostate cancer and Fibromyalgia. Dr. Sabbagh, a
      board-certified neurologist, received his undergraduate degree from the
      University of California Berkeley and his medical degree from the University
      of
      Arizona in Tucson. He is also the Associate Director of the Arizona Alzheimer’s
      Disease Core Center, a clinical instructor in the Sun Health St. Joseph’s
      Hospital’s Geriatric Fellowship Program, and a visiting scientist in the
      Department of Neurology at Mayo Clinic Scottsdale. He is also a staff physician
      at Boswell Memorial Hospital where he specializes in the diagnosis and treatment
      of Alzheimer’s disease. Dr. Sabbagh served his residency in neurology at Baylor
      College of medicine and a fellowship in geriatric neurology and dementia at
      the
      UCSD School of Medicine where he was on the faculty prior to joining Sun Health
      Research Institute. Dr. Sabbagh has authored or co-authored almost 70 chapter,
      reviews, and original papers on Alzheimer’s disease as well as authored a book
      on Alzheimer’s prevention entitled “The Alzheimer’s Answer: Reduce Your Risk and
      Keep Your Brain Healthy.”




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires the Company’s directors, executive officers,
      and the persons who beneficially own more than ten percent (10%) of the
      Company’s common stock to file reports of ownership and changes in ownership
      with the SEC. Copies of all filed reports are required to be furnished to the
      Company. Based solely on the reports received by the Company and on
      representations of the reporting persons, the Company determined that there
      were
      a number of transactions that were not timely reported. With respect to its
      current directors, executive officers, and persons beneficially owning more
      than
      ten percent (10%) of the Company’s common stock, the Company undertook to file
      forms throughout the year. The Company has implemented new procedures to ensure
      improved compliance with the reporting requirements on an on-going basis. To
      the
      Company’s knowledge, based solely on its review of the reports received and on
      representations of the reporting persons, the Company believes that these
      persons have complied with all applicable filing requirements during the fiscal
      year ended December 31, 2007.




**Code
      of Ethics**




The
      Company has adopted a code of ethics applicable to its principal executive
      officer and principal financial officer which is incorporated by reference
      with
      this Annual Report.




47




**Item
      10. Executive Compensation**





The
      following table sets forth information concerning the compensation for services
      in all capacities rendered to us for the four fiscal years ended December 31,
      2007 of our Chief Executive Officer and our other executive officers:


**Summary
        Compensation Table**


**Long Term Compensation****AnnualCompensation****(1)**
            
            **Awards****Name and PrincipalPosition**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Restricted**
              **Stock**
              **Award(s)****(2)******
              **($)**
            
            **Securities
                Underlying Options/SARs**
              **(#)**
            
            **All
                Other Compe-nsation**
              **($)**
            
            **Total**
              **($)**Steven
                B. Rash,
            
            
            2007
            
            
            260,425
            
            
            0
            
            
            0
            
            
            0
            
            
            (3)(4)(5)
            
            
            260,425Chairman
              of the Board /
            
            
            2006
            
            
            282,301
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            282,301Chief
                Executive Officer
            
            
            2005
            
            
            248,426
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            248,426Dr.
                Ira L. Goldknopf,
            
            
            2007
            
            
            104,167
            
            
            0
            
            
            0
            
            
            0
            
            
            (7)
            
            
            104,167Director
              of Proteomics (6)
            
            
            2006
            
            
            98,207
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            98,2072005
            
            
            78,948
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            78,948John
                P. Burton, Former
            
            
            2007
            
            
            59,103
            **(8)**
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            59,103Chief
              Financial Officer
            
            
            2006
            
            
            112,936
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            112,9362005
            
            
            57,138
            
            
            0
            
            
            42,000
            
            
            0
            
            
            0
            
            
            99,138Marion
                J. McCormick,
            
            
            2007
            
            
            30,329
            **(8)**
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            30,329Chief Accounting
              Officer








(1)
            Other
                annual compensation provided to the named executive officers did
                not
                exceed the applicable disclosure
                requirements.


(2)
            At
                December 31, 2004 the aggregate number and value of all restricted
                shares
                held by each of the named executive officers was as follows: Mr.
                Rash -
                13,250,000 restricted shares, $11,925,000 value and Dr. Goldknopf
                -
                13,250,000 restricted shares, $11,925,000 value. The values are based
                on
                the closing price of $0.90 of the Company’s common stock on May 18, 2004.
                Although the Company does not expect to pay dividends on its common
                stock,
                any dividends which may be paid on its common stock will not be paid
                on
                the restricted stock unless and until such time as the restricted
                stock
                becomes nonforfeitable.


(3)
            Mr.
                Rash joined the Company in May 2004 with the completion of the acquisition
                of assets from Advanced BioChem. Mr. Rash was the Chairman of the
                Board
                and Chief Executive Officer of Advanced BioChem. Mr. Rash has entered
                into
                an employment agreement with the Company which is described
                below.


(4)
            Pursuant
                to Mr. Rash’s employment agreement, he was awarded 13,250,000 shares of
                restricted common stock. The value is based upon a closing price
                of $0.90
                of the Company’s common stock on May 18, 2004. All of the shares are
                restricted stock and vested on May 18, 2006. In addition, Mr. Rash
                is
                entitled to receive 1,500,000 shares of restricted Series B preferred
                stock to be designated by the
                Company.


(5)
            In
                2003, Mr. Rash was granted by Advanced BioChem pursuant to his employment
                agreement 825,000 shares of Advanced BioChem’s common stock and the option
                to purchase 200,000 shares of common stock at $0.80 per share. At
                the time
                the 825,000 shares were granted, the fair market value of such stock
                was
                $0.80 per share for a total of $660,000. Mr. Rash continues to hold
                such
                shares. Advanced BioChem was to enter into an option agreement with
                Mr.
                Rash; however, no such option agreement has been executed nor is
                it
                expected since Mr. Rash is no longer an officer of Advanced
                BioChem.


(6)
            Dr.
                Goldknopf joined the Company in May 2004 with the completion of the
                acquisition of the assets of Advanced BioChem. Dr. Goldknopf was
                the Chief
                Scientific Officer of Advanced BioChem. Dr. Goldknopf has entered
                into an
                employment agreement with the Company as described
                below.


(7)
            Pursuant
                to Dr. Goldknopf’s employment agreement, he was awarded 13,250,000 shares
                of restricted common stock. The value is based upon a closing price
                of
                $0.90 of the Company’s common stock on May 18, 2004. All of the shares are
                restricted stock and vested on May 18, 2006. In addition, Dr. Goldknopf
                is
                entitled to receive 1,500,000 shares of restricted Series B preferred
                stock to be designated by the Company.(8)
            Salary
                for John Burton reflects amount earned from January to end of employment
                in July 2007. Salary for Marion McCormick reflects amount earned
                from
                August to December 2007.




48




**Director
      Compensation**





Mr.
      Rash
      and Dr. Goldknopf are the Company’s directors at this time. Except for the
      compensation to which each is entitled pursuant to the terms of their respective
      employment agreements, neither Mr. Rash nor Dr. Goldknopf receive any further
      compensation for service as directors. The Company has no formal plan for
      compensating outside directors at this time. However, at such time as the
      Company has outside directors, the Company expects to compensate its outside
      directors and to reimburse them for reasonable travel and other out-of-pocket
      expenses incurred in connection with the attendance at meetings.




**Option
      Grants in Last Fiscal Year**





No
      options were granted to the above named officers in 2006 or 2007.




**Employment
      Agreements**




The
      Company has entered into an amended and restated employment agreement with
      Mr.
      Rash. The employment agreement is effective as of May 18, 2004 and has an
      initial term of five years, subject to each party’s termination rights. The
      agreement provides for a base salary of $250,000 per year and the opportunity
      to
      receive cash bonuses based on performance upon the discretion of the Company’s
      board of directors. The agreement also includes participation in employee
      benefit plans offered by the Company to its employees, as well as a grant of
      13,250,000 shares of restricted common stock and 1,500,000 shares of restricted
      Series B preferred stock. The agreement contains a covenant not to compete
      with
      the Company during the period of employment and for a period of two years
      following the termination or expiration of his employment. The employment
      agreement also contains a non-disclosure and non-use of proprietary information
      clause and a non-interference clause covering the period of employment and
      for a
      period of five (5) years thereafter. Either party may terminate Mr. Rash’s
      employment under the contract, either with or without cause upon giving the
      other party at least thirty days notice. If the Company terminates Mr. Rash’s
      employment at any time during the initial term without cause, Mr. Rash will
      be
      entitled to receive compensation provided under the agreement for the remaining
      initial term of employment. In addition, in the event of a change in control
      as
      defined in the agreement, the Company may waive, in whole or in part, any and
      all remaining restrictions on the restricted shares of common stock and Series
      B
      preferred stock granted to Mr. Rash.




The
      Company has entered into an amended and restated employment agreement with
      Dr.
      Goldknopf. The employment agreement is effective as of May 18, 2004 and has
      an
      initial term of five years, subject to each party’s termination rights. The
      agreement provides for a base salary of $125,000 per year through December
      18,
      2004 and $100,000 per year thereafter, with an opportunity to receive cash
      bonuses based on performance upon the discretion of the Company’s board of
      directors. The agreement also includes participation in employee benefit plans
      offered by the Company to its employees, as well as a grant of 13,250,000 shares
      of restricted common stock and 1,500,000 shares of restricted Series B preferred
      stock. The agreement contains a covenant not to compete with the Company during
      the period of employment and for a period of two years following the termination
      or expiration of his employment. The employment agreement also contains a
      non-disclosure and non-use of proprietary information clause and a
      non-interference clause covering the period of employment and for a period
      of
      five (5) years thereafter. Either party may terminate Dr. Goldknopf’s employment
      under the contract, either with or without cause upon giving the other party
      at
      least thirty days notice. If the Company terminates Dr. Goldknopf’s employment
      at any time during the initial term without cause, Dr. Goldknopf will be
      entitled to receive compensation provided under the agreement for the remaining
      initial term of employment. In addition, in the event of a change in control
      as
      defined in the agreement, the Company may waive, in whole or in part, any and
      all remaining restrictions on the restricted shares of common stock and Series
      B
      preferred stock granted to Dr. Goldknopf.




49




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table sets forth information as of December 31, 2007, the most recent
      practicable date, regarding beneficial ownership of the Company’s common stock
      by the following persons: (i) each person who is known to the Company to
      beneficially own more than 5% of the outstanding shares of common stock; (ii)
      each of the Company’s directors; (iii) each of the Company’s executive officers
      named in the executive compensation table; and (iv) all of the Company’s
      directors and executive officers as a group. The data shown in the table
      immediately below is based on the stock transfer agent report as of December
      31,
      2007. To the Company’s knowledge, there has been no change to any of the amounts
      reported in the table below, as of the date of filing this report.




Unless
      otherwise indicated below, to the Company’s knowledge, all persons listed below
      have sole voting and investment power with respect to their shares of common
      stock, except to the extent authority is shared by spouses under applicable
      law.
      Beneficial ownership is determined in accordance with the rules of the SEC
      based
      on factors including voting and investment power with respect to shares, subject
      to applicable community property laws. Shares of common stock subject to options
      or warrants exercisable within 60 days of December 31, 2007 are deemed
      outstanding for the purpose of computing the percentage ownership of the person
      holding such options or warrants, but are not deemed outstanding for computing
      the percentage ownership of any other person.




**Name of Beneficial Owner**
            
            **Number of Shares of
                Common Stock**
            
            **Percent of Class**Steven
                B. Rash
              3400
                Research Forest Dr., Suite B2-3
              The
                Woodlands, Texas 77381
            
            
            3,335,500
            
            
            3.11
            %Ira
                L. Goldknopf
              3400
                Research Forest Dr., Suite B2-3
              The
                Woodlands, Texas 77381
            
            
            3,121,403
            
            
            1.01
            %Marion
                McCormick
              3400
                Research Forest Dr., Suite B2-3
              The
                Woodlands, Texas 77381
            
            
            9,750
            
            
            *All
                current directors and executive officers as a group (3
                persons)
            
            
            6,446,653
            
            
            6.03
            %


*Indicates
        less than one percent.


**Changes
      of Control**




In
      addition to the shares of the Company’s common stock beneficially owned by Mr.
      Rash and Dr. Goldknopf described above, the Company has entered into amended
      and
      restated employment agreements with Mr. Rash and Dr. Goldknopf which require
      the
      Company to issue 1,500,000 shares of restricted Series B preferred stock to
      each
      of Mr. Rash and Dr. Goldknopf. On September 6, 2007, the Company filed the
      certificate of amendment necessary to designate the Series B preferred stock
      and
      the powers, designations and relative rights of the Series B preferred stock
      but
      has not issued the shares of the Series B preferred stock. The Company intends
      to issue such shares of the Series B preferred stock to the two officers during
      calendar year 2008.




The
      terms
      of the Series B preferred stock agreed upon by the Company provide that while
      the shares of Series B preferred stock are held by Mr. Rash and Dr. Goldknopf,
      they will have the right to vote that number of votes equal to the number of
      outstanding shares of the Company’s common stock plus one additional vote such
      that they will hold a majority of the voting rights of the Company. In the
      event
      of the death or termination of employment of either Mr. Rash or Dr. Goldknopf,
      the remaining holder of the Series B preferred stock will continue to hold
      such
      voting rights. The issuance of such shares of Series B preferred stock will
      result in a change of control of the Company.




50




**Employee
      Stock Option Plans**




**Securities
      Authorized for Issuance Under Equity Compensation
      Plans**




**Number of securitiesto be issued upon**
              **exercise ofoutstanding options,warrants and rights**
            
            **Weighted-average**
              **exercise price of**
              **outstanding options,warrants and rights**
            
            **Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in column
                (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plans approved by security holders
            
            
            0
            
            
            0
            
            
            0Equity
                compensation plans enacted by management and approved by the Board
                of
                Directors, but not submitted for a vote or approved by all holders
                of the
                Company’s securities
            
            
            0
            
            
            0
            
            
            3,318,340Total
            
            
            0
            
            
            0
            
            
            3,318,340




The
      1,318,340 securities that remain available for future issuance under equity
      compensation plans arise from the Company’s 2004 Directors, Officers and
      Consultants Stock Option, Stock Warrant, and Stock Award Plan (“2004 Plan”). The
      Company has issued 4,681,660 shares of common stock under the 2004 Plan. The
      2004 Plan initially authorized the issuance of 6,000,000 shares of the Company’s
      common stock and 2,000,000 warrants pursuant to the Plan; however, the number
      of
      shares available under the 2004 Plan shall increase so that immediately
      following any grant of securities under the 2004 Plan, the total number of
      shares issuable under the 2004 Plan and reserved for issuance upon exercise
      of
      options, warrants, or conversion of shares of preferred stock will equal 15%
      of
      the total number of the Company’s issued and outstanding shares of common
      stock.




**Item
      12. Certain Relationships and Related Transactions.**




On
      May
      18, 2004, the Company acquired a set of assets from Advanced BioChem and assumed
      certain of its liabilities in exchange for the issuance of 15,000,000 shares
      of
      the Company’s common stock to Advanced BioChem. At the time of the acquisition,
      Mr. Rash owned approximately 3.92% of the common stock of Advanced BioChem,
      thus
      resulting in indirect beneficial ownership at the time of the transaction of
      approximately 588,000 shares of the Company’s common stock through Advanced
      BioChem. Additionally, Dr. Goldknopf held approximately 8.23% of the common
      stock of Advanced BioChem at the time of the transactions, thus resulting in
      his
      indirect beneficial ownership at the time of the transaction of approximately
      1,234,500 shares of the Company’s common stock through Advanced BioChem.




In
      March,
      2005, Mr. Rosinski loaned the Company $35,000. The loan, due to be repaid on
      or
      before April 30, 2005, is to be repaid with proceeds from later issue of
      permanent financing and is payable, with interest at rate of 6% per annum,
      The
      loan remains outstanding, is in default and is carried on the Balance
      Sheet.





In
      order
      to obtain bridge loan financing for the Company, Steven B. Rash, Chief Executive
      Officer of Power3, and Dr. Ira Goldknopf, Director of Proteomics of Power3,
      have
      both pledged a number of shares of stock they owned personally, as collateral
      for the bridge loans obtained. In the case of three of these bridge loan
      providers, pledged shares have been sold to pay back the notes payable due
      to
      the lenders. The amounts obtained from the sale of pledged shares have been
      reported to the Company by the lenders. As of December 31, 2007, the Company
      owed Steven B. Rash notes payable, in the amounts of his pledged shares that
      have been sold, in the amount of $924,456.  As of December 31, 2007, the
      Company owed Dr. Ira Goldknopf notes payable, in the amounts of his pledged
      shares that have been sold, in the amount of $975,360.




51




**Item
      13. Exhibits**




**Exhibit No.**
              
              **INDEX**2.1
              
              Asset
                  Purchase Agreement dated as of May 11, 2004 by and among Power3
                  Medical
                  Products, Inc., Advanced BioChem, Inc. d/b/a ProteEx, Steven B.
                  Rash and
                  Ira Goldknopf****(incorporated
                  by reference to Exhibit 2.1 to the Company’s Registration State on Form
                  SB-2 (File No**.**333-122227).3.1
              
              Certificate
                  of Incorporation (incorporated by reference to Exhibit 2.5 to the
                  Company’s Form 10-SB filed on September 28, 1998).3.2
              
              Certificate
                  of Merger (incorporated by reference to Exhibit 2.7 to the Company’s Form
                  10-SB filed on September 28, 1998).3.3
              
              Certificate
                  of Amendment of the Certificate of Incorporation (incorporated
                  by
                  reference to Exhibit 2.9 to the Company’s Form 10-SB filed on September
                  28, 1998).3.4
              
              Certificate
                  of Amendment of the Certificate of Incorporation (incorporated
                  by
                  reference to Exhibit 3. (I).10 to the Company’s Form S-3 filed on March 2,
                  2000).3.5
              
              Certificate
                  of Amendment to the Certificate of Incorporation (incorporated
                  by
                  reference to Exhibit 3.1 to the Company’s Form 8-K filed on November 5,
                  2004).3.6
              
              Certificate
                  of Amendment to the Certificate of Incorporation (incorporated
                  by
                  reference to Exhibit 3.1 to the Company’s Form 10-KSB filed on November
                  14, 2007).3.7
              
              Bylaws
                  (incorporated by reference to Exhibit 2.10 to the Company’s Form 10-SB
                  filed on September 28, 1998).4.1
              
              Form
                  of Convertible Debenture Due October 28, 2007 (incorporated by
                  reference
                  to Exhibit 4.1 to the Company’s Form 8-K filed on November 3,
                  2004).4.2
              
              Form
                  of Common Stock Purchase Warrant (incorporated by reference to
                  Exhibit 4.2
                  to the Company’s Form 8-K filed on November 3, 2004).4.3
              
              Form
                  of Additional Investment Right (incorporated by reference to Exhibit
                  4.3
                  to the Company’s Form 8-K filed on November 3, 2004).10.1
              
              Amended
                  and Restated Employment Agreement****for
                  Steven B. Rash (incorporated by reference to Exhibit 10.1 to the
                  Company’s
                  Form 8-K filed January 5, 2005).10.2
              
              Amended
                  and Restated Employment Agreement for Ira L. Goldknopf, Ph.D.
                  (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed
                  January 5, 2005).10.3
              
              Exclusive
                  License Agreement dated effective as of June 28, 2004 by and between
                  Baylor College of Medicine and Power3 Medical Products, Inc. (incorporated
                  by reference to Exhibit 10.1 to the Company’s Form 10-QSB/A for the
                  quarter ended September 30, 2004).10.4
              
              Research
                  Agreement signed August 17, 2004 by and between Baylor College
                  of Medicine
                  and Power3 Medical Products, Inc. (incorporated by reference to
                  Exhibit
                  10.13 to the Company’s Form 10-KSB for the year ended December 31,
                  2005).
  52
  10.5
              
              Patent
                  and Technology License Agreement dated August 1, 2004 by and between
                  The
                  Board of Regents of The University of Texas System, on behalf of
                  The
                  University of Texas M.D. Anderson Cancer Center, and Power3 Medical
                  Products, Inc. (incorporated by reference to Exhibit 10.2 to the
                  Company’s
                  Form 10-QSB/A for the quarter ended September 30,
                  2004).10.6
              
              Patent
                  and Technology License Agreement dated September 1, 2003 by and
                  between
                  The Board of Regents of The University of Texas System, on behalf
                  of The
                  University of Texas M.D. Anderson Cancer Center, and Advanced BioChem,
                  Inc. (d/b/a ProteEx) (incorporated by reference to Exhibit 10.3
                  to the
                  Company’s Form 10-QSB/A for the quarter ended September 30,
                  2004).10.7
              
              Securities
                  Purchase Agreement dated as of October 28, 2004, among the Company
                  and
                  each purchaser identified therein (incorporated by reference to
                  Exhibit
                  10.1 to the Company’s Form 8-K filed on November 3,
                  2004).10.8
              
              Amendment
                  to Securities Purchase Agreement dated January 19, 2005 among the
                  Company
                  and each purchaser identified therein (incorporated by reference
                  to
                  Exhibit 10.8 of the Company’s Registration Statement on Form SB-2 (File
                  No.333-122227)).10.9
              
              Registration
                  Rights Agreement dated as of October 28, 2004, among the Company
                  and each
                  purchaser identified therein (incorporated by reference to Exhibit
                  10.2 to
                  the Company’s Form 8-K filed on November 3, 2004).10.10
              
              2004
                  Directors, Officers and Consultants Stock Option, Stock Warrant
                  and Stock
                  Award Plan (incorporated by reference to Exhibit 4.1 of the Company’s
                  Registration Statement on Form S-8 filed January 20,
                  2004).10.11
              
              Collaborative
                  Research Agreement, dated March 21, 2005, by and between New Horizons
                  Diagnostics and Power3 (incorporated by reference to Exhibit 16.1
                  of the
                  Company’s Registration Statement on Form 10-KSB filed September 9, 2005).10.12
              
              Collaborative
                  Research and Licensing Agreement, dated May 17, 2005, by and between
                  BioSite Incorporated and Power3 for collaborative research and
                  worldwide
                  licensing to BioSite Incorporated (incorporated by reference to
                  Exhibit
                  16.1 of the Company’s Registration Statement on Form 10-KSB filed
                  September 9, 2005).10.13
              
              Research
                  Agreement, dated October 13, 2005, between Power3 and Pfizer, Inc.
                  (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed
                  October 19, 2005).10.14
              
              Promissory
                  Note executed by Power3 and Cordillera Fund LP in the amount of
                  $251,000,
                  dated April 5, 2005 (incorporated by reference to Exhibit 10.1
                  to the
                  Company’s Form 10-QSB filed August 22, 2005).10.15
              
              Promissory
                  Note, dated May 31, 2005, executed by Power3 and Steven B. Rash
                  in the
                  amount of $55,000 (incorporated by reference to Exhibit 26.4 to
                  the
                  Company’s Form SB-2/A filed on October 6, 2005).10.16
              
              Promissory
                  Note, dated June 3, 2005, executed by Power3 and Dr. Ira Goldknopf
                  in the
                  amount of $50,000 (incorporated by reference to Exhibit 26.5 to
                  the
                  Company’s Form SB-2/A filed on October 6, 2005).10.17
              
              Promissory
                  Note, dated June 13, 2005, executed June 17, 2005 between Power3
                  and John
                  Fife in the amount of $396,500 (incorporated by reference to Exhibit
                  10.1
                  to the Company’s Form 8-K filed on June 22,
                  2005).
  53
  10.18
              
              Promissory
                  Note (Amended version), dated August 29, 2005, executed by Power3
                  and John
                  Fife in the amended amount of $446,500 (incorporated by reference
                  to
                  Exhibit 10.1 to the Company’s Form 8-K filed on September 9,
                  2005).10.19
              
              Promissory
                  Note executed by Power3 and Cordillera Fund LP in the amount of
                  $200,000,
                  dated September 5, 2005 (incorporated by reference to Exhibit 10.3
                  to the
                  Company’s Form 8-K filed on September 9, 2005).10.20
              
              Promissory
                  Note, dated October 17, 2005, between Power3 and Dr. Ira Goldknopf
                  in the
                  amount of $39,231 (incorporated by reference to Exhibit 10.2 to
                  the
                  Company’s Form 8-K filed October 19, 2005).10.21
              
              Promissory
                  Note, dated September 6, 2005, between Power3 and Dr. Ira Goldknopf
                  in the
                  amount of $80,000 (incorporated by reference to Exhibit 10.2 to
                  the
                  Company’s Form 8-K filed September 9, 2005).10.22
              
              Promissory
                  Note, dated November 23, 2005, between Power3 and Dr. Ira Goldknopf
                  in the
                  amount of $52,000 (incorporated by reference to Exhibit 10.35 to
                  the
                  Company’s Form 10-KSB for the year ended December 31,
                  2005).10.23
              
              Promissory
                  Note executed on December 12, 2005 between Power3 and Trinity Financing
                  (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed
                  December 12, 2005).10.24
              
              Promissory
                  Note executed on August 7, 2006, between Power3 and Rich Kraniak
                  in the
                  amount of $20,000 (incorporated by reference to Exhibit 10.39 to
                  the
                  Company’s Form 10-KSB for December 2006).10.25
              
              Promissory
                  Note executed on August 7, 2006, between Power3 and Rich Kraniak
                  in the
                  amount of $100,000 (incorporated by reference to Exhibit 10.23
                  to the
                  Company’s Form 10-QSB for March 31, 2007).10.26
              
              Promissory
                  Note executed on October 27, 2006, between Power3 and Rich Kraniak
                  in the
                  amount of $100,000 (incorporated by reference to Exhibit 10.27
                  to the
                  Company’s Form 10-QSB for March 31, 2007).10.27
              
              Promissory
                  Note executed on October 27, 2006, between Power3 and Rich Kraniak
                  in the
                  amount of $30,000 (incorporated by reference to Exhibit 10.39 to
                  the
                  Company’s Form 10-KSB for December 2006).10.28
              
              Promissory
                  Note executed on October 27, 2006, between Power3 and Steven B.
                  Rash in
                  the amount of $5,800 (incorporated by reference to Exhibit 10.39
                  to the
                  Company’s Form 10-KSB for December 2006).10.29
              
              Promissory
                  Note executed on September 30, 2006, between Power3 and Steven
                  B. Rash in
                  the amount of $315,010 (incorporated by reference to Exhibit 10.39
                  to the
                  Company’s Form 10-KSB for December 2006).10.30
              
              Promissory
                  Note executed on January 20, 2006, between Power3 and Steven B.
                  Rash in
                  the amount of $40,515 (incorporated by reference to Exhibit 10.39
                  to the
                  Company’s Form 10-KSB for December 2006).10.31
              
              Promissory
                  Note executed on May 31, 2005, between Power3 and Steven B. Rash
                  in the
                  amount of $55,000 (incorporated by reference to Exhibit 26.4 to
                  the
                  Company’s Form SB-2/A as filed on October 6,
                  2005).
  54
  10.32
              
              Promissory
                  Note executed on March 1, 2006, between Power3 and Steven B. Rash
                  in the
                  amount of $50,000 (incorporated by reference to Exhibit 10.17 to
                  the
                  Company’s Form 10-QSB for March 31, 2007).10.33
              
              Promissory
                  Note executed on December 31, 2006, between Power3 and Steven B.
                  Rash in
                  the amount of $ 94,341 (incorporated by reference to Exhibit 10.39
                  to the
                  Company’s Form 10-KSB for December 2006).10.34
              
              Promissory
                  Note executed on September 30, 2006, between Power3 and Dr. Ira
                  Goldknopf
                  in the amount of $18,135 (incorporated by reference to Exhibit
                  10.39 to
                  the Company’s Form 10-KSB for December 2006).10.35
              
              Promissory
                  Note executed on September 30, 2006, between Power3 and Dr. Ira
                  Goldknopf
                  in the amount of $5,387 (incorporated by reference to Exhibit 10.39
                  to the
                  Company’s Form 10-KSB for December 2006).10.36
              
              Promissory
                  Note executed on September 30, 2006, between Power3 and Dr. Ira
                  Goldknopf
                  in the amount of $304,734 (incorporated by reference to Exhibit
                  10.39 to
                  the Company’s Form 10-KSB for December 2006).10.37
              
              Promissory
                  Note executed on March 2, 2006, between Power3 and Dr. Ira Goldknopf
                  in
                  the amount of $89,400 (incorporated by reference to Exhibit 10.19
                  to the
                  Company’s Form 10-QSB for March 31, 2006).10.38
              
              Promissory
                  Note executed on December 31, 2006, between Power3 and Dr. Ira
                  Goldknopf
                  in the amount of $106,117 (incorporated by reference to Exhibit
                  10.39 to
                  the Company’s Form 10-KSB for December 2006).10.39
              
              Promissory
                  Note executed on September 6, 2005 between Power3 and Dr. Ira Goldknopf
                  in
                  the amount of $80,000 (incorporated by reference to Exhibit 10.2
                  to the
                  Company Form 8-K filed on September 9, 2005).10.40
              
              Promissory
                  Note executed on October 27, 2006, between Power3 and Roger Kazanowski
                  in
                  the amount of $150,000 (incorporated by reference to Exhibit 10.25
                  to the
                  Company’s Form 10-QSB for March 31, 2007).10.41
              
              Promissory
                  Note executed on October 31, 2006, between Power3 and Andrew Dahl
                  in the
                  amount of $12,000 (incorporated by reference to Exhibit 10.29 to
                  the
                  Company’s Form 10-QSB for March 31, 2007).10.42
              
              Promissory
                  Note executed on October 27, 2006, between Power3 and Steve Scott
                  in the
                  amount of $25,000 (incorporated by reference to Exhibit 10.28 to
                  the
                  Company’s Form 10-QSB for March 31, 2007).10.43
              
              Promissory
                  Note executed on November 30, 2006, between Power3 and Jeffrey
                  Hyde in the
                  amount of $10,000 (incorporated by reference to Exhibit 10.30 to
                  the
                  Company’s Form 10-QSB for March 31, 2007).10.44
              
              Promissory
                  Note executed on September 14, 2006, between Power3 and Magic Arts
&
                  Entertainment in the amount of $50,000 (incorporated by reference
                  to
                  Exhibit 10.21 to the Company’s Form 10-QSB for March 31,
                  2007).
  55
  10.45
              
              Promissory
                  Note, dated May 31, 2006, between Power3 and John Fife in the amount
                  of
                  $266,000 (incorporated by reference to Exhibit 10.6 to the Company’s Form
                  10-QSB for June 30, 2006).10.46
              
              Consulting
                  Agreement signed with Noble Investments, dated March 1, 2007 (incorporated
                  by reference to Exhibit 10.43 to the Company’s Form 10-QSB for March 31,
                  2007).10.47
              
              Joint
                  Venture Agreement signed with NeoGenomics (incorporated by reference
                  to
                  Exhibit 10.44 to the Company’s Form 10-QSB for March 31,
                  2007).10.48
              
              Code
                  of Ethics for Chief Executive Officer, Chief Financial Officer
                  and
                  Principal Accounting Officer (incorporated by reference to Exhibit
                  14.1 to
                  the Company’s Form 10-KSB filed September 9, 2005).10.49
              
              Distributor
                  Agreement and Release between Power3 Medical Products, Inc. and
                  Financial
                  Advisory House (incorporated by reference to Exhibit 10.10 to the
                  Company’s Form 10-QSB for September 30, 2007).10.50
              
              Settlement
                  Agreement and Release of All Claims between Accounts Payable Vendor
                  and
                  Power3 Medical Products, Inc. (incorporated by reference to Exhibit
                  10.10
                  to the Company’s Form 10-QSB for September 30, 2007).10.51*
              
              Stock
                  Purchase Agreementsigned
                  by and between shareholders and Power3 Medical Products,
                  Inc.10.52*
              
              Share
                  Purchase Agreement signed by and between investors and Power3 Medical
                  Products, Inc.10.53*
              
              Clinical
                  Trial Agreement effective August 24, 2007 by and between Sun Health
                  Research Institute and Power3 Medical Products, Inc. signed
                  11/6/07.14.1
              
              Statement
                  of Company Policy and Policy Regarding Confidentiality and Securities
                  Trades by Company Personnel (incorporated by reference to Exhibit
                  10.10 to
                  the Company’s Form 10-QSB for September 30, 2007).31.1*
              
              Certification
                  of Power3 Medical Products, Inc. Chief Executive Officer, Steven
                  B. Rash,
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2*
              
              Certification
                  of Power3 Medical Products, Inc. Chief Accounting Officer, Marion
                  J.
                  McCormick, pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1*
              
              Certification
                  of Power3 Medical Products, Inc. Chief Executive Officer, Steven
                  B. Rash,
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.32.2*
              
              Certification
                  of Power3 Medical Products, Inc. Chief Accounting Officer, Marion
                  J.
                  McCormick, pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.99.1
              
              Press
                  Release dated September 6, 2007 (incorporated by reference to
                  Exhibit 99.1 to the Company’s Form 8-K filed September 10,
                  2007).99.2
              
              Press
                  Release dated October 15, 2007 (incorporated by reference to
                  Exhibit 99.1 to the Company’s Form 8k filed October 16,
                  2007).*
                  Furnished with this report




56




**Item
      14. Principal Accountant Fees and Services**




The
      following table sets forth the aggregate amount of fees billed by the Company’s
      independent accountants for the year ended December 31, 2007 and the year ended
      December 31, 2006:




**2007**
              
              **2006**Audit
                  Fees:
              
              $
              47,821
              
              $
              113,614Audit
                  Related Fees:
              
              $
              -
              
              $
              -Tax
                  Fees:
              
              $
              2,835
              
              $
              6,519All
                  Other Fees:
              
              $
              -
              
              $
              -Total
                  Fees:
              
              $
              50,656
              
              $
              120,133




The
      Company does not have an Audit Committee of the Board of Directors. All
      activities of the Company’s independent accountants are reviewed and approved
      prior to the engagement by the Board of Directors, who considers whether such
      activities could affect the independence of such accountants.




57


**SIGNATURES**




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


**Signature**
              
              **Title**
              
              **Date**/s/
                  StevenB.
                  Rash
              
              Chairman
                  and
              
              April
                  15, 2008Steven
                  B. Rash
              
              Chief
                  Executive Officer/s/
                    Ira L. Goldknopf
              
              Secretary
                  and Director of
              
              April
                  15, 2008Ira
                  L. Goldknopf
              
              Proteomics/s/
                  MarionJ.
                  McCormick
              
              Chief
                  Accounting Officer
              
              April
                  15, 2008Marion
                  J. McCormick




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