| x | Quarterly      report under Section 13 or 15(d) of the Securities Exchange Act of      1934 |
|---|---------------------------------------------------------------------------------------------|

|  ̈ | Transition      report under Section 13 or 15(d) of the Exchange  Act |
|--------|-----------------------------------------------------------------------|

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| Delaware                                                                |   | 20-8191477                                    |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State      or other Jurisdiction ofIncorporation      or Organization) |   | (I.R.S.      EmployerIdentification      No.) |

| 380 Lexington Avenue, 31st Floor, New York, New      York 10168 |
|-----------------------------------------------------------------|
| (Address      of Principal ExecutiveOffice)                     |

| 212-319-5555                                               |
|------------------------------------------------------------|
| (Issuer’s      Telephone Number, Including AreaCode) |

| Large accelerated filer       ̈              | Accelerated filer x                   |
|--------------------------------------------------|---------------------------------------|
| Non-accelerated filer         ̈    | Smaller reporting company       ̈ |
| (Do      not check if smaller reporting company) |                                  |

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|                                                                                         | Page   |
|----------------------------------------------------------------------------------------------|--------|
| Part      I:  Financial Information:                                               |   |   |
|                                                                                         |   |   |
| Item      1 –Financial Statements:                                                     |   |   |
|                                                                                         |   |   |
| Condensed      Balance Sheets                                                                | 3      |   |
|                                                                                         |   |   |
| Condensed      Statements of Operations                                                      | 4      |   |
|                                                                                         |   |   |
| Condensed      Statement of Stockholders’ Equity                                       | 5      |   |
|                                                                                         |   |   |
| Condensed      Statements of Cash Flows                                                      | 6      |   |
|                                                                                         |   |   |
| Notes      to Unaudited Condensed Financial Statements                                       | 7      |   |
|                                                                                         |   |   |
| Item      2 – Management’s Discussion and Analysis or Results of      Operations | 17     |   |
|                                                                                         |   |   |
| Item      4 – Controls and Procedures                                                  | 19     |   |
|                                                                                         |   |   |
| Part      II.  Other Information                                                   |   |   |
|                                                                                         |   |   |
| Item      2 – Unregistered Sales of Equity Securities and Use of      Proceeds         | 20     |   |
|                                                                                         |   |   |
| Item      6 – Exhibits                                                                 | 21     |   |
|                                                                                         |   |   |
| Signatures                                                                                   | 22     |   |

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|                                                          |   | As of March 31, 2009 (unaudited) |        |   | As of December 31, 2008 |   |
|---------------------------------------------------------------|--------|-----------------------------------------------------------|-------------|--------|---------------------------------------------|--------|
| ASSETS                                                        |   |                                                      |        |   |                                        |   |
| Current      Assets                                           |   |                                                      |        |   |                                        |   |
| Cash                                                          |   | $                                                         | 122,894     |   |                                        | $      | 144,587 |   |
| Investments      held in trust                                |   |                                                      | 135,388,509 |   |                                        |   | 135,731,897 |   |
| Prepaid      expenses                                         |   |                                                      | 26,605      |   |                                        |   | 48,355 |   |
| Prepaid      taxes                                            |   |                                                      | 51,594      |   |                                        |   | 124,218 |   |
| Total      Current Assets                                     |   |                                                      | 135,589,602 |   |                                        |   | 136,049,057 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Computer      equipment, (net of accumulated                  |   |                                                      |        |   |                                        |   |   |   |
| depreciation      of $1,697 and $1,414, respectively)         |   |                                                      | 3,958       |   |                                        |   | 4,241 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Total      assets                                             |   | $                                                         | 135,593,560 |   |                                        | $      | 136,053,298 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                     |   |                                                      |        |   |                                        |   |   |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Current      liabilities:                                     |   |                                                      |        |   |                                        |   |   |   |
| Accounts      payable and accrued expenses                    |   | $                                                         | 545,064     |   |                                        | $      | 329,835 |   |
| Deferred      trust interest                                  |   |                                                      | 450,192     |   |                                        |   | 520,018 |   |
| Deferred      underwriting fees                               |   |                                                      | 4,140,000   |   |                                        |   | 4,140,000 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Total      liabilities                                        |   |                                                      | 5,135,256   |   |                                        |   | 4,989,853 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Common      stock, subject to possible conversion,            |   |                                                      |        |   |                                        |   |   |   |
| 5,174,999      shares at conversion value                     |   |                                                      | 38,936,992  |   |                                        |   | 38,936,992 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Commitments                                                   |   |                                                      |        |   |                                        |   |   |   |
| Stockholders'      equity                                     |   |                                                      |        |   |                                        |   |   |   |
| Preferred      stock, $.0001 par value, Authorized            |   |                                                      |        |   |                                        |   |   |   |
| 1,000,000      shares; none issued or outstanding             |   |                                                      | -           |   |                                        |   | - |   |
| Common      stock, $.0001 par value                           |   |                                                      |        |   |                                        |   |   |   |
| Authorized      50,000,000 shares                             |   |                                                      |        |   |                                        |   |   |   |
| Issued      and outstanding 21,000,000 shares (which includes |   |                                                      |        |   |                                        |   |   |   |
| 5,174,999      subject to possible conversion)                |   |                                                      | 2,100       |   |                                        |   | 2,100 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Additional      paid-in capital                               |   |                                                      | 90,891,800  |   |                                        |   | 90,891,800 |   |
| Earnings      accumulated during the development stage        |   |                                                      | 627,412     |   |                                        |   | 1,232,553 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Total      stockholders' equity                               |   |                                                      | 91,521,312  |   |                                        |   | 92,126,453 |   |
|                                                          |   |                                                      |        |   |                                        |   |   |   |
| Total      liabilities and stockholders' equity               |   | $                                                         | 135,593,560 |   |                                        | $      | 136,053,298 |   |

----

----

|                                                 |   | For the three months ended March 31, 2009 |       |   | For the three months ended March 31, 2008 |   |       | For the period January 9, 2007 (inception) to March 31, 2009 |   |
|------------------------------------------------------|--------|------------------------------------------------------------------------------|------------|--------|------------------------------------------------------------------------------|--------|------------|----------------------------------------------------------------------------------------------------------------|--------|
| Income:                                              |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |
|  Interest                                       |   | $                                                                            | 84,294     |   |                                                                         | $      | 817,269    |                                                                                                           |   | $ | 3,998,553 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Total      Income:                                   |   |                                                                         | 84,294     |   |                                                                         |   | 817,269    |                                                                                                           |   |   | 3,998,553 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Expenses:                                            |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Professional      fees                               |   |                                                                         | 482,538    |   |                                                                         |   | 141,656    |                                                                                                           |   |   | 1,536,495 |   |
| Franchise      and capital taxes                     |   |                                                                         | 127,046    |   |                                                                         |   | 127,572    |                                                                                                           |   |   | 944,152 |   |
| Administrative      fees                             |   |                                                                         | 30,000     |   |                                                                         |   | 30,000     |                                                                                                           |   |   | 203,871 |   |
| Dues      and subscriptions                          |   |                                                                         | 4,310      |   |                                                                         |   | 7,219      |                                                                                                           |   |   | 49,181 |   |
| Insurance                                            |   |                                                                         | 17,500     |   |                                                                         |   | 17,500     |                                                                                                           |   |   | 118,968 |   |
| Other      operating expenses                        |   |                                                                         | 28,041     |   |                                                                         |   | 127,942    |                                                                                                           |   |   | 426,742 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Total      expenses                                  |   |                                                                         | 689,435    |   |                                                                         |   | 451,889    |                                                                                                           |   |   | 3,279,409 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| (Loss)      income before provision for income taxes |   |                                                                         | (605,141   | )      |                                                                         |   | 365,380    |                                                                                                           |   |   | 719,144 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Provision      for income taxes                      |   |                                                                         | -          |   |                                                                         |   | 26,927     |                                                                                                           |   |   | 91,732 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Net      (loss) income                               |   | $                                                                            | (605,141   | )      |                                                                         | $      | 338,453    |                                                                                                           |   | $ | 627,412 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Net      (loss) income per share basic and           |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| diluted                                              |   | $                                                                            | (0.03      | )      |                                                                         | $      | 0.02       |                                                                                                           |   | $ | 0.04 |   |
|                                                 |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| Weighted      average shares                         |   |                                                                         |       |   |                                                                         |   |       |                                                                                                           |   |   |   |   |
| outstanding      basic and diluted                   |   |                                                                         | 21,000,000 |   |                                                                         |   | 21,000,000 |                                                                                                           |   |   | 16,836,207 |   |

----

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|                                                                                                                                                        |   | Common Stock |       |   |   |   |   | Earnings Accumulated During the |   |   |                   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|--------|--------|--------|------------------------------------------------|--------|--------|------------------------|--------|
|                                                                                                                                                        |   | Shares            |       |   | Amount |   |   | Additional paid-in capital           |   |   | Development Stage |   |   | Stockholders’ Equity |   |
| Issuance      of common stock to initial stockholders on January 9, 2007 at      approximately $.007 per share                                              |   |              | 3,750,000  |   |   | $      | 375    |                                           |   | $      | 24,625                 |   |   | $ | — |   |   | $ | 25,000 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Sale of 17,250,000      units, net of underwriters discount      and offering expenses (includes 5,174,999      shares subject to possible      conversion) |   |              | 17,250,000 |   |   |   | 1,725  |                                           |   |   | 127,729,167            |   |   |   | — |   |   |   | 127,730,892 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Private      placement warrants (2,075,000 shares)                                                                                                          |   |              |       |   |   |   |   |                                           |   |   | 2,075,000              |   |   |   |   |   |   |   | 2,075,000 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Proceeds subject to      possible conversion of 5,174,999      shares                                                                                       |   |              |       |   |   |   |   |                                           |   |   | (38,936,992            | )      |   |   |   |   |   |   | (38,936,992 | ) |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Net      income for the period                                                                                                                              |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   | 1,242,440 |   |   |   | 1,242,440 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                                                                                           |   |              | 21,000,000 |   |   | $      | 2,100  |                                           |   | $      | 90,891,800             |   |   | $ | 1,242,440 |   |   | $ | 92,136,340 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Net      loss for the year                                                                                                                                  |   |              | -          |   |   |   | -      |                                           |   |   | -                      |   |   |   | (9,887 | ) |   |   | (9,887 | ) |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                                                                                                                           |   |              | 21,000,000 |   |   | $      | 2,100  |                                           |   | $      | 90,891,800             |   |   | $ | 1,232,553 |   |   | $ | 92,126,453 |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Unaudited:                                                                                                                                                  |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Net      loss for the period                                                                                                                                |   |              | -          |   |   |   | -      |                                           |   |   | -                      |   |   |   | (605,141 | ) |   |   | (605,141 | ) |
|                                                                                                                                                        |   |              |       |   |   |   |   |                                           |   |   |                   |   |   |   |   |   |   |   |   |   |
| Balance      at March 31, 2009                                                                                                                              |   |              | 21,000,000 |   |   | $      | 2,100  |                                           |   | $      | 90,891,800             |   |   | $ | 627,412 |   |   | $ | 91,521,312 |   |

----

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|                                                                                           |   | For the three months ended March 31, 2009 |     |   | For the three months ended March 31, 2008 |   |     | For the period January 9, 2007 (inception) to March 31, 2009 |   |
|------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|----------|--------|------------------------------------------------------------------------------|--------|----------|----------------------------------------------------------------------------------------------------------------|--------|
| Cash      flow from operating activities                                                       |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |
| Net      income (loss)                                                                         |   | $                                                                            | (605,141 | )      |                                                                         | $      | 338,453  |                                                                                                           |   | $ | 627,412 |   |
| Adjustments      to reconcile net income (loss) to net      cash used in operating activities: |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Interest      income on investments held in trust account                                      |   |                                                                         | (14,312  | )      |                                                                         |   | (974,425 | )                                                                                                              |   |   | (4,445,986 | ) |
| Depreciation                                                                                   |   |                                                                         | 283      |   |                                                                         |   | 268      |                                                                                                           |   |   | 1,697 |   |
| Changes      in operating assets/liabilities:                                                  |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Decrease      (increase) in prepaid expenses                                                   |   |                                                                         | 21,750   |   |                                                                         |   | 24,191   |                                                                                                           |   |   | (26,605 | ) |
| (Increase)      decrease in prepaid taxes                                                      |   |                                                                         | 72,624   |   |                                                                         |   | (33,978  | )                                                                                                              |   |   | (51,594 | ) |
| Increase      in accounts payable and accrued expenses                                         |   |                                                                         | 215,229  |   |                                                                         |   | 19,385   |                                                                                                           |   |   | 545,064 |   |
| (Decrease)      increase in capital and income tax payable                                     |   |                                                                         | -        |   |                                                                         |   | (252,240 | )                                                                                                              |   |   | - |   |
| (Decrease)      increase in deferred trust interest                                            |   |                                                                         | (69,826  | )      |                                                                         |   | 157,535  |                                                                                                           |   |   | 450,192 |   |
| Net      cash used in operating activities                                                     |   |                                                                         | (379,393 | )      |                                                                         |   | (720,811 | )                                                                                                              |   |   | (2,899,820 | ) |
|                                                                                           |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Cash      flows from Investing Activities                                                      |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Purchases      of computer equipment                                                           |   |                                                                         | -        |   |                                                                         |   | (905     | )                                                                                                              |   |   | (5,655 | ) |
| Investments      placed in trust                                                               |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | (133,930,000 | ) |
| Disbursements      from investments held in trust                                              |   |                                                                         | 357,700  |   |                                                                         |   | 641,000  |                                                                                                           |   |   | 2,987,477 |   |
| Net      cash provided by (used in) investing activities                                       |   |                                                                         | 357,700  |   |                                                                         |   | 640,095  |                                                                                                           |   |   | (130,948,178 | ) |
|                                                                                           |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Cash      flows from financing activities                                                      |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Gross      proceeds from public offering                                                       |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | 138,000,000 |   |
| Proceeds      from sale of shares of common stock                                              |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | 25,000 |   |
| Proceeds      from note payable, stockholder                                                   |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | 100,000 |   |
| Payment      of note payable, stockholder                                                      |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | (100,000 | ) |
| Proceeds      from private placement warrants                                                  |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | 2,075,000 |   |
| Payment      of offering costs                                                                 |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | (6,129,108 | ) |
| Net      cash provided by financing activities                                                 |   |                                                                         | -        |   |                                                                         |   | -        |                                                                                                           |   |   | 133,970,892 |   |
|                                                                                           |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Net      increase (decrease) in cash                                                           |   |                                                                         | (21,693  | )      |                                                                         |   | (80,716  | )                                                                                                              |   |   | 122,894 |   |
| Cash      at beginning of the period                                                           |   |                                                                         | 144,587  |   |                                                                         |   | 118,868  |                                                                                                           |   |   | - |   |
| Cash      at the end of the period                                                             |   | $                                                                            | 122,894  |   |                                                                         | $      | 38,152   |                                                                                                           |   | $ | 122,894 |   |
| Supplemental      schedule of non-cash financing activities:                                   |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Accrual      of deferred underwriting fees                                                     |   | $                                                                            | -        |   |                                                                         | $      | -        |                                                                                                           |   | $ | 4,140,000 |   |
|                                                                                           |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Supplemental      schedule of cash flow information:                                           |   |                                                                         |     |   |                                                                         |   |     |                                                                                                           |   |   |   |   |
| Cash      paid during the period for income taxes                                              |   | $                                                                            | 36,200   |   |                                                                         | $      | 360,000  |                                                                                                           |   | $ | 923,986 |   |

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| 1. | Organization,BusinessOperations      And Significant Accounting Policies |   | KBL Healthcare Acquisition Corp.      III (the “Company”)      was incorporated in Delaware on January 9, 2007 as a blank check company whose      objective is to effect a merger, capital stock exchange, asset acquisition      or other similar business combination with an operating      business in the      healthcare or healthcare-related industries. The condensed financial statements at      March 31,      2009 and for the      periods ended March      31, 2009  and 2008 are unaudited and have been prepared by the      Company in accordance with accounting principles generally accepted in the      United States of America for interim financial information and with the      instructions to Form 10-Q. Accordingly, they do not include      all of the information and footnotes required by accounting principles      generally accepted in the United States of America for complete financial      statements. In the      opinion of management, all adjustments (consisting of normal adjustments)      have been made that are necessary to present fairly the financial position      of the Company as of March 31, 2009, the results of its operations and its cash      flows for the three months ended March 31, 2009, the three months ended      March 31, 2008 and for the period from January 9, 2007 (inception) to      March 31, 2009 and its changes in stockholders’ equity for the three      months ended March 31, 2009 and for the period from January 9, 2007 (inception) through March 31, 2009. Operating results for the interim      periods presented are not necessarily      indicative of the results to be expected for a full      year. These unaudited condensed interim      financial statements should be read in conjunction with the audited      financial statements and notes thereto for the period ended December 31,      2008 included in the Company’s Annual Report on Form 10-K filed with the      U.S. Securities and Exchange Commission (“SEC”) on March 13, 2009. The      December 31, 2008 balance sheet and the statement of stockholders’ equity      for the period ended December 31, 2007 and the year ended December 31,      2008 have been derived from these audited financial statements. The      accounting policies used in preparing these unaudited financial statements      are consistent with those described in the December 31, 2008 audited      financial statements. All activity from January 9, 2007 (inception) through July 25, 2007 related to the Company’s formation and      initial public offering described below.  Subsequent to July 25, 2007, the      Company has been seeking a business combination with an operating business      as described below. |
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|   |   |   | The registration statement for the      Company’s initial public offering (“Offering”) was declared effective July      19, 2007. The Company consummated the Offering on July 25, 2007 and      received net proceeds of approximately $127,731,000 (Note 2). The      Company’s management has broad discretion with respect to the specific      application of the net proceeds of this Offering, although substantially      all of the net proceeds of this Offering are intended to be generally      applied toward consummating a business combination with an operating      business in the healthcare or healthcare-related industries (“Business      Combination”). Furthermore, there is no assurance that the Company will be      able to successfully effect a Business Combination. An amount of      $133,930,000, including $4,140,000 of deferred underwriting discounts and      commissions and the $2,075,000 proceeds of the Private Placement Warrants      described in Note 2 was initially placed in a trust account (“Trust      Account”) and invested in United States “government securities” within the      meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a      maturity of 180 days or less or in money market funds meeting certain      conditions under Rule 2a-7 promulgated under the Investment Company Act of      1940 until the earlier of (i) the consummation of its first Business      Combination and (ii) liquidation of the Company. The placing of funds in      the Trust Account may not protect those funds from third party claims      against the Company. Although the Company will seek to have its vendors,      providers of financing, prospective target businesses or other entities it      engages, execute agreements with the Company waiving any right, title,      interest or claim of any kind in or to any monies held in the Trust      Account, there is no guarantee that they will execute such agreements. The      Company’s Chairman of the Board, the Company’s Chief Executive Officer and      the Company’s Chief Operating Officer have agreed that they will be liable      under certain circumstances to ensure that the proceeds in the Trust      Account are not reduced by the claims of target businesses or vendors,      providers of financing, service providers or other entities that are owed      money by the Company for services rendered to or contracted for or      products sold to the Company. However, there can be no assurance that they      will be able to satisfy those obligations. The remaining net proceeds (not      held in the Trust Account) may be used to pay for business, legal and      accounting due diligence on prospective acquisitions and continuing      general and administrative expenses. Additionally, up to an aggregate of      $1,900,000 of interest earned on the Trust Account balance may be released      to the Company to fund working capital requirements and additional amounts      may be released to fund tax obligations. The Company, after signing a      definitive agreement for the acquisition of a target business, is required      to submit such transaction for stockholder approval. In the event that      stockholders owning 30% or more of the shares sold in the Offering vote      against the Business Combination and exercise their conversion rights      described below, the Business Combination will not be consummated. All of      the Company’s stockholders prior to the Offering, including all of the      officers and directors of the Company (“Initial Stockholders”), have      agreed to vote their 3,750,000 founding shares of common stock in      accordance with the vote of the majority in interest of all other      stockholders of the Company (“Public Stockholders”) with respect to any      Business Combination. After consummation of a Business Combination, these      voting safeguards will no longer be  applicable. |
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|   |   |   | With respect to a Business      Combination which is approved and consummated, any Public Stockholder who      voted against the Business Combination may demand that the Company convert      his or her shares. The per share conversion price will equal the amount in      the Trust Account (including interest, but less amounts reserved or      released to us for working capital and net of taxes payable), calculated      as of two business days prior to the consummation of the proposed Business      Combination, divided by the number of shares of common stock held by      Public Stockholders at the consummation of the Offering. Accordingly,      Public Stockholders holding approximately 29.99% of the aggregate number      of shares owned by all Public Stockholders may seek conversion of their      shares in the event of a Business Combination. Therefore, a portion of the      net proceeds of the offering (approximately 29.99% of the amount placed in      trust excluding the portion relating to the deferred underwriting fees)      has been classified as common stock subject to possible conversion and a      portion of the interest earned on the Trust Account (approximately 29.99%      of the interest earned on the Trust Account after permissible deductions      for working capital requirements and tax obligations) has been classified      as deferred interest in the accompanying balance sheet. Such Public      Stockholders are entitled to receive their per share interest in the Trust      Account computed without regard to the shares held by Initial      Stockholders. The Company’s Certificate of      Incorporation provides for mandatory liquidation of the Company in the      event that the Company does not consummate a business combination by July      19, 2009. If the Company has not completed a Business Combination by such      date, its corporate existence will cease and it will dissolve and      liquidate for the purposes of winding up its affairs. This factor raises substantial      doubt about the Company’s ability to continue as a going concern. The      accompanying financial statements are prepared assuming the Company will      continue as a going concern. The financial statements do not include any      adjustments that might result from the outcome of this uncertainty. In      the event of liquidation, it is likely that the per share value of the      residual assets remaining available for distribution (including Trust Fund      assets) will be less than the initial public offering price per share in      the Offering (assuming no value is attributed to the Warrants contained in      the Units sold in the Offering discussed in Note  2). |
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|   |   |   | Net      Income Per      Share – Net income      per share is computed by dividing net income by the weighted-average      number of shares of common stock outstanding during the period. The effect      of the 17,250,000 outstanding warrants included in the units issued in      connection with the Offering and the 2,075,000 outstanding warrants issued      in connection with the private placement has not been considered in the      diluted income per share calculation since such warrants are contingently      exercisable. New Accounting      Pronouncements      –  In December 2007, the      “FASB” released      Statement of      Financial Accounting Standards No. 141(R), Business Combinations (revised      2007) (“SFAS 141(R)”), which changes many well-established business      combination accounting practices and significantly effects how acquisition      transactions are reflected in the financial statements. Additionally, SFAS      141(R) will affect how companies negotiate and structure transactions,      model financial projections of acquisitions and communicate to      stakeholders. SFAS 141(R) must be applied prospectively to business      combinations for which the acquisition date is on or after the beginning      of the first annual reporting period beginning on or after December 15,      2008. The Company’s adoption of SFAS 141(R) did not have a material effect      on the Company’s financial statements. In December 2007, the      “FASB” released      SFAS No.      160, Non-controlling Interests in      Consolidated Financial Statements, an amendment of ARB No.51 (      “SFAS 160”), which establishes accounting and      reporting standards for the noncontrolling interests in a subsidiary and      for the deconsolidation of a subsidiary. SFAS 160 requires consolidated      net income to be reported at amounts that include the amounts attributable      to both the parent and the noncontrolling interests and requires      disclosure, on the face of the consolidated statement of income, of the      amounts of consolidated net income attributable to the parent and to the      noncontrolling interest. Previously, net income attributable to the      noncontrolling interest was reported as an expense or other deduction in      arriving at consolidated net income. SFAS 160 is effective for financial      statements issued for fiscal years beginning after December 15, 2008.      The Company’s      adoption of SFAS 160 did not have a material effect on the Company’s      financial statements. |
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|   |   |   | In September      2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”),      which defines fair value, establishes a framework for measuring fair value      in accordance with generally accepted accounting principles, and expands      disclosures about fair value measurements.  SFAS 157 does not      require any new fair value measurements; rather, it applies under other      accounting pronouncements that require or permit fair value      measurements.  The provisions of SFAS 157 are to be applied      prospectively as of the beginning of the fiscal year in which it is      initially applied, with any transition adjustment recognized as a      cumulative-effect adjustment to the opening balance of retained      earnings.  The provisions of SFAS 157 are effective for fiscal      years beginning after November 15, 2007.  The Company adopted      the provisions of SFAS 157 for the fiscal year beginning January 1, 2008,      except for nonfinancial assets and nonfinancial liabilities that are      recognized or disclosed at fair value in the financial statements on a      nonrecurring basis for which delayed application was permitted until the      Company’s fiscal year beginning January 1, 2009.  The Company’s      adoption of the remaining provisions of SFAS 157 on January 1, 2009 did      not have a material effect on the Company’s financial      statements. In June 2008, the FASB ratified      EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded      Feature) is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5      provides guidance on how to determine if certain instruments or embedded      features are considered indexed to an entity’s own stock.  EITF      07-5 requires companies to use a two-step approach to evaluate an      instrument’s contingent exercise provisions and settlement provisions in      determining whether the instrument is considered to be indexed to its      own.  EITF 07-5 is effective for fiscal years beginning after      December 15, 2008 and any interim periods therein with any outstanding      instrument at the date of adoption requiring a retrospective application      of the accounting through a cumulative effect adjustment to retained      earnings upon adoption.  The adoption of EITF 07-5 did not have      a significant impact on the Company’s financial      statements. The Company does not believe that      any other recently issued, but not yet effective, accounting standards if      currently adopted would have a material effect on the accompanying      condensed financial statements. Reclassifications– Certain amounts in the first      quarter 2008 financial statements have been reclassified in order to      conform to the first quarter 2009      presentation. |
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| 2.     | Initial      Public Offering |   | On July 25, 2007, the Company sold      17,250,000 Units (including 2,250,000 units to cover over-allotments) in      the Offering. Each Unit consists of one share of the Company’s common      stock and one Redeemable Common Stock Purchase Warrant (“Warrants”). Each      Warrant entitles the holder to purchase from the Company one share of      common stock at an exercise price of $6.00 commencing the later of the      completion of a Business Combination and July 19, 2008 and expiring July      18, 2011. The Company may redeem the Warrants, at a price of $.01 per      Warrant upon 30 days’ notice while the Warrants are exercisable, only in      the event that the last sale price of the common stock is at least $11.50      per share for any 20 trading days within a 30 trading day period ending on      the third day prior to the date on which notice of redemption is given. In      accordance with the warrant agreement relating to the Warrants sold and      issued in the Offering, the Company is only required to use its best      efforts to maintain the effectiveness of the registration statement      covering the Warrants. The Company will not be obligated to deliver      securities, and there are no contractual penalties for failure to deliver      securities, if a registration statement is not effective at the time of      exercise. Additionally, in the event that a registration is not effective      at the time of exercise, the holder of such Warrant shall not be entitled      to exercise such Warrant and in no event (whether in the case of a      registration statement not being effective or otherwise) will the Company      be required to net cash settle the warrant exercise. Consequently, the      Warrants may expire unexercised and unredeemed. |
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|   |                         |   | The Company paid the underwriters      in the Offering an underwriting discount of 7% of the gross proceeds of      the Offering. However, the underwriters have agreed that 3% ($4,140,000)      of the underwriting discounts will not be payable unless and until the      Company completes a Business Combination and have waived their right to      receive such payment upon the Company’s liquidation if it is unable to      complete a Business Combination. In addition, the underwriters will      forfeit a portion of this fee ($0.24 per share) to pay a portion of the      amounts due to converting stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| 3.     | Private      Placement       |   | Certain of the Company’s officers,      directors and special advisors purchased a total of 2,075,000 Warrants      (“Private Placement Warrants”) at $1.00 per Warrant (for an aggregate      purchase price of $2,075,000) privately from the Company. The purchase      price of the Warrants was in excess of their fair share. These purchases      took place simultaneously with the Offering. All of the proceeds received      from these purchases have been placed in the Trust Account. The Private      Placement Warrants are identical to the Warrants underlying the Units in      the Offering except that if the Company calls the Warrants for redemption,      the Private Placement Warrants may be exercisable on a “cashless basis,”      at the holder’s option, so long as such securities are held by such      purchaser or their affiliates. Furthermore, the purchasers have agreed      that the Private Placement Warrants will not be sold or transferred by      them until after the Company has completed a Business      Combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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| 4. | Investments      Held in Trust |   | Reconciliation of investments held      in trust as of March 31, 2009 is as  follows: |
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|                                          |   | 2009   |        |
|------------------------------------------|--------|--------|-------------|
| Contribution      to trust               |   | $      | 133,930,000 |   |
| Interest      income received            |   |   | 4,445,986   |   |
| Withdrawals      to fund operations (a)  |   |   | (1,900,000  | ) |
| Withdrawals      to fund estimated taxes |   |   | (1,087,477  | ) |
| Total      investments held in trust     |   | $      | 135,388,509 |   |

|   |                                     |   | (a) amount is limited to      $1,900,000                                                                                                       |
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|   |                                     |   |                                                                                                                                           |
| 5.     | Fair      Value of Financial Instruments |   | The table below presents the      balance of assets and liabilities measured at fair value on a recurring      basis by level withinhierarchy. |

|                                |   | March      31, 2009 |        |
|--------------------------------|--------|---------------------|-------------|
|                           |   | Total               |        |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                           |   |                |        |   |   |   |   |   |   |   |   |   |
| Investments      Held in Trust |   | $                   | 135,388,509 |   |   | $ | 135,388,509 |   |   | $ | - |   |   | $ | - |   |
|                           |   |                |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      assets              |   | $                   | 135,388,509 |   |   | $ | 135,388,509 |   |   | $ | - |   |   | $ | - |   |

|   |   |   | The Company’s investments held in      trust include money market securities that are considered to be highly      liquid and easilytradable. |
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| 6. | Commitments |   | The Company presently occupies      office space provided by an affiliate of three of the Initial      Stockholders. Such affiliate has agreed that, until the Company consummates a Business      Combination, it will make such office space, as well as certain office and      secretarial services, available to the Company, as may be required by the      Company from time to time. The Company has agreed to pay such affiliate      $10,000 per month for such services      commencing on the effective date of the Offering. The statement of      operations for the three months ended March 31, 2009 and 2008 includes $30,000 and the period from January 9,      2007 (inception) to      March 31,      2009 includes $203,871 of expense related to this      agreement. Pursuant      to letter agreements which the Initial Stockholders will enter with the      Company and the underwriters, the Initial Stockholders will waive their      right to receive distributions with respect to their founding shares upon      the Company’sliquidation. |
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|   |                 |   | The      Initial Stockholders and the holders of the Private Placement Warrants (or      underlying securities) will be entitled to registration rights with      respect to their founding shares or Private Placement Warrants (or      underlying securities) pursuant to an agreement dated as of July 19, 2007.      The holders of the majority of the founding shares are entitled to demand      that the Company register these shares at any time commencing three months      prior to the first anniversary of the consummation of a Business      Combination. The holders of the Private Placement Warrants (or underlying      securities) are entitled to demand that the Company register these      securities at any time after the Company consummates a Business      Combination. In addition, the Initial Stockholders and holders of the      Private Placement Warrants (or underlying securities) have certain      “piggy-back” registration rights on registration statements filed after      the Company’s consummation of a Business Combination. The      Company entered into consulting agreements with two consultants on August      1, 2007 and August 29, 2007. The agreements are terminable by either party      upon 60 and 30 days prior written notice, respectively. The Company is      obligated to pay the consultants a combined fee of $33,750 per month plus      expenses for consulting services and a success fee totaling $600,000 30      days after the closing of the initial Business Combination by the Company      provided such Business Combination is completed within a certain number of      days from the termination of the agreements. Included in professional fees      in the accompanying statements of income for the three months ended March      31, 2009 is $76,250, $101,250 for the three months ended March 31, 2008,      and $641,250 for the period January 9, 2007 (inception) to March 31, 2009      related to these agreements. At December 31, 2008 the Company issued a      termination notice in relation to the August 1, 2007 consulting      agreement.  The notice terminates the consulting agreement      effective February 28, 2009. If a potential transaction is consummated by      the Company at any time before its liquidation, the Company shall pay the      consultant the success fee. The Company has engaged with      several third-party independent contractors to assist in finding a      potential target business to acquire. The Company has generally agreed to      pay such entities a fee between 0.5% and 1.5% of the total value of the      transaction for any target business referred by such third parties that is      ultimately acquired by the Company. There is no obligation to pay such      entities any fee unless the Company acquires a target business referred by      such entity. |
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| 7.     | Preferred      Stock |   | The Company is authorized to issue      1,000,000 shares of preferred stock with such designations, voting and      other rights and preferences as may be determined from time to time by the      Board of Directors.The agreement with the      underwriters prohibits the Company, prior to a Business Combination, from      issuing preferred stock which participates in the proceeds of the Trust      Account or which votes as a class with the Common Stock on a Business      Combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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| 8.       | Common      Stock                       |   | Effective July 19, 2007, the      Company’s Board of Directors authorized a stock dividend of 0.2 shares of      common stock for each outstanding share of common stock. All references in      the accompanying financial statements to the number of shares have been      retroactively restated to reflect this  transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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|  9. |  Proposed      BusinessCombination |   |  On March 13, 2009, the Company      entered into an Agreement and Plan of Reorganization (“Merger Agreement”)      with PRWT Services, Inc. (“PRWT”), PRWT Merger Sub, Inc. (“Merger Sub”)      and the holders of all outstanding capital stock of PRWT (“PRWT      Stockholders”). PRWT      and its subsidiaries are a diversified enterprise of pharmaceutical      manufacturing and distribution, facilities management, and business      process outsourcing services.  Pursuant to the Merger Agreement,      (a) the Company will merge with Merger Sub, with the Company being the      surviving entity of the merger and a wholly owned subsidiary of PRWT, (b)      all of the Company’s securities will automatically convert into an equal      number of securities of PRWT of like tenor and (c) PRWT will become the      public company following consummation of the transaction (“New      Pubco”).  In connection with and as a result of the merger and      the recapitalization of PRWT’s outstanding capital stock, immediately      following the consummation of the merger, the PRWT Stockholders will own      an aggregate of 11,950,000 shares of New Pubco common stock (“Merger      Shares”), subject to upward or downward adjustment in the event PRWT’s      consolidated total indebtedness is more or less than $45,000,000 at the      closing of the merger, and will receive an aggregate of $3,500,000 cash      from New Pubco in exchange for the release and discharge of any and all      claims against New Pubco.  941,211 of the Merger Shares will be      placed in escrow to provide a fund to satisfy certain net debt adjustment      and indemnification obligations of the PRWT Stockholders to New Pubco      under the terms of the Merger Agreement. An additional 8,000,000 shares of      New Pubco common stock will be placed in escrow at the closing to be      released to the PRWT Stockholders upon New Pubco attaining certain levels      of EBITDA in fiscal 2009, 2010 and/or 2011 or upon certain exercises of      New Pubco redeemable warrants.  At the closing of the merger,      the funds held in the Trust Account will be transferred to New Pubco,      after deduction of transaction expenses, tax obligations (if any),      deferred underwriting commissions, and the $3,500,000 cash payment to the      PRWT Stockholders. The merger is expected to be      consummated in the third quarter of 2009, after the required approval by      our stockholders and      the fulfillment of certain other conditions, as described in the Merger      Agreement. The merger      is expected to be accounted for as a reverse  merger. |

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| 10. | Subsequent      Event |   | On May 6, 2009, the Company announced that PRWT Services, Inc.      (“PRWT”) has purchased an aggregate of approximately 7.275 million      warrants of the      Company in private      transactions for an aggregate purchase price of approximately $2.0      million.  The warrants purchased represent approximately 42% of      the total Company’s warrants issued in the Company’s initial public offering      (“IPO”). Following the business      combination, PRWT intends to retire all of the aforementioned warrants it      has purchased. |
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| ITEM      2: | UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OFPROCEEDS |
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|                               | KBL      HEALTHCARE ACQUISITION CORP. III               |
|------------------------------------|---------------------------------------------------------|
|                               |                                                    |
| Dated:  May      8, 2009 |                                                    |
|                               | /s/ Marlene Krauss, M.D.                                |
|                               |  Marlene      Krauss, M.D.                         |
|                               |  Chief      Executive Officer                      |
|                               |  (Principal      Executive Officer)                |
|                               |                                                    |
|                               | /s/ Michael Kaswan                                      |
|                               |  Michael      Kaswan                               |
|                               |  Chief      Operating Officer                      |
|                               |  (Principal      Accounting and Financial Officer) |

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