WOUND MANAGEMENT TECHNOLOGIES, INC. (Form: 10-Q, Received: 08/16/2010 17:23:50)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2010

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

Commission File No. 0-11808

WOUND MANAGEMENT TECHNOLOGIES, INC.

	Texas	59-2220004
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification Number)

777 Main Street

Suite 3100

Fort Worth, Texas 76102

(Address of principal executive offices)

(817) 820-7080

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

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

As of June 30, 2010 35,346,027 shares of the Issuer's $.001 par value common stock were issued and 35,341,938 shares were outstanding.

WOUND MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES

Form 10-Q

Quarter Ended June 30, 2010

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and
December 31, 2009 (Audited)	2

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009	3

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2010 and 2009	4

Notes to unaudited condensed consolidated financial statements	5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS	10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13

ITEM 4T. CONTROLS AND PROCEDURES	13

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings	14
ITEM 1A Risk Factors	14
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
ITEM 3. Defaults upon Senior Securities	14
ITEM 4. Removed and reserved	14
ITEM 5. Other Information	14
ITEM 6. Exhibits	14

SIGNATURE	15

WOUND MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2010 (Unaudited) December 31, 2009 (Audited)

ASSETS	June 30, 2010			December 31, 2009

CURRENT ASSETS:
Cash	$	22,029		$	(4,363	)
Accounts Receivable, net		71,785			30,003
Inventory, net		106,374			130,668
Notes Receivable, current		484,422			-
Interest Receivable		25,328			-
Total Current Assets		709,938			156,308

LONG-TERM ASSETS:
Property and Equipment, net		1,778			2,750
Intangible Assets - Patent, net		472,036			497,552
Intangible Assets - Marketing Contacts, net		3,873,730			4,083,120
Deferred Loan Costs		76,848			5,318
Prepaid and Other Assets		18,315			27,549
Note Receivable, including accrued interest		1,556,250			-
Total Long Term Assets		5,998,957			4,616,289

TOTAL ASSETS	$	6,708,895		$	4,772,597

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Accounts Payable	$	284,893		$	261,161
Royalties Payable		387,851			383,013
Accrued Liabilities		366,454			391,972
Accrued Interest		161,362			55,806
Notes Payable - related parties		2,181,758			712,272
Notes payable, net of discount		545,100			653,386
Total Current Liabilities		3,927,418			2,457,610

LONG-TERM LIABILITIES
Debentures, net of discount		282,857			-

TOTAL LIABILITIES		4,210,275			2,457,610

STOCKHOLDERS' EQUITY (DEFICIENCY)
Series A Preferred Stock, $10 par value, 5,000,000 shares authorized; 0 issued and outstanding.		-			-
Series B Preferred Stock, $10 par value, 75,000 shares authorized; 0 issued and outstanding.		-			-
Common Stock: $0.001 par value; 100,000,000 shares authorized; 35,346,027 issued and 35,341,938 outstanding as of June 30, 2010 and 32,937,310 issued and 32,933,221 outstanding as of December 31, 2009		35,345			32,937
Additional Paid-in Capital		21,751,589			19,661,267
Stock Subscription Receivable		(292,074	)		(292,074	)
Treasury Stock		(12,039	)		(12,039	)
Accumulated Deficit		(18,984,201	)		(17,075,104	)
Total Stockholders' Equity (Deficiency)		2,498,620			2,314,987
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)	$	6,708,895		$	4,772,597


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

WOUND MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

	Three			Three			Six			Six
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
REVENUES:	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009

Total Revenue	$	114,977		$	73,725		$	180,957		$	127,812

Cost of Revenue		28,419			134,278			48,814			413,753

Gross Profit		86,558			(60,553	)		132,143			(285,941	)

GENERAL AND ADMINISTRATIVE EXPENSES:

General and Administrative Expenses		587,534			187,042			975,380			408,630
Depreciation / Amortization		117,939			1,986			235,878			3,972
INCOME (LOSS) FROM CONTINUING OPERATIONS:		(618,915	)		(249,581	)		(1,079,115	)		(698,543	)

OTHER INCOME (EXPENSES):
Loss on Settlement		(12,017	)		-			(732,674	)		-
Interest Income		43,633			-			68,753			-
Interest Expense		(75,707	)		(74,330	)		(166,061	)		(111,993	)

LOSS BEFORE INCOME TAXES		(663,006	)		(323,911	)		(1,909,097	)		(810,536	)
Current tax expense		-			-			-			-
Deferred tax expense		-			-			-			-
NET LOSS	$	(663,006	)	$	(323,911	)	$	(1,909,097	)	$	(810,536	)

Basic and diluted loss per share of common stock:	$	(0.02	)	$	(0.01	)	$	(0.06	)	$	(0.03	)

Weighted average number of common shares outstanding		35,038,079			27,937,310			34,494,356			27,937,310


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

WOUND MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 and 2009

	2010			2009
Cash flows from operating activities
Net loss from continuing operations	$	(1,909,097	)	$	(810,536	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		235,878			3,972
Deferred costs - amortization		(71,530	)		-
Amortization of discount		3,316			15,000
Stock paid for services		218,282			-
Loss on debt settlement		732,674			-
Non-cash expenses		22,019			68,000
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses		-			(82,596	)
(Increase) decrease in accounts receivable		(41,782	)		10,275
(Increase) decrease in inventory		24,294			36,059
(Increase) decrease in interest receivable		(81,578	)		-
(Increase) decrease in prepaids and other assets		9,234			-
Increase (decrease) in royalties payable, including related accrued interest		4,838			10,809
Increase (decrease) in accounts payable and accrued liabilities		(1,786	)		145,122
Increase (decrease) in accrued interest payable		105,556			-
Net cash flows used in operating activities		(749,682	)		(603,895	)

Cash flows from investing activities
Cash paid in acquisitions		(100,000	)		-
Purchase of notes receivable - related party		(798,500	)		-
Proceeds from notes receivable - related party		297,363			-
Net cash flows used in investing activities		(601,137	)		-

Cash flows from financing activities
Proceeds from notes payable - related parties		875,796			820,070
Payments on notes payable - related parties		(39,481	)		(215,000	)
Proceeds from notes payable		310,000			-
Payments on notes payable		(414,102	)		-
Proceeds from Debentures		495,000			-
Proceeds from common stock/additional paid in capitol		149,998			-
Net cash flows provided by financing activities		1,377,211			605,070

Increase (decrease) in cash		26,392			1,175

Cash and cash equivalents, beginning of period		(4,363	)		1,142
Cash and cash equivalents, end of period	$	22,029		$	2,317

Cash paid during the period for:
Interest	$	-		$	33,184
Income taxes		-			-

Supplemental Non-cash investing and financing activities:
700,000 shares of common stock issued with cash-less exercise of warrants	$	-		$	700
20,000 shares of common stock contributed to obtain note payable	$	-		$	68,000
Amortized discount on note payable	$	3,316		$	15,000
Common stock for debt conversion	$	1,512,307		$	-
Common stock issued for services	$	218,282		$	-


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

WOUND MANAGEMENT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The terms “WMT,” “we,” the “Company,” and “us” as used in this report refer to Wound Management Technologies, Inc. The accompanying unaudited condensed consolidated balance sheet as of June 30, 2010 and unaudited condensed consolidated statements of operations for the six months ended June 30, 2010 and 2009 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of WMT, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010 or any other period. These financial statements and notes should be read in conjunction with the financial statements for each of the two years ended December 31, 2009 and December 31, 2008, included in the Company’s Annual Report on Form 10-K. The accompanying condensed consolidated balance sheet as of December 31, 2009 has been derived from audited financial statements at that date.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WMT and its wholly-owned subsidiaries: Wound Care Innovations, LLC (“WCI”), BioPharma Management Technologies, Inc. (“BioPharma”), Resorbable Orthopedic Products, LLC (“Resorbable”), and Secure eHealth, LLC (“eHealth”). eHealth, a Nevada limited liability company, was purchased on February 1, 2010 (see Note 3 “Asset and Business Acquisitions”). All intercompany accounts and transactions have been eliminated.

NOTE 2 -- GOING CONCERN

The Company has current liabilities in excess of current assets and has a stockholders’ deficiency. The Company has had limited operations and has not been able to develop an ongoing, reliable source of revenue to fund its existence. The Company’s day-to-day expenses have been covered by proceeds obtained, and services paid for, by the issuance of stock and notes payable. The adverse effect on the Company’s results of operations due to its lack of capital resources can be expected to continue until such time as the Company is able to generate additional capital from other sources. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

These unaudited interim condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The continuation of the Company as a going concern is dependent upon the success of the Company in obtaining additional funding and the success of its future operations. The ability of the Company to achieve these objectives cannot be determined at this time.

NOTE 3- ASSET AND BUSINESS ACQUISITIONS

On February 1, 2010, the Company entered into a purchase agreement with VHGI Holdings, Inc., formerly VirtualHealth Technologies, Inc. (“VHGI”), a Delaware corporation. The total purchase price of $500,000, which consisted of $100,000 in cash and a promissory note in the principal amount of $400,000 (the “WMT Note”), was paid for certain assets and liabilities. Amounts recorded by the Company as a result of this transaction were the following:

a)	An asset has been recorded for the $1,500,000 Senior Secured Convertible Promissory Note Receivable issued by Private Access, Inc. (the “Private Access Note”).

b)	A liability has been recorded for the note payable obligation of $1,000,000, which includes accrued interest, incurred by VHGI in conjunction with the Private Access Note transaction.

No value was assigned to the other assets included in the transaction, which were fully amortized intangibles, and no value was included in the purchase price paid. These intangibles include intellectual property related to the “Veriscrip” prescription drug monitoring technology and the System Tray Notifier license owned by eHealth. WMT also purchased VHGI’s 100% membership interest in eHealth.

Scott A. Haire, the Company's Chief Executive Officer (“CEO”) and Chairman, also serves as the CEO, Chief Financial Officer (“CFO”), and a director of VHGI. Based on shares outstanding as of the Annual Report on Form 10-K filed by VHGI for the year ended December 31, 2009, Mr. Haire beneficially owns, individually and through H.E.B., LLC, a Nevada limited liability company (“HEB”) of which Mr. Haire is the managing member, 42% of the outstanding common stock of VHGI.

NOTE 4 – NOTES RECEIVABLE

The Private Access Note is with an unrelated company and the loan of $1,500,000 accrues interest at 9% per annum from the day of purchase to the maturity date of July 31, 2013, with $56,250 of interest accrued as of June 30, 2010. According to the terms of the Assignment and Assumption Agreement between VHGI, Private Access, Inc. (“Private Access”) and the Company, VHGI assigned all rights, title and interest in the Private Access Note, including the right to serve as collateral agent for the collateral pledged as security by Private Access, to the Company. Under the terms of the Security Agreement dated August 3, 2009, which was assigned to the Company by VHGI, the Company, along with other investors, holds pro rata security interests in all property of Private Access including its intellectual property.

Funds are advanced to and from HEB (see terms of agreement in Note 5) and at June 30, 2010 the amount advanced to HEB is $484,422 and the related accrued interest as of this date is $25,328.

NOTE 5 – NOTES PAYABLE

Notes Payable – Related Parties

Funds are advanced to the Company from various related parties, including from affiliates of Scott A. Haire, who is the Company’s

CEO. Other stockholders fund the Company as necessary to meet working capital requirements and expenses. The following is a summary of amounts due to related parties, including accrued interest separately recorded, as of June 30, 2010:

Related party	Nature of relationship	Terms of the agreement	Principal amount

H.E.B., LLC, a Nevada limited liability company	Scott Haire is the managing member of H.E.B., LLC	Series of advances under two separate, unsecured lines of credit totaling $1 million dated November 26, 2003 and November 4, 2004, both at 10% per annum; no maturity date; unused lines available at June 30, 2010 total $720,209. Accrued interest at June 30, 2010 is $94,361.	$1,279,790
Commercial Holding AG, LLC	Commercial Holding AG, LLC has provided previous lines of credit to affiliates of H.E.B., LLC	Unsecured notes with interest accrued at rates of 8% and 10% per annum until paid in full with no maturity date. Accrued interest at June 30, 2010 is $32,676.	501,968
VHGI Holdings, Inc.	Scott Haire is a majority shareholder of WMT and VHGI	Unsecured note at 9% interest per annum with February 1, 2011 maturity date. Accrued interest at June 30, 2010 is $15,000.	400,000
TOTAL			$2,181,758

Notes Payable

In July 2009, the Company executed a discounted note to an unrelated party with a face amount of $615,000 and a funded amount of $550,000. The discount of $65,000 is expensed over the term of the loan. The note accrues interest at 18% per annum and was due in January 2010, but was subsequently extended to August 31, 2010. Deferred loan costs amounted to $79,766 and were amortized over the term of the loan and were fully amortized as of March 31, 2010. The balance as of June 30, 2010 is $255,897.

Related to the above mentioned note executed in July 2009, a shareholder of the Company contributed 50,000 shares of Company stock owned or controlled by the shareholder, to a lender to facilitate obtaining a loan for the Company. In addition, another shareholder contributed 1,000,000 shares of the stock of an unrelated company to the same lender to facilitate obtaining the loan. The $220,000 total value of the stock has been recorded as a capital contribution and was amortized as interest expense over the term of the loan.

On December 7, 2009 the Company executed a convertible promissory note in the amount of $45,000 to an unrelated party. The principal and accrued interest, at 8% per annum, is due nine months from date of execution. On February 4, 2010 and March 9, 2010 the Company executed two additional convertible promissory notes with the same terms to the same unrelated party in the amounts of $25,000 and $30,000, respectively. The total discount amount related to the notes is $7,500 and this amount is being amortized over the term of the loans. The unamortized discount balance at June 30, 2010 is $3,298. In June 2010, $7,500 of the principal balance was settled with the issuance of 26,023 shares of common stock of the Company. The debt was reduced at a discounted rate of $.29 and a loss on settlement was recognized for $12,017. The loss was calculated based on the difference between this rate and the $.75 closing price of the stock on the date of issuance. The balance as of June 30, 2010 is $89,202.

On April 4, 2010 the Company executed a promissory note in the amount of $100,000 to an unrelated party. The principal and accrued interest, at 10% per annum, is due October 30, 2010. A second promissory note was executed by the Company to the same unrelated party for $100,000 on June 11, 2010 and this note is due August 31, 2010.

Debentures

On March 30, 2010, the Company entered into a Securities Purchase Agreement and, pursuant to this agreement, a total of $1,000,000 in principal amount of convertible debentures (the “Debentures”), with a maturity date of March 2013, may be sold to investors. The Debentures may be converted into shares of the Company’s common stock at a conversion price equal to seventy percent (70%) of the lowest closing bid price per share for the twenty (20) trading days immediately preceding the date of conversion; provided that no holder may convert Debentures into, nor shall the Company issue to such holder, shares of common stock to the extent that the conversion would result in a Holder and its affiliates together beneficially owning more than 4.99% of the then issued and outstanding shares of the Company’s common stock. This ownership restriction may be waived, however, by a holder upon sixty-one (61) days prior written notice.

The Debentures may be redeemed by the Company at any time or from time to time at a price equal to (x) one hundred twenty percent (120%) of the principal amount of the Debenture if the Debenture is called for redemption prior to the expiration of six months from the issuance date, or one hundred thirty one percent (131%) if called for redemption thereafter, plus (y) interest accrued through the day immediately preceding the date of redemption.

On April 1, 2010, the Company issued Debentures in the aggregate principal amount of $255,000 and additional issuances were made in April and May, 2010 for $55,000 and $185,000, respectively. In accordance with Accounting Standards Codification (“ASC”) Topic No. 470-20-25-4, the intrinsic value of the embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid in capital. A discount in the amount of $212,143 has been recorded for the beneficial conversion feature, which will be amortized over the term of the debt. The June 30, 2010 debt balance of $495,000 after the discount is $282,857. In addition, debt issuance costs of $76,850 have been deferred and will be amortized over the term of the debt. The debentures have a three (3) year life from the date of issuance.

NOTE 6 – INTANGIBLE ASSETS

BioPharma Management Technologies, Inc.

On September 17, 2009, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), whereby BioPharma became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, 4,500,000 shares of the Company’s restricted common stock were issued in exchange for all the outstanding common stock of BioPharma.

Prior to the Merger Agreement, BioPharma entered into a 50% joint venture with A&Z Pharmaceutical, LLC (A&Z) to form Pharma Technology International, LLC (“Pharma Tech”). A&Z is a privately held wholesale distributor of pharmaceuticals formed in 1997. A&Z’s customer base includes tertiary hospitals, medical institutions, and governmental agencies located in the United States, South America, Europe and the Middle East.The operations of Pharma Tech to date have been minimal.

Pharma Tech entered into a Distribution Agreement (the “Distribution Agreement”) to market, distribute and sell the WCI wound care products in the Middle East through existing A&Z distribution channels. The initial focus will be on CellerateRX® and the agreement requires Pharma Tech to sell a minimum of $500,000 of the product each year of the five year agreement to maintain the exclusive right to sell the product. The agreement covers 20 countries throughout the Middle East and Northern Africa.

As part of the BioPharma acquisition, the formula for a shingles based product was obtained which is only at the idea stage and no determination has been made as to whether the formula can be developed cost effectively into a product. According to the guidance in ASC Topic No. 805-20-25-1, identifiable assets should be recognized separately from goodwill and there was no value assigned to this formula.

The BioPharma transaction has been accounted for as a business combination based on the guidance in ASC Topic No. 805, “Business Combinations.” The financial statements of BioPharma have been consolidated with those of the Company since the date of acquisition and an intangible asset was recorded in the amount of $4,187,515 or approximately $.93 per common share issued. The value of the intangible asset recorded by the Company was based on the the estimated value of the marketing contacts and relationships of the joint venture supported by the projected sales opportunites provided from the Distribution Agreement. According to ASC Topic No. 805-20-55-27, a customer relationship acquired in a business combination that does not arise from a contract may be an identifiable asset separate from goodwill. The estimated useful life of the intangible asset is ten (10) years based on the automatic renewable five (5) year term of the Distribution Agreement. Six months of amortization of the asset has been recorded for the period ended June 30, 2010 which is $209,390. The amount amortized for the year ended December 31, 2009 was $104,695.

Resorbable Orthopedic Products, LLC

On September 29, 2009, the Company entered into an Asset Purchase Agreement (the “Agreement”), whereby the Company acquired a patent from Resorbable Orthopedic Products, LLC, a New Jersey limited liability company (“Resorbable NJ”) in exchange for 500,000 shares of the Company’s common stock and the assumption of a legal fee payable in the amount of $47,595 which is related to the patent. The patent was recorded as an intangible asset of $462,715, or approximately $.93 per share plus $47,595 for the assumed liability. The intangible asset is being amortized over an estimated ten (10) year useful life. Amortization of the asset recorded was $25,516 for the six months ended June 30, 2010 and $12,758 for the year ended December 31, 2009. The recording of this transaction was based on the guidance in ASC Topic No. 350-30 “General Intangibles other than Goodwill.”

Upon closing of the asset sale by Resorbable NJ, the managers of this New Jersey limited liability company abandoned the name “Resorbable Orthopedic Products, LLC.” RSI-ACQ Acquisition, LLC, a Texas limited liability company owned by the Company and formed on August 24, 2009, assumed the name of “Resorbable Orthopedic Products, LLC” in Texas.

NOTE 7- COMMITMENTS AND CONTINGENCIES

Lawsuit – The Company is currently a defendant in a Florida state court lawsuit regarding the alleged nonpayment of certain brokerage commissions. During the second quarter of 2010, the lawsuit went to mediation and it was determined that the Company is not liable for any damages as a result of the settlement agreement.

NOTE 8- STOCKHOLDERS’ EQUITY

Preferred Stock

As of May 2008, all shares of Series A preferred stock were converted into common stock. There are currently 5,000,000 shares authorized with no shares of preferred stock currently issued or outstanding.

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 75,000 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution. Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate. There are currently no Series B Shares issued or outstanding.

Common Stock

The Company is authorized to issue 100,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At June 30, 2010 there are 35,346,027 shares issued and 35,341,938 shares outstanding. At December 31, 2009, there were 32,937,310 shares issued and 32,933,221 shares outstanding. Of these shares, 4,089 shares are held by the Company as treasury stock.

During the three month period ending March 31, 2010, a portion of the debt ($772,133) owed to Commercial Holding AG, LLC (“CH”) was settled with the issuance of 1,715,850 shares of restricted common stock of the Company and CH is considered a related party. The debt was reduced at a value of $0.45 per share and a loss on settlement amount of $720,657 was calculated based on the difference between this value and the estimated fair value of the stock price of $0.87. A discount from the $1.45 closing price of the stock on the date of issuance to $.87 was considered appropriate given the thinly traded market for the stock and the large number of shares being issued. In addition, the stock was restricted as to trading under Rule 144.

During the three month period ending June 30, 2010, a portion of the convertible debt ($7,500) owed to an unrelated party was settled with the issuance of 26,023 shares of common stock of the Company, as mentioned in Note 5, resulting in a loss on settlement of $12,017.

During the three month period ending March 31, 2010 and June 30, 2010, the Company issued 95,000 shares of common stock for payment of services valued at $70,050 and 196,844 shares of common stock for payment of services valued at $148,232, respectively.

On May 14, 2010, the Company entered into a Subscription Agreement with an unrelated party (the “Investor”) to purchase 250,000 Units (“Units”), with each Unit consisting of one (1) share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and a warrant to purchase one (1) share of Common Stock (the “Warrants”), at a purchase price of $0.40 per Unit. The Warrants may be exercised at any time over a three-year period and have an exercise price of $1.00 per share of Common Stock. On May 20, 2010, the Company sold an additional 125,000 Units to an unrelated party.

Warrants

In connection with the above mentioned subscription agreements, the investors were issued three-year warrants to purchase up to an aggregate of 375,000 shares of our common stock at an exercise price of $1.00.

T Squared Investments, LLC (“T Squared”) currently holds 1,299,769 warrants issued by the Company to purchase shares of the Company’s common stock, which consist of 1,000,000 warrants with an exercise price of $2.00 and 299,769 warrants with an exercise price of $.001. The warrants have an expiration date of January 9, 2013.

2010 Omnibus Long-Term Incentive Plan

On March 12, 2010, the Company adopted, subject to shareholder approval, the 2010 Omnibus Long-Term Incentive Plan (the “Plan”) to offer competitive long-term incentive compensation opportunities as well as to align the interests of the participants with those of the Company’s shareholders. The Plan will be administered by the Compensation Committee, which shall be composed of two outside directors appointed by the Board of Directors.

Under the Plan, stock options, stock appreciation rights, restricted shares, and performance shares may be awarded at the discretion of the Compensation Committee to selected officers, employees, consultants and eligible directors of the Company. In order for the Plan to become effective, shareholder approval must be obtained on or before March 11, 2011.

NOTE 9- SUBSEQUENT EVENTS

Subsequent to June 30, 2010, $30,000 of the principal balance of unrelated party debt was settled with the issuance of 129,961 shares of common stock of the Company.

The Company has evaluated all subsequent events from the balance sheet date through the date of this filing.

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

The following discussion of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

Some of the statements contained in this report discuss future expectations, contain projections of results of operations or financial condition, or state other "forward-looking" information. The words "believe," "intend," "plan," "expect," "anticipate," "estimate," "project," "goal" and similar expressions identify such a statement was made. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. Factors that might cause or contribute to such a discrepancy include, but are not limited to the risks discussed in this and our other SEC filings. We do not promise to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. Future events and actual results could differ materially from those expressed in, contemplated by, or underlying such forward-looking statements.

The following discussion and analysis of our financial condition is as of June 30, 2010. Our results of operations and cash flows should be read in conjunction with our unaudited financial statements and notes thereto included elsewhere in this report and the audited financial statements and the notes thereto included in our Form 10-K for the year ended December 31, 2009.

Business Overview

Our current focus is developing and marketing products for the advanced wound care market, as pursued through our wholly-owned subsidiary, Wound Care Innovations, LLC (“WCI”). WCI owns the exclusive worldwide licensing and distribution rights for CellerateRX® advanced wound care collagen products in the human health market. According to the International Diabetes Federation, the number of diabetics globally is projected to grow from 285 million in the year 2010 to 360 million in the year 2030. WCI is targeting all aspects of the advanced wound care market with a focus on diabetic wounds and wounds in the elderly, both growing populations.

With evidence based clinical studies in place, the Company is now focused on expanding sales and distribution, as noted below:

--In September 2009, the Company acquired BioPharma Management Technologies, Inc. (“BioPharma”) to distribute CellerateRX® in the Middle East through Pharma Tech International, Inc., a joint venture between BioPharma and A&Z Pharmaceutical.

--In October 2009, WCI signed a distribution agreement with Biocure S.r.L. (“Biocure”) of Milan, Italy to launch its European sales. The Biocure network includes over 1.5 million patients in England, Italy, France, Germany and Spain. We anticipate that the first products will be delivered in the fourth quarter of 2010.

--In April 2010, WCI expanded sales efforts by adding sales and marketing executives to the management team to oversee direct sales efforts and to more effectively manage distribution channels for the CellerateRX products.

--In June 2010, WCI signed an independent sales representative agreement with KOMED, LLC (“KOMED”), an Atlanta based sales organization currently representing only the Microcyn wound cleaning product. Under this agreement, KOMED will also sell CellerateRX® in the Southeast US (Texas to the Carolinas). KOMED has thirty-eight field sales people who began selling CellerateRX® as of July 1, 2010.

Subsequent to June 30, 2010, WCI signed a distribution agreement with KOMED for direct response advertising on television and niche online marketing of CellerateRX in the United States. TV Goods Holding Corp will produce and air the infomercials in cooperation with KOMED. Also, WCI signed a distribution agreement with Healing Innovations of Belize to facilitate the sale of CellerateRX® in Central America. Similar initiatives are in development to service South America, Mexico, Israel, the Philippines and other international markets.

In addition, the Company has broadened its biotech product portfolio with the acquisition of Resorbable Orthopedic Products, LLC in September 2009. In February 2010, the company extended its healthcare industry footprint with the acquisition of eHealth, a provider of secure health data and messaging alert solutions that provide a collaboration platform between health providers, healthcare insurers, ancillary service providers and patients.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company has not materially changed its significant accounting policies.

Results of Operations and Financial Condition

Three months ended June 30, 2010 compared with the three months ended June 30, 2009

Revenues . The Company generated revenues for the three months ended June 30, 2010 of $114,977 compared to revenues of $73,725 for the three months ended June 30, 2009, or a 56% increase in revenues. Revenues increased in 2010 as a result of the addition of a sales and marketing team to increase the awareness of the product in domestic and international markets.

Cost of revenues . Costs of revenues for the three months ended June 30, 2010 were $28,419 compared to costs of revenues of $134,278 for the three months ended June 30, 2009, or a 79% decrease in costs of revenues. The decrease is a result of payments to the patent holder of CellerateRX in 2009, which were not incurred in 2010, as part of the advance royalties paid/owed to the CellerateRX founder under the exclusive license agreement.

General and administrative expenses (“G&A") . G&A expenses for the three months ended June 30, 2010 were $587,534 compared to G&A expenses of $187,042 for the three months ended June 30, 2009, or a 214% increase in G&A expenses. The increase in expenses is primarily due to an increase in consulting fees paid between 2009 and 2010.

Interest Income . Interest income was $43,633 for the three months ended June 30, 2010, compared to $0 for the three months ended June 30, 2009, or a 100% increase. The increase is due to the purchase of the $1.5 million note receivable from VHGI Holdings, Inc. in the first quarter of 2010.

Interest Expense . Interest expense was $75,707 for the three months ended June 30, 2010, compared to approximately the same amount of $74,330 for the three months ended June 30, 2009.

Net loss . We had a net loss for the three months ended June 30, 2010 of $663,006 compared with a net loss of $323,911 for the three months ended June 30, 2009, or an increase in loss of 105%. The increase in loss is due to increase in wage expense for the addition of a sales team and the increase in marketing efforts to increase product distribution. Also, amortization expense for the intangible assets acquired in late 2009 is reflected in the 2010 results and this type of expense was not incurred in the six months of 2009.

All material changes in results of operations for the six months ended June 30, 2010 compared with the six months ended June 30, 2009 are identified in the above analysis for the three month periods ended June 30, 2010 and 2009.

Liquidity and Capital Resources

Historically, we have financed our operations primarily from the sale of debt and equity securities. Our financing activities generated approximately $1,377,000 for the six months ended June 30, 2010 and approximately $605,000 for the six months ended June 30, 2009.

We will need to raise additional capital in fiscal year 2010 to fund our business plan and support our operations. As our prospects for funding, if any, develop during the fiscal year, we will assess our business plan and make adjustments accordingly. The report of our independent auditors with regard to our financial statements for the fiscal year ended December 31, 2009 included a going concern qualification. Although we have successfully funded our operations to date by attracting additional equity investors and by obtaining loans, there is no assurance that our capital raising efforts will be able to attract additional necessary capital for our operations. If we are unable to obtain additional funding for operations at any time now or in the future, we may not be able to continue operations as proposed, requiring us to modify our business plan, curtail various aspects of our operations or cease operations.

Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

For the period ended June 30, 2010, there were no other changes to our critical accounting policies as identified in our Annual Report on Form 10-K for the year ended December 31, 2009.

Federal Payroll Tax Commitment

The Company is delinquent in the payment of 2005-2006 payroll tax liabilities to the Internal Revenue Service (“IRS”). As of June 30, 2010, unpaid payroll taxes total approximately $172,484 and related penalties and interest approximated $193,970 computed through June 30, 2010. These liabilities have been recorded as accrued liabilities and general and administrative expenses as of June 30, 2010. A tax lien was filed against the Company in December 2009. The Company

is attempting to settle this matter with the IRS.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2010, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of June 30, 2010, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEEDINGS

Item 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide this information.

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

Set forth below is information regarding the issuance and sales of the Company’s securities without registration for the first six months of 2010. The securities bear a restrictive legend and no advertising or public solicitation was involved.

On May 14, 2010, the Company entered into a Subscription Agreement with an unrelated party (the “Investor”) to purchase 250,000 Units (“Units”), with each Unit consisting of one (1) share of the Company’s common stock and a warrant to purchase one (1) share of the Company’s common stock (the “Warrants”), at a purchase price of $0.40 per Unit. The Warrants may be exercised at any time over a three-year period and have an exercise price of $1.00 per share of common stock. On May 20, 2010, the Company sold an additional 125,000 Units to an unrelated party.

The issuances described above were made in private transactions or private placements intending to meet the requirements of one or more exemptions from registration, including the exemption provided under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). The investors were not solicited through any form of general solicitation or advertising, the transactions being non-public offerings, and the sales were conducted in private transactions where the investor identified an investment intent as to the transaction without a view to an immediate resale of the securities; the shares were “restricted securities” in that they were both legended with reference to Rule 144 as such and the investors identified they were sophisticated as to the investment decision and in most cases we reasonably believed the investors were “accredited investors” as such term is defined under Regulation D based upon statements and information supplied to us in writing and verbally in connection with the transactions. We have never utilized an underwriter for an offering of our securities and no sales commissions were paid to any third party in connection with the above-referenced sales.

Item 3. Defaults upon Senior Securities

None

Item 4. Removed and Reserved

Item 5. Other Information

Effective May 20, 2010, Dr. Philip J. Rubinfeld and Ms. Deborah Jenkins Hutchinson were appointed as two new members of the Company’s Board of Directors by unanimous consent of the current Board of Directors of the Company.

Item 6. Exhibits

The following documents are filed as part of this Report:

Exhibit No.

2.1

Agreement and Plan of Merger, dated as of September 17, 2009, by and among BioPharma Management Technologies, Inc., a Texas corporation, Wound Management Technologies, Inc., a Texas corporation, BIO Acquisition, Inc., and the undersigned shareholders.

3.1

Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed April 11, 2008)

3.2

Articles of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit A to the Company’s Information Statement filed with the Commission on May 13, 2008)

3.3

Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed April 11, 2008)

3.4

Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock of Wound Management Technologies, Inc. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 25, 2010.

4.1*

Wound Management Technologies, Inc. 2010 Omnibus Long Term Incentive Plan dated March 12, 2010 with effective subject to shareholder approval on or before March 11, 2011.

10.1

Securities Purchase Agreement, dated as of March 3, 2010 by and among Wound Management Technologies, Inc., and the investors named therein (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Commission on March 30, 2010).

31.1*

Certification of Principal Executive Officer and Principal Financial Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley Act of 2002*

32.1*

Certification of Principal Executive Officer and Principal Financial Officer in accordance with 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith

SIGNATURES

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

	WOUND MANAGEMENT TECHNOLOGIES, INC.

Date: August 16, 2010	By:	/s/ Scott A. Haire
		Scott A. Haire, Chairman of the Board,
		Chief Executive Officer and Principal Financial Officer

WOUND MANAGEMENT TECHNOLOGIES, INC.

2010 OMNIBUS LONG TERM INCENTIVE PLAN

General Purpose of Plan; Definitions

1.1 Name and Purposes . The name of this plan is the Wound Management Technologies, Inc. 2010

Omnibus Long Term Incentive Plan. The purpose of this Plan is to enable Wound Management Technologies, Inc. and its Affiliates to: (i) attract and retain skilled and qualified officers, employees and Directors who are expected to contribute to the Company’s success by providing long-term incentive compensation opportunities competitive with those made available by other companies; (ii) motivate participants to achieve the long-term success and growth of the Company; (iii) facilitate ownership of shares of the Company; and (iv) align the interests of the participants with those of the Company’s Shareholders.

1.2 Certain Definitions . Unless the context otherwise indicates, the following words shall have the

following meanings whenever used in this Plan:

“ Affiliate ” means any corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company within the meaning of Section 414(b) or (c) of the Code.

“ Award ” means any Common Share, Stock Option, Stock Appreciation Right, Restricted Share, Restricted Share Unit or Performance Share granted pursuant to this Plan.

“ Base Value ” is defined in Section 7.3.

“ Beneficial Owner ” means a “ beneficial owner ,” as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto).

“ Board ” means the Board of Directors of the Company. “ Change in Control ” is defined in Section 12.1.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and lawful regulations and guidance promulgated thereunder. Whenever reference is made to a specific Internal Revenue Code section, such reference shall be deemed to be a reference to any successor Internal Revenue Code section or sections with the same or similar purpose.

“ Committee ” means the entity administering this Plan as provided in Section 2.1.

“ Common Shares ” means shares of common stock of the Company, par value $0.001 per share.

“ Company ” means Wound Management Technologies, Inc., a corporation organized under the laws of the State of Texas and, except for purposes of determining whether a Change in Control has occurred, any corporation or entity that is a successor to Wound Management Technologies, Inc. or substantially all of the assets of Wound Management Technologies, Inc. and that assumes the obligations of Wound Management Technologies, Inc. under this Plan by operation of law or otherwise.

“ Date of Grant ” means the date on which the Committee grants an Award.

“ Director ” means a member of the Board.

“ Disability ” shall be defined in the Award agreements, as necessary.

“ Eligible Director ” is defined in Section 4.1.

“ Employment ” as used herein shall be deemed to refer to (i) a participant’s employment if the participant is an employee of the Company or any of its Affiliates, (ii) a participant’s services as a consultant, if the participant as a consultant to the Company or its Affiliates and (iii) a participant’s services as a non-employee director, if the participant is a non-employee member of the Board; provided that, for any Award that is or becomes subject to Section 409A of the Code, termination of Employment means a “ separation from service ” under Section 409A of the Code.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and any lawful regulations and guidance promulgated thereunder. Whenever reference is made to a specific Securities Exchange Act of 1934 section, such reference shall be deemed to be a reference to any successor section or sections with the same or similar purpose.

“ Exercise Price ” means the purchase price of a Share pursuant to a Stock Option.

“ Fair Market Value ” means: (i) if the Common Shares are listed on a national securities exchange or quoted in an interdealer quotation system, the last sales price or, if unavailable, the average of the closing bid and asked prices per Share on such date (or, if there was no trading or quotation of the Common Shares on such date, on the next preceding date on which there was trading or quotation); or (ii) if the Common Shares are not listed on a national securities exchange or quoted in an interdealer quotation system, the “ Fair Market Value ” of Common Shares shall be determined by the Committee in a reasonable manner pursuant to a reasonable valuation method. Notwithstanding anything to the contrary in the foregoing, as of any date, the “ Fair Market Value ” of Common Shares shall be determined in a manner consistent with avoiding adverse tax consequences under Code Section 409A. In addition, “ Fair Market Value ” with respect to ISOs and related SARs shall be determined in accordance with Section 6.2(f).

“ Full-Value Awards ” means Restricted Share Awards, Restricted Share Unit Awards, Performance Share Awards and Common Share Awards.

“ Incentive Stock Option ” and “ ISO ” mean a Stock Option which meets the requirements of Section 422 of the Code.

“ Non-Qualified Stock Option ” and “ NQSO ” mean a Stock Option that does not meet the requirements of Section 422 of the Code.

“ Outside Director ” means a Director who meets the definitions of the terms “ outside director ” used in Section 162(m) of the Code, “ independent director ” set forth in The Nasdaq Stock Market, Inc. rules, and “ non-employee director ” set forth in Rule 16b-3, or any successor definitions adopted by the Internal Revenue Service, The Nasdaq Stock Market, Inc. and Securities and Exchange Commission, respectively, and similar requirements under any other applicable laws, rules and regulations.

“ Parent ” means any corporation which qualifies as a “ parent corporation ” of the Company under Section 424(e) of the Code.

“ Performance Period ” is defined in Section 8.4(g).

“ Performance Shares ” means any Shares issued pursuant to an Award granted under Article 9.

“ Permitted Holder ” means as of the date of determination, any participant in an employee benefit plan (or trust forming a part thereof) maintained by (i) the Company or its Affiliates or (ii) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company.

“ Person ” means a “ person ”, as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

“ Plan ” means this Wound Management Technologies, Inc. 2010 Omnibus Long Term Incentive Plan, as amended from time to time.

“ Plan Year ” means the calendar year.

“ Restricted Share Units ” means Shares issued by the Company pursuant to an Award granted under Article 8 that will be issued to a participant at a future time or times at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value if continued Employment, continued directorship and/or other terms and conditions specified by the Committee are satisfied.

“ Restricted Shares ” means Shares which are issued by the Company pursuant to an Award granted under Article 8 to a participant at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value but which are subject to forfeiture and restrictions on their sale or other transfer by the participant.

“ Retirement ” shall be defined in the Award agreements, as necessary. “ Rule 16b-3 ” is defined in Article 17.

“ Section 162(m) Person ” means, for any taxable year, a person who is a “ covered employee ” under Section 162(m)(3) of the Code.

“ Share ” or “ Shares ” mean one or more of the Common Shares.

“ Shareholder ” means an individual or entity that owns one or more shares of stock of the Company, including Common Shares.

“ Stock Appreciation Rights ” and “ SARs ” mean any right pursuant to an Award granted under Article 7.

“ Stock Option ” means a right to purchase a specified number of Shares at a specified price which is granted pursuant to Article 5; such right may be an Incentive Stock Option or a Non-Qualified Stock Option.

“ Stock Power ” means a power of attorney executed by a participant and delivered to the Company which authorizes the Company to transfer ownership of Restricted Shares, Performance Shares or Common Shares from the participant to the Company or a third party.

“ Subsidiary ” means any corporation which qualifies as a “subsidiary corporation” of the Company under Section 424(f) of the Code.

“ Vested ” means, with respect to a Common Share, when the Common Share has been awarded; with respect to a Stock Option, when the Stock Option first becomes exercisable; with respect to a Stock Appreciation Right, when the Stock Appreciation Right first becomes exercisable; with respect to Restricted Shares, when the Shares are no longer subject to forfeiture and restrictions on transferability; with respect to Restricted Share Units and Performance Shares, when the units or Shares are no longer subject to forfeiture and are convertible to Shares. “ Vest ” and “ Vesting ” shall have correlative meanings.

2.1 Authority and Duties of the Committee .

(a) The Plan shall be administered by a Committee of at least two Directors who are appointed by the Board. Unless otherwise determined by the Board, the Compensation Committee of the Company shall serve as the Committee that will administer the Plan, and all of the members of the Committee shall be Outside Directors. Notwithstanding this requirement that the Committee consist exclusively of Outside Directors, no action or determination by the Committee or an individual then considered to be an Outside Director shall be deemed void because it is discovered that a member of the Committee or such individual fails to satisfy the requirements for being an Outside Director, except to the extent required by applicable law.

(b) The Committee has the power and authority to grant Awards pursuant to the terms of this Plan to officers, employees, consultants and Eligible Directors.

(c) The Committee has the sole and exclusive authority, subject to any limitations specifically set forth in this Plan, to:

(i)	select the officers, employees, consultants and Eligible Directors to whom Awards are granted;

(ii)	determine the types of Awards granted and the timing of such Awards;

(iii)

determine the number of Shares to be covered by each Award granted hereunder;

(iv)	determine whether an Award is, is intended to be, or shall remain, “ performance-based compensation ” within the meaning of Section 162(m) of the Code;

(v)

determine the other terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder; such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Stock Options or Stock Appreciation Rights may be exercised (which may be based on performance objectives), any Vesting, acceleration or waiver of forfeiture restrictions, any performance criteria (including any performance criteria as described in Section 162(m)(4)(C) of the Code) applicable to an Award, and any restriction or limitation regarding any Option or Stock Appreciation Right or the Common Shares relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine;

(vi)	determine whether any conditions or objectives related to Awards have been met, including any such determination required for compliance with Section 162(m) of the Code;

(vii)

subsequently modify or waive any terms and conditions of Awards, not inconsistent with the terms of this Plan;

(viii)

adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it deems advisable from time to time;

(ix)	promulgate such administrative forms as they from time to time deem necessary or appropriate for administration of the Plan;

(x)	construe, interpret, administer and implement the terms and provisions of this Plan, any Award and any related agreements;

(xi)	correct any defect, supply any omission and reconcile any inconsistency in or between the Plan, any Award and any related agreements;

(xii)

prescribe any legends to be affixed to certificates representing Shares or other interests granted or issued under the Plan; and

(xiii)

otherwise supervise the administration of this Plan.

(d) All decisions made by the Committee pursuant to the provisions of this Plan are final and

binding on all persons, including the Company, its Shareholders and participants, but may be made by their terms subject to ratification or approval by, the Board, another committee of the Board or Shareholders.

(e) The Company shall furnish the Committee and its delegates with such clerical and other

assistance as is necessary for the performance of the Committee’s duties under the Plan.

2.2 Delegation of Duties . The Committee may delegate ministerial duties to any other person or

persons, and it may employ attorneys, consultants, accountants or other professional advisers for purposes relating to plan administration at the expense of the Company.

2.3 Limitation of Liability . Members of the Board, members of the Committee and Company

employees who are their designees acting under this Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for grossly negligent or willful misconduct in the performance of their duties hereunder.

Stock Subject to Plan

3.1 Total Shares Limitation . Subject to the provisions of this Article, the maximum number of

Shares that may be issued pursuant to Awards granted under this Plan is 2,000,000, which may be treasury Shares or unissued Shares.

3.2 Other Limitations .

(a) Stock Option Limitations . The maximum number of Shares available with respect to all

Stock Options granted under this Plan is 2,000,000 Shares. The maximum number of Shares available with respect to ISOs granted under this Plan is 2,000,000 Shares.

(b) Full-Value Limitations . The maximum number of Shares available with respect to Full-

Value Awards granted under this Plan is 2,000,000 Shares.

under this Plan to any participant in any Plan Year (including but not limited to Awards of Options and SARs), regardless of whether such Awards are thereafter canceled, forfeited or terminated, shall not exceed 500,000 Shares. The foregoing annual limitation is intended to include the grant of all Awards including, but not limited to, Awards representing “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

3.3 Awards Not Exercised; Effect of Receipt of Shares . If any outstanding Award, or portion

thereof, expires, or is terminated, canceled or forfeited, the Shares that would otherwise be issuable with respect to the unexercised portion of such expired, terminated, canceled or forfeited Award shall be available for subsequent Awards under this Plan. If (i) the Exercise Price of a Stock Option is paid in Shares, (ii) Shares underlying the exercised portion of an SAR are not issued upon exercise of the SAR, (iii) Shares are withheld to satisfy an

individual participant’s tax obligations or (iv) Shares are repurchased by the Company on the open market with respect to Awards under this Plan, the Shares received, not issued, withheld or repurchased by the Company in connection therewith shall not be added to the maximum aggregate number of Shares which may be issued under Section 3.1.

3.4 Dilution and Other Adjustments . If the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, redesignation, reclassification, merger, consolidation, liquidation, split-up, reverse split, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Committee may, in such manner as it deems equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the limitations set forth above and (iv) the purchase or Exercise Price or any performance objective with respect to any Award; provided, however , that the number of Shares or other securities covered by any Award or to which such Award relates is always a whole number. Notwithstanding the foregoing, the foregoing adjustments shall be made in conformity with: (i) Sections 422 and 424 of the Code with respect to ISOs; (ii) Treasury Department Regulation Section 1.424- 1 (and any successor) with respect to NQSOs, applied as if the NQSOs were ISOs; (iii) Section 409A of the Code, to the extent necessary to avoid its application or avoid adverse tax consequences thereunder; and (iv) Section 162(m) of the Code with respect to Awards granted to Section 162(m) Persons that are intended to be “ performance-based compensation ,” unless specifically determined otherwise by the Committee.

4.1 Eligibility . Officers, all other active common law employees of the Company or any of its Affiliates, consultants and Outside Directors (each an “ Eligible Director ”) who are selected by the Committee in its sole discretion are eligible to participate in this Plan.

4.2 Award Agreements . Awards are contingent upon the participant’s execution of a written agreement in a form prescribed by the Committee. Execution of an Award agreement shall constitute the participant’s irrevocable agreement to, and acceptance of, the terms and conditions of the Award set forth in such agreement and of the terms and conditions of the Plan applicable to such Award. Award agreements may differ from time to time and from participant to participant.

5.1 Option Grant . Each Stock Option granted under this Plan will be evidenced by minutes of a

meeting, or by a unanimous written consent without a meeting, of the Committee, and by a written agreement dated as of the Date of Grant and executed by the Company and by the appropriate participant.

5.2 Terms and Conditions of Grants . Stock Options granted under this Plan are subject to the

following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies with respect to exercisability and with respect to the Shares acquired upon exercise as may be provided in the relevant agreement evidencing the Stock Options, as the Committee deems desirable, so long as such terms and conditions are not inconsistent with the terms of this Plan:

(a) Exercise Price . Subject to Section 3.4, the Exercise Price will never be less than 100% of

the Fair Market Value of the Shares on the Date of Grant. Except as otherwise provided in Section 3.4, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares on the Date of Grant.

(b) Option Term . Any unexercised portion of a Stock Option granted hereunder shall expire

at the end of the stated term of the Stock Option. The Committee shall determine the term of each Stock Option at the time of grant, which term shall not exceed ten years from the Date of Grant. The Committee may extend the term of a Stock Option, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be ten years.

such conditions as determined by the Committee in its discretion at or after grant. If the Committee provides that any Stock Option becomes Vested over a period of time or on conditions, in its entirety or in installments, the Committee may waive or accelerate those Vesting provisions at any time.

(d) Method of Exercise . Vested portions of any Stock Option may be exercised in whole or in

part at any time during the option term by giving written notice of exercise to the Company specifying the number of Shares to be purchased. The notice must be given by or on behalf of a person entitled to exercise the Stock Option, accompanied by payment in full of the Exercise Price, along with any tax withholding pursuant to Article 16. Subject to the approval of the Committee, the Exercise Price may be paid:

(i)	in cash in any manner satisfactory to the Committee;

(ii)	by tendering (by either actual delivery of Shares or by attestation) unrestricted Shares that are owned on the date of exercise by the person entitled to exercise the Stock Option having an aggregate Fair Market Value on the date of exercise equal to the applicable Exercise Price;

(iii)

by a combination of cash and unrestricted Shares that are owned on the date of exercise by the person entitled to exercise the Stock Option;

(iv)	By delivery of irrevocable instructions to a broker to sell Shares obtained upon exercise of the Stock Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the Exercise Price for the Shares being purchased; and

(v)	by another method permitted by law and affirmatively approved by the Committee which assures full and immediate payment or satisfaction of the Exercise Price.

The Committee may withhold its approval for any method of payment for any reason, in its sole discretion, including but not limited to concerns that the proposed method of payment will result in adverse financial accounting treatment, adverse tax treatment for the Company or a participant or a violation of the Sarbanes-Oxley Act of 2002, as amended from time to time, and lawful regulations and guidance promulgated thereunder.

(e) Issuance of Shares . The Company will issue or cause to be issued Shares as soon as practicable after exercise of a Stock Option and receipt of full payment of the Exercise Price. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, in certificated or uncertificated form, no right to vote or receive dividends or any other rights as a Shareholder will exist with respect to the Shares, notwithstanding the exercise of the Stock Option.

(f) Form . Unless the grant of a Stock Option is designated at the time of grant as an ISO, it is deemed to be an NQSO. ISOs are subject to the additional terms and conditions in Article 6.

(g) Special Limitations on Stock Option Awards . Unless an Award agreement approved by the Committee expressly provides otherwise, Stock Options awarded under this Plan are intended to meet

the requirements for exclusion from coverage under Section 409A of the Code and all Stock Option Awards shall be construed and administered accordingly.

Special Rules Applicable to Incentive Stock Options

6.1 Eligibility . Notwithstanding any other provision of this Plan to the contrary, an ISO may only be granted to employees (including officers and Directors who are also employees) of the Company or an Affiliate which is also a Parent or Subsidiary.

6.2 Special ISO Rules .

(a) Term . No ISO may be exercisable on or after the tenth anniversary of the Date of Grant, and no ISO may be granted under this Plan on or after the tenth anniversary of the effective date of this Plan.

(b) Ten Percent Shareholder . If a grantee owns (at the time of the Award and after application of the rules contained in Section 424(d) of the Code) equity securities possessing more than 10% of the total combined voting power of all classes of equity securities of the Company, its Parent or any Subsidiary, the Exercise Price of the ISO will be at least 110% of the Fair Market Value of the Shares as of the Date of Grant and such ISO shall not be exercisable on or after the fifth anniversary of the Date of Grant.

(c) Limitation on Grants . The aggregate Fair Market Value (determined with respect to each ISO at the time of grant) of the Shares with respect to which ISOs are exercisable for the first time by an optionee during any calendar year (under this Plan or any other plan adopted by the Company or a Parent or a Subsidiary) shall not exceed $100,000. If such aggregate Fair Market Value shall exceed $100,000, such number of ISOs as shall have an aggregate Fair Market Value equal to the amount in excess of $100,000 shall be treated as NQSOs.

(d) Non-Transferability . Notwithstanding any other provision herein to the contrary, no ISO (and, if applicable, related Stock Appreciation Right) may be transferred except by will or by the laws of descent and distribution, nor may an ISO (or related Stock Appreciation Right) be exercisable during an optionee’s lifetime other than by him or her (or his or her guardian or legal representative to the extent permitted by applicable law).

(e) Termination of Employment . No ISO may be exercised more than three months following termination of Employment for any reason (including Retirement) other than death or Disability, nor more than one year following termination of Employment due to death or Disability (as defined in Section 422 of the Code), or such option will no longer qualify as an ISO and shall thereafter be, and receive the tax treatment applicable to, an NQSO. For this purpose, a termination of Employment is cessation of Employment such that no Employment relationship exists between the participant and the Company, a Parent or a Subsidiary.

(f) Fair Market Value . For purposes of any ISO granted hereunder (or, if applicable, related Stock Appreciation Right), the Fair Market Value of Shares shall be determined in the manner required by Section 422 of the Code.

6.3 Subject to Code Amendments . The foregoing limitations are designed to comply with the requirements of Section 422 of the Code and shall be automatically amended or modified to comply with changes to Section 422 of the Code. Any ISO which fails to meet the requirements of Section 422 of the Code is automatically treated as an NQSO appropriately granted under this Plan provided that it otherwise meets the Plan’s requirements for being an NQSO.

Stock Appreciation Rights

7.1 SAR Grant and Agreement . Stock Appreciation Rights may be granted under this Plan, either

independently or in conjunction with the grant of a Stock Option. Each SAR granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee, and by a written agreement dated as of the Date of Grant and executed by the Company and by the appropriate participant.

7.2 SARs Granted in Conjunction with Option . Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under this Plan, at the same time as the grant of the Stock Option, and will be subject to the following terms and conditions:

(a) Term . Each Stock Appreciation Right, or applicable portion thereof, granted with respect to a given Stock Option or portion thereof terminates and is no longer exercisable upon the termination or exercise of the related Stock Option, or applicable portion thereof.

(b) Exercisability . A Stock Appreciation Right is exercisable only at such time or times and to the extent that the Stock Option to which it relates is Vested and exercisable in accordance with the provisions of Article 5 or otherwise as the Committee may determine.

(c) Method of Exercise . A Stock Appreciation Right may be exercised by the surrender of the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, are no longer exercisable to the extent the related Stock Appreciation Rights have been exercised and are deemed to have been exercised for the purpose of the limitation set forth in Article 3 on the number of Shares to be issued under this Plan. Upon the exercise of a Stock Appreciation Right, subject to satisfaction of tax withholding requirements, the holder of the Stock Appreciation Right is entitled to receive cash or Shares equal in value to the excess of the Fair Market Value of a Share on the exercise date over the Exercise Price per Share specified in the related Stock Option, multiplied by the number of Shares in respect of which the Stock Appreciation Right is exercised. Any fractional Shares shall be paid in cash or, if the Committee determines, rounded downward to the next whole Share. At any time the Exercise Price per Share of the related Stock Option exceeds the Fair Market Value of one Share, the holder of the Stock Appreciation Right shall not be permitted to exercise such right.

7.3 Independent SARs . Stock Appreciation Rights may be granted without related Stock Options, and independent Stock Appreciation Rights will be subject to the following terms and conditions:

(a) Term . Any unexercised portion of an independent Stock Appreciation Right granted hereunder shall expire at the end of the stated term of the Stock Appreciation Right. The Committee shall determine the term of each Stock Appreciation Right at the time of grant, which term shall not exceed ten years from the Date of Grant. The Committee may extend the term of a Stock Appreciation Right, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be ten years.

(b) Exercisability . A Stock Appreciation Right is exercisable, in whole or in part, at such time or times as determined by the Committee at or after the time of grant.

(c) Method of Exercise . A Stock Appreciation Right may be exercised in whole or in part during the term by giving written notice of exercise to the Company specifying the number of Shares in respect of which the Stock Appreciation Right is being exercised. The notice must be given by or on behalf of a person entitled to exercise the Stock Appreciation Right. Upon the exercise of a Stock Appreciation Right, subject to satisfaction of tax withholding requirements, the holder of the Stock Appreciation Right is entitled to receive cash or Shares equal in value to the excess of the Fair Market Value of a Share on the exercise date over the Fair Market Value of a Share on the Date of Grant (the “ Base Value ”) multiplied by the number of Stock Appreciation Rights being exercised. Any fractional Shares shall be paid in cash or, if

the Committee determines, rounded downward to the next whole Share. At any time the Fair Market Value of a Share on a proposed exercise date does not exceed the Base Value, the holder of the Stock Appreciation Right shall not be permitted to exercise such right.

7.4 Other Terms and Conditions of SAR Grants . Stock Appreciation Rights are subject to such other

terms and conditions, not inconsistent with the provisions of this Plan, as are determined from time to time by the Committee.

7.5 Special Limitations on SAR Awards . Unless an Award agreement approved by the Committee

expressly provides otherwise, Stock Appreciation Rights awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code and all Stock Appreciation Rights Awards shall be construed and administered accordingly.

Restricted Share and Restricted Share Unit Awards

8.1 Restricted Share Grants and Agreements . Restricted Share Awards consist of Shares which are

issued by the Company to a participant at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value but which are subject to forfeiture and restrictions on their sale or other transfer by the participant. Each Restricted Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee, and by a written agreement dated as of the Date of Grant and executed by the Company and by the participant. The timing of Restricted Share Awards and the number of Shares to be issued (subject to Section 3.4) are to be determined by the Committee in its discretion. By accepting a grant of Restricted Shares, the participant consents to any tax withholding.

8.2 Terms and Conditions of Restricted Share Grants . Restricted Shares granted under this Plan are

subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan, as the Committee deems desirable:

(a) Purchase Price . The Committee shall determine the prices, if any, at which Restricted

Shares are to be issued to a participant, which may vary from time to time and from participant to participant and which may be below the Fair Market Value of such Restricted Shares at the Date of Grant.

(b) Restrictions . All Restricted Shares issued under this Plan will be subject to such

restrictions as the Committee may determine, which may include, without limitation, the following:

(i)	a prohibition against the sale, transfer, pledge or other encumbrance of the

Restricted Shares, such prohibition to lapse at such time or times as the Committee determines (whether in installments, at the time of the death, Disability or Retirement of the holder of such shares, or otherwise, but subject to the Change in Control provisions in Article 12 and the applicable Award agreements);

(ii)	a requirement that the participant forfeit such Restricted Shares in the event of termination of the participant’s Employment or directorship with the Company or its Affiliates prior to Vesting;

(iii)

a prohibition against Employment or retention of the participant by any competitor of the Company or its Affiliates, or against dissemination by the participant of any secret or confidential information belonging to the Company or an Affiliate;

(iv)

any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of The Nasdaq Stock Market or any other stock exchange or transaction reporting system upon which such Restricted Shares are then listed or quoted and any state laws, rules and regulations, including “blue sky” laws; and s

(v)	such additional restrictions as are required to avoid adverse tax consequence sunder Section 409A of the Code.

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse. However, if the Committee determines that restrictions lapse upon the attainment of specified performance objectives, then the provisions of Sections 9.2 and 9.3 will apply. If the written agreement governing an Award to a Section 162(m) Person provides that such Award is intended to be “ performance-based compensation ,” the applicable provisions of Article 9 implementing Section 162(m) of the Code will also apply.

(c) Delivery of Shares . Restricted Shares will be certificated and registered in the name of the participant and deposited, together with a Stock Power, with the Company. Each such certificate will bear a legend in substantially the following form:

“The transferability of this certificate and the Common Shares represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Wound Management Technologies, Inc. 2010 Omnibus Long Term Incentive Plan and an agreement entered into between the registered owner and the Company. A copy of this Plan and agreement are on file in the office of the Secretary of the Company.”

At the end of any time period during which the Restricted Shares are subject to forfeiture and restrictions on transfer, and after any tax withholding, such Shares will be delivered free of all restrictions (except for any pursuant to Section 15.2) to the participant or other appropriate person and with the foregoing legend removed.

(d) Forfeiture of Shares . If a participant who holds Restricted Shares fails to satisfy the restrictions, Vesting requirements and other conditions relating to the Restricted Shares prior to the lapse, satisfaction or waiver of such restrictions and conditions, except as may otherwise be determined by the Committee, the participant shall forfeit the Shares and transfer them back to the Company in exchange for a refund of any consideration paid by the participant or such other amount which may be specifically set forth in the Award agreement. A participant shall execute and deliver to the Company one or more Stock Powers with respect to Restricted Shares granted to such participant.

(e) Voting and Other Rights . Except as otherwise required for compliance with Section 162(m) of the Code and the terms of the applicable Restricted Share Agreement, during any period in which Restricted Shares are subject to forfeiture and restrictions on transfer, the participant holding such Restricted Shares shall have all the rights of a Shareholder with respect to such Shares, including, without limitation, the right to vote such Shares and the right to receive any dividends paid with respect to such Shares; provided that if restrictions lapse upon the attainment of specified performance objectives, then the participant will receive any dividends only to the extent performance objectives are achieved.

8.3 Restricted Share Unit Awards and Agreements . Restricted Share Unit Awards consist of Shares that will be issued to a participant at a future time or times at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value if continued Employment, continued directorship and/or other terms and conditions specified by the Committee are satisfied. Each Restricted Share Unit Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee, and by a written agreement dated as of the Date of Grant and executed by the Company and the Plan participant. The timing of Restricted Share Unit Awards and the number of Restricted Share Units to be awarded (subject to Section 3.2) are to be determined by the Committee in its sole discretion. By accepting a Restricted Share Unit Award, the participant agrees to remit to the Company when due any tax withholding as provided in Article 16.

8.4 Terms and Conditions of Restricted Share Unit Awards . Restricted Share Unit Awards are subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan, as the Committee deems desirable:

(a) Purchase Price . The Committee shall determine the prices, if any, at which Shares are to be issued to a participant after Vesting of Restricted Share Units, which may vary from time to time and among participants and which may be below the Fair Market Value of Shares at the Date of Grant.

(b) Restrictions . All Restricted Share Units awarded under this Plan will be subject to such restrictions as the Committee may determine, which may include, without limitation, the following:

(i)	a prohibition against the sale, transfer, pledge or other encumbrance of the Restricted Share Unit;

(ii)	a requirement that the participant forfeit such Restricted Share Unit in the event of termination of the participant’s Employment or directorship with the Company or its Affiliates prior to Vesting;

(iii)

a prohibition against Employment of the participant by, or provision of services by the participant to, any competitor of the Company or its Affiliates, or against dissemination by the participant of any secret or confidential information belonging to the Company or an Affiliate;

(iv)

any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of The Nasdaq Stock Market or any other stock exchange or transaction reporting system upon which the Common Shares are then listed or quoted and any state laws, rules and interpretations, including “blue sky” laws; and

(v)	such additional restrictions as are required to avoid adverse tax consequences under Section 409A of the Code.

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.

(c) Performance-Based Restrictions . The Committee may, in its sole discretion, provide restrictions that lapse upon the attainment of specified performance objectives. In such case, the provisions of Sections 9.2 and 9.3 will apply (including, but not limited to, the enumerated performance objectives). If the written agreement governing an Award to a Section 162(m) Person provides that such Award is intended to be “ performance-based compensation ,” the applicable provisions of Article 9 implementing Section 162(m) of the Code will also apply.

(d) Voting and Other Rights . A participant holding Restricted Share Units shall not be deemed to be a Shareholder solely because of such units. Such participant shall have no rights of a Shareholder with respect to such units; provided, however , that an Award agreement may provide for payment of an amount of money (or Shares with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Restricted Share Unit Award but if restrictions lapse upon the attainment of specified performance objectives, then such dividend equivalents shall be paid only to the extent performance objectives are achieved.

(e) Lapse of Restrictions . If a participant who holds Restricted Share Units satisfies the restrictions and other conditions relating to the Restricted Share Units prior to the lapse or waiver of such restrictions and conditions, the Restricted Share Units shall be converted to, or replaced with, Shares which are free of all restrictions except for any restrictions pursuant to Section 15.2.

(f) Forfeiture of Restricted Share Units . If a participant who holds Restricted Share Units fails to satisfy the restrictions, Vesting requirements and other conditions relating to the Restricted Share Units prior to the lapse, satisfaction or waiver of such restrictions and conditions, except as may otherwise be determined by the Committee, the participant shall forfeit the Restricted Share Units.

(g) Termination . A Restricted Share Unit Award or unearned portion thereof will terminate without the issuance of Shares on the termination date specified on the Date of Grant or upon the termination of Employment or directorship of the participant during the time period or periods specified by the Committee during which any performance objectives must be met (the “ Performance Period ”). If a participant’s Employment or directorship with the Company or its Affiliates terminates by reason of his or her death, Disability or Retirement, the Committee in its discretion at or after the Date of Grant may determine that the participant (or the heir, legatee or legal representative of the participant’s estate) will receive a distribution of Shares in an amount which is not more than the number of Shares which would have been earned by the participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active Employment in the Performance Period to the total number of months in the Performance Period. However, with respect to Awards intended to be performance-based compensation (as described in Section 9.4(d)), distribution of the Shares shall not be made prior to attainment of the relevant performance objectives.

(h) Special Limitations on Restricted Share Unit Awards . Restricted Share Units awarded under this Plan are intended to be compliant with, or exempt from, Section 409A of the Code and all Restricted Share Unit Awards shall be construed and administered accordingly.

8.5 Time Vesting of Restricted Share and Restricted Share Unit Awards . Restricted Shares or Restricted Share Units, or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant, subject to the restrictions on time Vesting set forth in this Section. If the Committee provides that any Restricted Shares or Restricted Share Unit Awards become Vested over time (with or without a performance component), the Committee may waive or accelerate such Vesting provisions at any time, subject to the restrictions on time Vesting set forth in this Section.

Performance Share Awards

9.1 Performance Share Awards and Agreements . A Performance Share Award is a right to receive Shares in the future conditioned upon the attainment of specified performance objectives and such other conditions, restrictions and contingencies as the Committee may determine. Each Performance Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee, and by a written agreement dated as of the Date of Grant and executed by the Company and by the Plan participant. The timing of Performance Share Awards and the number of Shares covered by each Award (subject to Section 3.2) are to be determined by the Committee in its discretion. By accepting a grant of Performance Shares, the participant agrees to remit to the Company when due any tax withholding as provided in Article 16.

9.2 Performance Objectives . At the time of grant of a Performance Share Award, the Committee will specify the performance objectives which, depending on the extent to which they are met, will determine the number of Shares that will be distributed to the participant. The Committee will also specify the Performance Period during which the performance objectives must be met. With respect to Awards to Section 162(m) Persons intended to be “ performance based compensation ,” the Committee may use performance objectives based on one or more of the following: (i) earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization or earnings before interest and taxes); (ii) net income; (iii) operating income; (iv) earnings per share; (v) book value per share; (vi) return on Shareholders’ equity; (vii) expense management; (viii) return on investment; (ix) improvements in capital structure or capital expenses; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins; (xii) stock price; (xiii) market share; (xiv) costs; (xv) liquidity or cash flow; (xvi) working capital and working capital metrics; (xvii) return on assets; (xviii) assets, debt or net debt; (xix) total return; (xx) customer satisfaction survey performance; (xxi) quality improvement performance; (xxii) manufacturing productivity performance; and (xxiii) such other objective performance criteria as determined by the Committee in its sole discretion. The Committee may designate a single goal criterion or multiple goal criteria for performance measurement purposes. Performance measurement may be based on absolute Company, business unit or divisional performance and/or on performance as compared with that of other publicly-traded companies. The performance objectives and periods need not be the same for each participant nor for each Award.

9.3 Adjustment of Performance Objective and Evaluations . The Committee may modify, amend or otherwise adjust the performance objectives specified for outstanding Performance Share Awards if it determines that an adjustment would be consistent with the objectives of this Plan and taking into account the interests of the participants and the public Shareholders of the Company and such adjustment complies with the requirements of Section 162(m) of the Code for Section 162(m) Persons, to the extent applicable, unless the Committee indicates a contrary intention. The types of events which could cause an adjustment in the performance objectives include, without limitation, accounting changes which substantially affect the determination of performance objectives, changes in applicable laws or regulations which affect the performance objectives, and divisive corporate reorganizations, including spin-offs and other distributions of property or stock. The Committee may also appropriately adjust any performance evaluation under a performance objective or objectives to reflect any of the following events that may occur during the Performance Period: (1) asset gains or losses; (2) litigation, claims, judgments or settlements; (3) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (4) accruals for reorganization and restructuring programs; and (5) any extraordinary, unusual, non-recurring or non-cash items.

9.4 Other Terms and Conditions . Performance Share Awards granted under this Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan as the Committee deems desirable:

(a) Delivery of Shares . As soon as practicable after the applicable Performance Period has ended, the participant will receive a distribution of the number of Shares earned during the Performance Period, depending upon the extent to which the applicable performance objectives were achieved. Such Shares will be registered in the name of the participant and will be free of all restrictions except for any restrictions pursuant to Section 15.2.

(b) Termination . A Performance Share Award or unearned portion thereof will terminate without the issuance of Shares on the termination date specified at the time of grant or upon the termination of Employment or directorship of the participant during the Performance Period. If a participant’s Employment or directorship with the Company or its Affiliates terminates by reason of his or her death, Disability or Retirement (except with respect to Section 162(m) Persons), the Committee in its discretion at or after the time of grant may determine, notwithstanding any Vesting requirements under Section 9.4(a), that the participant (or the heir, legatee or legal representative of the participant’s estate) will receive a distribution of a portion of the participant’s then-outstanding Performance Share Awards in an amount which is not more than the number of shares which would have been earned by the participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active Employment in the Performance Period to the total number of months in the Performance Period. However, with respect to Awards intended to be “ performance-based compensation ” (as described in Section 9.4(d)), distribution of the Shares shall not be made prior to attainment of the relevant performance objective.

(c) Voting and Other Rights . Awards of Performance Shares do not provide the participant with voting rights or rights to dividends prior to the participant becoming the holder of record of Shares issued pursuant to an Award; provided, however , that an Award agreement may provide for payment of an amount of money (or Shares with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Performance Share Award but such dividend equivalents shall be paid only to the extent performance objectives are achieved. Prior to the issuance of Shares, Performance Share Awards may not be sold, transferred, pledged, assigned or otherwise encumbered.

(d) Performance-Based Compensation . The Committee may designate Performance Share Awards as being “ remuneration payable solely on account of the attainment of one or more

performance goals ” as described in Section 162(m)(4)(C) of the Code. Such Awards shall be automatically amended or modified to comply with amendments to Section 162 of the Code to the extent applicable, unless the Committee indicates a contrary intention.

9.5 Time Vesting of Performance Share Awards . Performance Share Awards, or portions thereof,

are exercisable at such time or times as determined by the Committee in its discretion at or after grant, subject to the restrictions on time Vesting set forth in this Section. If the Committee provides that any Performance Shares become Vested over time (accelerated by a performance component), the Committee may waive or accelerate such Vesting provisions at any time, subject to the restrictions on time Vesting set forth in this Section.

9.6 Special Limitations on Performance Share Awards . Unless an Award agreement approved by

the Committee provides otherwise, Performance Shares awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code and all Performance Share Awards shall be construed and administered accordingly.

10.1 Eligibility . Notwithstanding any other provision of this Plan to the contrary, a Common Share may only be granted to an employee or Eligible Director.

10.2 Terms and Conditions of Common Share Awards .

(a) Purpose . Common Shares may be granted in consideration of services rendered to the Company by employees or Eligible Directors in their capacity as Directors.

(b) Vesting . Common Shares shall be fully-Vested.

Transfers and Leaves of Absence

11.1 Transfer of Participant . For purposes of this Plan, the transfer of a participant among the Company and its Affiliates is deemed not to be a termination of Employment.

11.2 Effect of Leaves of Absence . For purposes of this Plan, the following leaves of absence are deemed not to be a termination of Employment:

(a) a leave of absence, approved in writing by the Company, for military service, sickness or any other purpose approved by the Company, if the period of such leave does not exceed 90 days;

(b) a leave of absence in excess of 90 days, approved in writing by the Company, but only if the employee’s right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence, the employee returns to work within 30 days after the end of such leave; and

Effect of Change in Control

12.1 Change in Control Defined . “ Change in Control ” means the occurrence of any of the following: (i) the sale or disposition, in one or a series of related transactions, of all or substantially all, of the assets of the Company to any Person or “ group ” (as such term is defined in Sections 13(d)(3) or 14(d)(2) of the Exchange Act) other than the Permitted Holders; (ii) any Person or group, other than the Permitted Holders, that is or becomes the Beneficial Owner (except that a Person shall