Proteonomix 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM 10-Q

(Exact name of registrant as specified in its charter)

(Mark One)

[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2010

[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___________to ____________

Commission File Number: 000-53750

PROTEONOMIX, INC.

(Exact name of registrant as specified in its charter)

Delaware 13-3842844

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

187 Mill Lane, Mountainside, New Jersey 07052

(Address of principal executive offices) (Zip Code)

973-544-6116

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a Registrant.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

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 [x] No

APPLICABLE ONLY TO CORPORATE ISSUERS

On August 11, 2010 there were 4,897,734 shares outstanding of the issuer’s common stock.

TABLE OF CONTENTS


Item	Description	Page
PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS.	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS.	3
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	12
ITEM 4.	CONTROLS AND PROCEDURES.	12

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS.	14
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	14
ITEM 3.	DEFAULT UPON SENIOR SECURITIES.	14
ITEM 4.	SUBMISSION OF MATERS TO A VOTE OF SECURITY HOLDERS.	14
ITEM 5.	OTHER INFORMATION.	14
ITEM 6.	EXHIBITS.	14

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The Registrant's financial statements for the six month period ended June 30, 2010 and 2009 are attached to this quarterly report.

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

Financial Information

Introduction

The following discussion should be read in conjunction with the Financial Statements and Notes thereto. Our fiscal year ends December 31. This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include (i) changes in external factors or in our internal budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which the Company operates; and (iv) various competitive market factors that may prevent us from competing successfully in the marketplace.

General Business Overview

We are a biotechnology company engaged in the discovery and development of stem cell therapeutic and cosmeceutical products. We are developing pre clinical-stage therapeutic agents and treatments for diabetes, heart and lung diseases. Our discoveries involve non embryonic stem cell treatments.

We have developed intellectual property embodied in patent applications including but not limited to: a medium and scaffolding for enhancing the growth of stem cells, a growth platform for stem cells, a unique cord blood banking cryopreservation bag, a device to eliminate malformed stem cells via filtration. We have developed products utilizing our intellectual property including but not limited to a cosmeceutical based on our NC138 matrix. We have utilized our management and advisory team in conjunction with third party universities and research centers to develop these products. We have concentrated on our cosmeceutical treatment based on our licensed technology. In fiscal 2008, we completed the development of our cosmeceutical products and we anticipate sales to begin in the fourth quarter of 2010.

Azurel, Ltd. was incorporated on June 26, 1995 in the State of Delaware and marketed a line of fragrances. On February 2, 2001, Azurel filed a voluntary petition for protection from creditors under Chapter 11 in the United States Bankruptcy Court for the District of New Jersey, Newark until it was discharged from bankruptcy in December, 2005. In September 2006, Azurel, Ltd., through a share exchange agreement, acquired National Stem Cell Inc. and its subsidiary, The Sperm Bank of New York and changed its name to National Stem Cell Holding, Inc.

National Stem Cell had intellectual property consisting of research into immunological isolation of stem cell populations derived from umbilical cord blood and bone marrow and, in March 2006, began working with the John Hopkins University and developed multiple patents in stem cell expansion, stem cell growth and identification of particular types of stem cells.

The Sperm Bank of New York, an operating wholly-owned subsidiary of National Stem Cell, derives its revenue from the sale of donated sperm units to potential parents and from the cryopreservation of sperm units maintained by individuals for future use.

On July 8, 2008, the Company formed Proteoderm as a third wholly-owned subsidiary. Through this subsidiary, the Company produces and synthesizes protein polypeptides secreted by stem cells and incorporate them into uniquely formulated personal care products.

In August 2008, the Company changed its name to Proteonomix, Inc.

In an effort to place different technologies and therapies in different subsidiaries, Stromacel, Inc. ("StromaCel") was registered as a Florida corporation on December 24, 2009 by our President and CEO, Michael Cohen, for $168. In February, 2010 we acquired all of StromaCel’s authorized shares at cost for $168 and StromaCel became a subsidiary of the Company.

We formed Proteonomix Regenerative Translational Medicine Institute, Inc. ("PRTMI") as a Florida corporation on January 5, 2010 and PRTMI RD, SRL incorporated under the laws of the Dominican Republic in February, 2010 as a subsidiary of PRTMI. PRTMI will focus on the translation of promising research in stem cell biology and cellular therapy to clinical applications of regenerative medicine. At present, the PRTMI subsidiary does not have any assets, including technology licenses. We cannot guarantee if and when it will become operational.

StromaCel intends to develop therapies using stromal cells which are key components of tissues and provide critical cytokines and growth factors as well as the cellular microenvironment for normal homeostasis. A cytokine is a small protein released by cells that affects the interactions and communications between cells and the behavior of cells. A growth factor is a naturally occurring substance capable of stimulating cellular growth, proliferation and differentiation. Homeostasis is a self-regulating process by which a biological system maintains stability while adjusting to changing conditions. Stromal cells provide a niche proliferation environment for stem cells. StromaCel's goal is to study the basic cellular properties of stromal cells and to identify the utility of cellular and protein derivatives in disease repair.

With the above in mind, on May 4, 2010, Proteonomix licensed from the Cohen-McNiece Foundation the Stromal Cell technology (“Technology”) for potential therapeutic use in the regrowth of damaged cardiac cells after a heart attack. The Cohen-McNiece Foundation was formed by Proteonomix President, Michael Cohen, and its Chief Scientific Officer and Vice-President, Ian McNiece, PhD to develop cellular technology for patients who have suffered myocardial infarctions. The Technology was licensed in exchange for a 2% royalty on gross revenue derived from use of the Technology and 1,000,000 stock options at $3.55 per share to Michael Cohen, the Company’s president. The 2% royalty will be used by the Foundation to do further research into stem cell applications. Proteonomix received a right of first refusal to license any technology developed by the Foundation. Proteonomix has sub-licensed the Technology to StromaCel for a 2% royalty, but Proteonomix will remain responsible for all costs associated with patent prosecution for the Technology. In the event of bankruptcy, the rights to the Technology granted by the license revert to the Foundation.

On June 1, 2010, Proteonomix began to concentrate its Research and Development resources on the development of StromaCel in order to further develop its portfolio of intellectual properties and global partnerships.

On May 24, 2010, Proteonomix launched its retail web site, www.proteoderm.com, and began accepting pre-orders for its anti-aging line of skin care products. Proteoderm contains Matrix NC-138 an anti-aging bioactive ingredient, developed by Proteonomix Inc. Matrix NC-138 is the first product in the Company's pipeline that was a result of the Company's R & D program stem cell and collagen growth. The Company does not anticipate filling orders until the 2^nd quarter of 2011.

On May 28, 2010, Proteonomix completed the development of a new formulation of Proteoderm. The new formulation will only be available at licensed health professionals' offices. The new product, Proteoderm PS (physician strength) is designed to provide a specific dosage of the active ingredient Matrix NC-138, to the patient depending on the patient's skin type and genomic analysis. This should enable the professional to emphasize the use of information about an individual patient to select or optimize that patient's preventative and therapeutic care for their skin.

On June 1, 2010 Proteonomix retained Wolfe Axelrod Weinberger Associates (“WAW”), an investor relations agency for one year. WAW is to receive $7,500 a month and options to purchase 75,000 shares at a purchase price of $5.00 per share, which vest ratably over the 12 month contract commencing July 1, 2010. At the end of a ninety day trial period, the Company may cancel the Agreement and WAW would retain 18,750 options at $5.00 per share.

On June 15, 2010 Proteonomix retained Logoform AG, to provide marketing, investor relations and capital raising services for Proteonomix for three months. Logoform received 100,000 options at $5.00 per share ratably over one year and exercisable until May 2011. Logoform AG also received 50,000 shares of Proteonomix to be paid by a third party on behalf of the Company. Logoform AG will also receive a four percent finder’s fee for equity or debt raised up to $3,000,000.

On June 16, 2010 Proteonomix shares began to trade on the OTC Bulletin Board under the symbol PROT.

Financial Operations Overview

Revenues

Our revenues and associated direct costs since inception are a result of our sales of donor sperm samples from our Sperm Bank of New York subsidiary, a company engaged in reproductive tissue banking. In 2011 we anticipate the beginning of sales in the second quarter of our Proteoderm products.

General and Administrative Expenses

General and administrative expenses consist primarily of the costs associated with our general management, including salaries, professional fees such as legal and accounting, marketing expenses and advisory fees. We have increased our general and administrative expense for legal and accounting compliance costs, investor relations and other activities associated with operating as a publicly traded company. We have strengthened our administrative capabilities through various consulting agreements. Continued increases will also likely result from additional operational, financial, accounting and advisory contracts. The majority of our expenses were paid by stock based compensation agreements.

Income Taxes

We have not recognized any deferred tax assets or liabilities in our financial statements since we cannot assure their future realization. Because realization of deferred tax assets is dependent upon future earnings, a full valuation allowance has been recorded on the net deferred tax assets, which relate primarily to net operating loss carry-forwards. In the event that we become profitable within the next several years, we have net deferred tax assets (before a 100% valuation allowance) of approximately $5,986,403 that may be utilized prior to us having to recognize any income tax expense or make payments to the taxing authorities. Utilization of our net operating loss carry-forwards in any one year may be limited under IRC Section 382, and we could be subject to the alternative minimum tax, thereby potentially diminishing the value to us of this tax asset.

RESULTS OF OPERATION AND FINANCIAL CONDITION

THREE MONTHS ENDED JUNE 30, 2010 VS. THREE MONTHS ENDED JUNE 30, 2009

For the three months ended June 30, 2010


	Stem-Cell	Proteoderm	Sperm Bank	PRTMI & PRTMI RD(1)	StromaCel	Total
Sales	$ -	$ -	$37,539	$ -	$-	$37,539
Cost of sales	$ -	$ -	$1,692	$ -	$ -	$1,692
Gross profit	$ -	$ -	$35,847	$ -	$ -	$35,847
Operating expenses	$869,145	$9,008	$19,019	$ -	$676	$897,848
Depreciation and amortization	$3,476	$ -	$ -	$ -	$ -	$3,476
Other income (expense)	$(8,375)	$ -	$ -	$ -	$ -	($8,375)
Net income (loss)	$(880,996)	($9,008)	$16,828	$ -	($676)	($873,852)
(1) PRTMI RD is a wholly-owned subsidiary of PRTMI.

For the three months ended June	30, 2009

	Stem-Cell	Sperm Bank	Total
Sales	$ -	$25,941	$25,941
Cost of sales	$ -	$2,331	$2,331
Gross profit	$ -	$23,610	$23,610
Operating expenses	$224,950	$5,355	$230,305
Depreciation and amortization	$3,476	$ -	$3,476
Other income (expense)	($8,375)	$ -	($8,375)
Net income (loss)	($236,801)	$18,255	($218,546)

Revenue

For the three months ended June 30, 2010 revenue was $37,539, an increase of $11,598 from $25,941 for the same period in 2009. This was a result of an increase in sales of SBNY.

Direct costs for the three months ended June 30, 2010 decreased by $638 for the three months ended June 30, 2009 because of a decrease in inventory at SBNY.

Operating Expenses

Operating expenses include the five subsidiaries in 2010, including indirect labor, stock based compensation, professional, consulting and marketing fees, other general and administrative expenses, depreciation and amortization which was $901,324 for the three months ended June 30, 2010 compared to $233,781 for the same period in 2009, an increase of $667,543. The increase is a result of the following: an increase of wages and wage related expenses of $28,389, a decrease of stock based compensation for professional and marketing fees of $1,901 valued at market for the date of issuance, an increase of professional and marketing fees including legal and accounting fees of $537,631, an increase of other general and administrative expense of $103,424 and no change in depreciation and amortization. The stock based professional and consulting fees for 2010 and 2009 relate to legal, internal accounting, marketing and advisory fees. All valuations are based on the market price of our common stock at the date of issuance as contracts with consultants and professionals were based on the issuance of shares of our common stock and not on a specific dollar amount. When considering the above changes in operating expenses please refer to the heading “Stock Based Compensation” below. As a result, our expenses as set forth in our financial statements will vary as a result of the price of our common stock at the dates of stock issuances for services and not for other economic reasons.

Other Income (Expense)

There was no change in other expense which included interest expense of $8,375 for the three months ended June 30, 2010 and $8,375 for the three months ended in June 2009,

For the six months ended June 30, 2010


	Stem-Cell	Proteoderm	Sperm Bank	PRTMI & PRTMI RD(1)	StromaCel	Total
Sales	$ -	$ -	$47,325	$ -	$ -	$47,325
Cost of sales	$ -	$ -	$2,112	$ -	$ -	$2,112
Gross profit	$ -	$ -	$45,213	$ -	$ -	$45,213
Operating expenses	$1,671,899	$18,188	$35,285	$2,100	$844	$1,728,316
Depreciation and amortization	$6,952	$ -	$ -	$ -	$ -	$6,952
Other income (expense)	($19,026)	$ -	$ -	$ -	$ -	($19,026)
Net income (loss)	($1,697,877)	($18,188)	$9,928	($2,100)	($844)	($1,709,081)

(1)

PRTMI RD is a wholly-owned subsidiary of PRTMI.

For the six months ended June 30, 2009



	Stem-Cell	Sperm Bank	Total
Sales	$ -	$55,125	$55,125
Cost of sales	$ -	$3,552	$3,552
Gross profit	$ -	$51,573	$51,573
Operating expenses	$1,742,358	$46,576	$1,788,934
Depreciation and amortization	$6,952	$ -	$6,952
Other income (expense)	($16,750)	$ -	($16,750)
Net income (loss)	($1,766,060)	$4,997	(1,761,063)

RESULTS OF OPERATION AND FINANCIAL CONDITION

SIX MONTHS ENDED JUNE 30, 2010 VS. SIX MONTHS ENDED JUNE 30, 2009

Revenue

For the six months ended June 30, 2010 revenue was $47,325, a decrease of $7,800 from $55,125 for the same period in 2009. This was a result of a decrease in sales of SBNY.

Direct costs for the six months ended June 30, 2010 decreased by $1,440 for the six months ended June 30, 2009 because of a decrease in sales at SBNY.

Operating Expenses

Operating expenses include the five subsidiaries in 2010, including indirect labor, stock based compensation, professional, consulting and marketing fees, other general and administrative expenses, depreciation and amortization which were $1,735,268 for the six months ended June 30, 2010 compared to $1,795,866 for the same period in 2009, a decrease of $60,618. The decrease is a result of the following: an increase of wages and wage related expenses of $30,747, a decrease of stock based compensation for professional and marketing fees of $1,901 valued at market for the date of issuance, a decrease of professional and marketing fees including legal and accounting fees of $182,253, an increase of other general and administrative expenses of $92,789, and no change in depreciation and amortization. The stock based professional and consulting fees for 2010 and 2009 relate to legal, internal accounting, marketing and advisory fees. All valuations are based on the market price of our common stock at the date of issuance as contracts with consultants and professionals were based on the issuance of shares of our common stock and not on a specific dollar amount. When considering the above changes in operating expenses please refer to the heading “Stock Based Compensation” below. As a result, our expenses as set forth in our financial statements will vary as a result of the price of our common stock at the dates of stock issuances for services and not for other economic reasons.

Other Income (Expense)

Other expenses included interest expense of $19,026 for the three months ended June 30, 2010 which was an increase of $2276 over the interest expense for the three months ended in June 2009 of $16,750,

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow



	Six Months Ended June 30,
	2010			2009

Net cash (used in) operating activities	$	(368,067)	$	(199,799)
Net cash (used in) provided by investing activities	$	-	$	-
Net cash provided by financing activities	$	272,200	$	221,592

The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to establish profitable operations. For the six months ended June 30, 2010, the Company had limited operating abilities, and, as a result, had negative cash flow from operations.

We had cash of approximately $3,960 at June 30, 2010 and a working capital deficit of $5,465,135. The primary areas of funding were the proceeds received from notes payable - related parties of $272,200; a decrease in accounts payable and accrued expenses of $38,979. We will need to generate significant additional revenue to support our projected increases in staffing and other operating expenses, which we cannot give any assurance we will be able to accomplish. Our current operating expenditures are approximately $125,000 per month to support our operations; and under our projected growth plan, we expect to double that amount to approximately $250,000 per month in the last quarter of fiscal 2010. Our monthly cash burn rate is $95,000. Along with revenues from our existing contracts and sales at SBNY, we believe that we will need to raise capital to address the reduction in debt required for us to grow, become effective and to allow us to stay in business. We estimate that we will require approximately $1,500,000 in additional capital to sustain our operations at their current level through fiscal 2010 and that we will require as much as $1,000,000 in additional revenues or $1,500,000 in additional funding to achieve our projected growth plan. The Company is in default on the John Hopkins $190,000 obligation, but the Company anticipates being able to meet this obligation by September 1, 2010.

Although we believe the additional capital we will require will be provided either through new equity investment, debt and/or increased revenue from the sale of our cosmeceuticals products, we cannot assure that the equity investment will be made, we can obtain debt at acceptable terms or that we can generate sufficient revenue to maintain projected operating levels. Accordingly, we may need to try to secure additional equity or debt financing which we cannot assure would be available to us at prices that would be acceptable. Our failure to generate such revenue, reduce expenses or obtain necessary financing would impair our ability to stay in business and raises substantial doubt about our ability to remain as a going concern. We are attempting to raise capital through share issuance but we have no specific timetable. Our management team is meeting with institutions and investment bankers in an effort to raise debt or equity funding. The Company has not received any definitive proposal. It has no specific timetable for raising additional equity. The current cash burn rate is covered either by the management team or by stock issuances. Debts are covered by stock issuances or conversion to debt instruments. The Company’s only source of revenue to date is SBNY which reported revenues of $47,325 for the six months ended June 30, 2010 and a total company net loss of $1,709,081 and revenues of $55,125 with a total company net loss of $1,761,063 for the six months ended June 30, 2009.

Off-Balance Sheet Arrangements

We have no off-balance sheet financing arrangements and we have not entered into any transactions involving unconsolidated subsidiaries or special purpose entities.

Effect of Inflation

Inflation and changing prices are not generally a material factor affecting our business. General operating expenses such as salaries, employee benefits, advisory fee and lease costs are, however, subject to normal inflationary pressures

APPLICATION OF CRITICAL ACCOUNTING POLICIES

General

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition.

We believe that the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our financial statements.

Use of Estimates

Revenue Recognition

In the periods covered by this report, the Company's revenues have been generated from the sales of its donor sperm samples. The Company recognizes revenues provided a contractual arrangement exists, delivery has occurred and the fee is determinable and collection is reasonably assured. The Company assesses whether the fee is fixed and determinable based on the payment terms associated with the transaction. If a fee is based upon a variable such as acceptance by the customer, the Company accounts for the fee as not being fixed and determinable. In these cases, the Company defers revenue and recognizes it when it becomes due and payable.

If the Company enters into support agreements, revenue will be recognized over the life of the contract on a straight-line basis regardless of when the fee is due and payable.

Stock-based Compensation

We account for employee stock-based compensation by using ASC 718-10 which requires recognition of stock-based compensation expense for all share-based payments based on fair value. These include grants of employee stock options, restricted stock plans, performance-based awards and stock appreciation rights transactions be recognized in the financial statements based on their fair values over the period during which an employee is required to provide service in exchange for the award (the vesting period), net of estimated forfeitures. The estimation of fair value of stock options requires management to make estimates for certain assumptions regarding risk-free interest rates, expected life of the options, expected volatility of the price of our common stock, and the expected dividend yield of our common stock.

We account for non-employee stock-based compensation expense under ASC 505“Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". We utilize the fair value of the option issued to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the non-employee has been reached or the performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

Long-Lived Assets

Long-lived assets that do not have indefinite lives, such as property and equipment, license agreements, and patents are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses for assets to be held and used are then measured based on the excess, if any, of the carrying amounts of the assets over their fair values. Long-lived assets to be disposed of in a manner that meets certain criteria are stated at the lower of their carrying amounts or fair values less costs to sell and are no longer depreciated.

SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS

Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurement and Disclosures (Topic 820) (“ASU 2009-05"). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted market price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required for Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.

In January 2010, the Company adopted FASB ASU No. 2010-06, Fair Value Measurement and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require new disclosures of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. These new disclosures are effective beginning with the first interim filing in 2010. The disclosures about the roll forward of information in Level 3 are required for the Company with its first interim filing in 2011. The Company does not believe this standard will impact their financial statements.

ASC 470-20-65, “Transition Guidance for Conforming Changes to, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" (“ASC 470-20-65"). ASC 470-20-65 is effective for years ending after December 15, 2008. The overall objective of ASC 470-20-65 is to provide for consistency in application of the standard. The Company has computed and recorded a beneficial conversion feature in connection with certain of their prior financing arrangements and does not believe that ASC 470-20-65 will have a material effect on that accounting.

ASC 815-40, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock" (“ASC 815-40"), provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock and it applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative., ASC 815-40 also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock. The Company is determining what impact, if any, ASC 815-40 will have on its financial position, results of operations and cash flows.

ASC 470-20, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" (“ASC 470-20") requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company does not believe that the adoption of ASC 470-20 will have a material effect on its financial position, results of operations or cash flows.

In April 2008, ASC issued ASC 350, “Determination of the Useful Life of Intangible Assets". This amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350. The guidance is used for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company does not believe ASC 350 will materially impact their financial position, results of operations or cash flows.

In March 2008, ASC issued ASC 815, Disclosures about Derivative Instruments and Hedging Activities", (“ASC 815"). ASC 815 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that ASC 815 will have an impact on their results of operations or financial position.

ASC 805 will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met. Finally, ASC 805 will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date. This will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted and the ASC is to be applied prospectively only. Upon adoption of this ASC, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed. The adoption of ASC 805 is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In December 2007, the Company adopted ASC 805, Business Combinations (“ASC 805"). ASC 805 retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. ASC 805 will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition. ASC 805 will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date.

ASC 810-10-65 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Management is determining the impact that the adoption of ASC 810-10-65 will have on the Company’s financial position, results of operations or cash flows.

In December 2007, the ASC issued ASC 810-10-65, Noncontrolling Interests in Consolidated Financial Statements. ASC 810-10-65 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment.

In February 2007, ASC issued 825-10, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of ASC 320-10, (“ASC 825-10") which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. ASC 825-10 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

In September 2006, ASC issued 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of ASC 820 is not expected to have a material impact on the financial statements.

Other ASU’s that have been issued or proposed by the FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

Management of Proteonomix Inc., which consists primarily of our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles generally accepted in the United States of America.

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting at June 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of June 30, 2010, management identified significant deficiencies related to (i) the absence of U.S. GAAP expertise of an internal accounting staff, (ii) our internal audit functions and (iii) the absence of an Audit Committee which resulted in an ineffective system of internal control at June 30, 2010.

Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was not effective as of June 30, 2010.

In order to correct the above mentioned deficiencies, we have taken and plan on taking the following remediation measures:

We intend to appoint additional members to our board of directors in 2010 and establish an audit committee.

We intend to hire additional staff in 2010 familiar with financial reporting controls and compliance with Sarbanes-Oxley rules and regulations as well as U.S. GAAP.

We intend to hire internal audit staff to consolidate and concentrate our efforts with the building of its five subsidiaries.

We intend to segregate duties and implement appropriate review procedures throughout the accounting and administration controls.

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this quarterly report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein.


Exhibit No.	Description
31.1	Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
32.2	Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

_________________

(1) Filed herewith.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 11, 2010

Proteonomix, Inc.

By: /s/ Michael Cohen

Michael Cohen

Principal Executive Officer

By: /s/ Robert Kohn

Robert Kohn

Principal Financial Officer

PROTEONOMIX, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2010 AND 2009

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page(s)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009........................................................F-2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE SIX AND THREE MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)...............F-3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED).....................................F-4

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010 AND 2009 (UNAUDITED)…...............................................................................F-5

F-1


PROTEONOMIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009


ASSETS	(UNAUDITED)
	JUNE 30,	DECEMBER 31,
	2010	2009
Current Assets:
Cash and cash equivalents	$ 3,960	$ 99,827
Accounts receivable, net	37,266	41,813
Inventory	190,353	192,465

Total Current Assets	231,579	334,105

Fixed assets, net of depreciation	36,503	41,077

Other Assets:
Intangible assets, net of amortization	33,461	35,839
Intellectual Property License	3,401,891	-

Total Other Assets	3,435,352	35,839

TOTAL ASSETS	$ 3,703,434	$ 411,021

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES
Current Liabilities:
Obligation to issue common stock	$ 2,407,193	$ 1,733,606
Current portion of notes payable - related parties	689,831	417,631
Current portion of notes payable	-	392,675
Accounts payable and accrued expenses	2,599,690	2,359,116

Total Current Liabilities	5,696,714	4,903,028


Total Liabilities	5,696,714	4,903,028

STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $.001 Par Value; 10,000,000 and 4,000,000 shares authorized
Preferred stock Series A - 200,000 shares issued and outstanding	200	200
Preferred stock Series B - 6 shares issued and outstanding	-	-
Preferred stock Series C -	50	50
Common stock, $.001 Par Value; 240,000,000 and 50,000,000 shares authorized
and 4,897,734 and 4,264,664 shares issued and outstanding	4,898	4,265
Additional paid-in capital	15,608,641	11,401,466
Retained earnings (deficit)	(17,607,069)	(15,897,988)


Total Stockholders’ Equity (Deficit)	(1,993,280)	(4,492,007)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$ 3,703,434	$ 411,021

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

F-2


PROTEONOMIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)



	THREE MONTHS ENDED		SIX MONTHS ENDED
	JUNE 30,		JUNE 30,
	2010	2009	2010	2009

OPERATING REVENUES
Sales	$ 37,539	$ 25,941	$ 47,325	$ 55,125

COST OF GOODS SOLD
Inventory - beginning	192,045	190,854	192,465	191,775
Purchases	-	-	-	2,217
	192,045	190,854	192,465	193,992
Inventory - end	(190,353)	(190,440)	(190,353)	(190,440)
Total Cost of Goods Sold	1,692	2,331	2,112	3,552

GROSS PROFIT (LOSS)	35,847	23,610	45,213	51,573

OPERATING EXPENSES

Wages and wage related expenses	106,521	78,132	215,329	184,582
Stock based compensation	13,494	15,395	13,494	15,395
Professional, consulting and marketing fees	656,255	118,624	1,273,298	1,455,551
Other general and administrative expenses	121,578	18,154	226,195	133,406
Depreciation and amortization	3,476	3,476	6,952	6,952
Total Operating Expenses	901,324	233,781	1,735,268	1,795,886

LOSS BEFORE OTHER INCOME (EXPENSE)	(865,477)	(210,171)	(1,690,055)	(1,744,313)

Interest income (expense), net	(8,375)	(8,375)	(19,026)	(16,750)
Total Other Income (expense)	(8,375)	(8,375)	(19,026)	(16,750)

NET LOSS BEFORE PROVISION FOR INCOME TAXES	(873,852)	(218,546)	(1,709,081)	(1,761,063)
Provision for Income Taxes	-	-	-	-

NET LOSS APPLICABLE TO COMMON SHARES	$ (873,852)	$ (218,546)	$(1,709,081)	$ (1,761,063)

NET LOSS PER BASIC AND DILUTED SHARES	$ (0.20)	$ (0.09)	$ (0.39)	$ (0.63)


WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING	4,452,498	2,467,903	4,359,100	2,800,537

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

F-3


PROTEONOMIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)


	SIX MONTHS ENDED
	JUNE 30,
	2010	2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,709,081)	$ (1,761,063)

Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization	6,952	6,952
Common stock issued for consulting services	73,950	796,110
Stock based compensation	13,494	15,395
Obligation to issue common shares - Services	974,180	480,000


Changes in assets and liabilities
Decrease in accounts receivable	4,547	(43,286)
Decrease in inventory	2,112	1,335
Increase in accounts payable and
and accrued expenses	265,779	304,758
Total adjustments	1,341,014	1,561,264

Net cash (used in) operating activities	(368,067)	(199,799)


CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from notes payable - related parties	272,200	221,592

Net cash provided by financing activities	272,200	221,592

NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS	(95,867)	21,793

CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD	99,827	115

CASH AND CASH EQUIVALENTS - END OF PERIOD	$ 3,960	$ 21,908

CASH PAID DURING THE PERIOD FOR:
Income taxes	$ -	$ -
Interest expense	$ -	$ -


SUPPLEMENTAL NONCASH INFORMATION:

Common stock issued for consulting services	$ 73,950	$ 796,110
Conversion of obligation to issue common shares to common stock and
additional paid in capital	$ 300,593	$ 1,630,500
Conversion of obligation to issue preferred shares to preferred stock and
additional paid in capital	$ -	$ 2,000
Conversion of notes payable and accrued interest for common stock and
additional paid in capital	$ 417,879	$ -

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

F-4

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 1 -ORGANIZATION AND BASIS OF PRESENTATION

The unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual statements and notes. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the December 31, 2009 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

Proteonomix, Inc. (the “Company") is a Delaware corporation incorporated on June 26, 1995 as Azurel, Ltd. In September 2006, Azurel, Ltd. changed its name to National Stem Cell Holding, Inc. and then in August 2008 the name of the Company was changed to Proteonomix, Inc.

Azurel, Ltd. was incorporated on June 26, 1995 in the State of Delaware and marketed a line of fragrances. On February 2, 2001, Azurel filed a voluntary petition for protection from creditors under Chapter 11 in the United States Bankruptcy Court for the District of New Jersey, Newark until it was discharged from bankruptcy in December, 2005. Control was changed in September 2006 when Azurel acquired National Stem Cell, Inc. and its subsidiary, The Sperm Bank of New York, Inc. through a share exchange agreement. In this transaction the common stock was reverse split 1:37. Azurel subsequently changed its name following the acquisition. Then again in August 2008, the Company reverse split its stock 1:10 when the name was changed to Proteonomix, Inc.

On January 14, 2005, National Stem Cell, Inc. acquired The Sperm Bank of New York, Inc. a company established in 1997 operating as a reproductive cell and tissue bank. National Stem Cell, Inc. acquired The Sperm Bank of New York, from its sole shareholder, for a note payable in the amount of $150,000 and acquired the accounts receivable and inventory valued at $150,000. On January 13, 2006, National Stem Cell Inc. converted the note payable into 21,866 shares of common stock. The acquisition was treated as a purchase transaction.

On July 8, 2008, the Company formed Proteoderm, Inc. as a wholly-owned subsidiary. Through this subsidiary, the Company produces and synthesizes protein polypeptides and growth hormones secreted by stem cells and incorporates them into uniquely formulated personal care products. Proteoderm, Inc. has generated no revenues since inception.

On January 5, 2010, the Company formed the Proteonomix Regenerative Translational Medicine Institute, (“PRTMI”), as a wholly-owned subsidiary. PRTMI will focus on the translation of research in stem cell biology and cellular therapy to clinical applications of regenerative medicine. PRTMI formed PRTMI RD, a company incorporated in the Dominican Republic in February, 2010.

On February 24, 2010 the Company acquired StromaCel, Inc., a wholly-owned subsidiary for the price of its formation cost on December 24, 2009. The mission of StromaCel is to develop therapies using stromal cells. Stromal cells are key components of tissues and provide critical cytokines and growth factors as well as the cellular microenvironment for normal homeostasis.

F-5

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 1 -ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

On May 4, 2010, Proteonomix licensed from the Cohen-McNiece Foundation the Stromal Cell technology for potential therapeutic use in the regrowth of damaged cardiac cells after a heart attack. The Cohen-McNiece Foundation was formed by Proteonomix President, Michael Cohen, and its Chief Scientific Officer and Vice-President, Ian McNiece, PhD to develop cellular technology for patients who have suffered myocardial infarctions. The Technology was licensed in exchange for a 2% royalty on gross revenue derived from use of the StromalCel Technology and 1,000,000 stock options exercisable for five years at $3.55 per share vested immediately to Michael Cohen, our President and 90% owner of the Cohen-McNiece Foundation. The 2% royalty will be used by the Foundation to do further research into stem cell applications. Proteonomix also received a right of first refusal to license any technology developed by the Foundation.

Proteonomix has sub-licensed the StromaCel Technology to StromaCel for a 2% royalty, but Proteonomix will remain responsible for all costs associated with patent prosecution for the StromaCel Technology. In the event of bankruptcy, the rights to the Technology granted by the license revert to the Foundation.

The Company owns and operates five subsidiaries, The Sperm Bank of New York, Inc., Proteoderm, Inc., National Stem Cell, Inc., PRTMI and StromaCel, Inc.

The Company is a biotechnology company engaged in the discovery and development of stem cell therapeutic products. The Company is developing pre-clinical-stage therapeutic agents and treatments for cancer, diabetes, heart, lung, and kidney diseases as well as for stem cell bone marrow and organ transplants. The Company’s discoveries involve stem cell treatments without using embryonic stem cells.

Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB") Accounting Standards Codification (“ASC") 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Positions or Emerging Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs").

The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

Going Concern

As shown in the accompanying condensed consolidated financial statements the Company has incurred recurring losses of $1,709,081 and $1,761,063 for the six months ended June 30, 2010 and 2009 respectively. In addition, the Company has a working capital deficit in the amount of $5,465,135 as of June 30, 2010. The Company has continued to develop its pre-clinical-stage therapeutic agents and various treatments utilizing stem cell treatments while generating revenues and operating its sperm bank division.

There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period. Management believes that the Company’s capital requirements will depend on many factors. These factors include the final phase of development of their pre-clinical stage therapeutic agents being successful as well as product implementation and distribution.

F-6

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 1 -ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

Going Concern (Continued)

In the near term, the Company plans to seek quotation of its common stock on the OTC Bulletin Board to gain liquidity and notice. The Company will continue to pursue traditional forms of financing. The Company’s ability to continue as a going concern for a reasonable period is dependent upon management’s ability to raise additional interim capital and, ultimately, achieve profitable operations. There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to the Company, if at all.

The condensed consolidated financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to derivative liabilities, bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of SIX months or less to be cash equivalents. Any amounts of cash in financial institutions over FDIC insured limits, exposes the Company to cash concentration risk.

Fair Value of Financial Instruments (other than Derivative Financial Instruments)

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. For the notes payable, the carrying amount reported is based upon the incremental borrowing rates otherwise available to the Company for similar borrowings.

Research and Development

The Company incurs costs on activities that relate to research and development of new technology and products. Research and development costs are expensed as incurred. Certain of these costs may be reduced by government grants and investment tax credits where applicable. The Company has never had any government grants or investment tax credits.

Intangible Assets

The Company’s intangible assets consist of patents and intellectual property, which are carried at the purchase price and/or the legal cost to obtain them. Patents are being amortized over their estimated useful lives, which range from seven to seventeen years.

F-7

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets (Continued)

The cost of intellectual property purchased from others that is immediately marketable or that has an alternative future use is capitalized and amortized as intangible assets. Capitalized costs are amortized using the straight-line method over the estimated economic life of the related asset. The Company periodically reviews its capitalized intangible assets to assess recoverability based on the projected undiscounted cash flows from operations, and impairments are recognized in operating results when a permanent diminution in value occurs.

The value assigned to the license is not currently being amortized because the license is perpetual. The Company will test for impairment on an annual basis and impair the value if necessary.

Revenue Recognition

The Company recognizes revenue for the sales of its donor sperm samples, which have been the only source of revenue to date are when persuasive evidence of an arrangement exists and delivery has occurred, provided the fee is fixed or determinable and collection is probable. The Company assesses whether the fee is fixed and determinable based on the payment terms associated with the transaction. If a fee is based upon a variable such as acceptance by the customer, the Company accounts for the fee as not being fixed and determinable. In these cases, the Company defers revenue and recognizes it when it becomes due and payable. The Company assesses the probability of collection based on a number of factors, including past transaction history with the customer and the current financial condition of the customer. If the Company determines that collection of a fee is not reasonably assured, revenue is deferred until the time collection becomes reasonably assured.

The Company anticipates revenue from support agreements it enters into will be recognized on a straight-line basis over the life of the contract, although the fee is due and payable at the time the agreement is signed or upon annual renewal.

Accounts Receivable

The Company intends to conduct business with companies based on an evaluation of each customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is expected to vary from customer to customer due to the financial condition of each customer. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. Management has determined that there is an allowance of $168,787 for doubtful accounts at June 30.

Accounts receivable will generally be due within 30 days and collateral is not required.

Income Taxes

Under ASC 740 the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Uncertainty in Income Taxes

Under ASC 740-10-25 recognition and measurement of uncertain income tax positions is required using a “more-likely-than-not" approach. Management evaluates their tax positions on an annual basis and has determined that as of June 30, 2010 no additional accrual for income taxes is necessary.

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets; equipment - 5 years, and furniture and fixtures - 5 years.

When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Deduction is made for retirements resulting from renewals or betterments.

F-8

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment of Long-Lived Assets

Long-lived assets, primarily its licenses and fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company does not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would

necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant

change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the

carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company

recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value.

(Loss) Per Share of Common Stock

Basic net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share ("EPS") include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share on the consolidated statement of operations due to the fact that the Company reported a net loss and to do so would be anti-dilutive for the periods presented.

The following is a reconciliation of the computation for basic and diluted EPS:

June 30, 2010 June 30, 2009

Net loss

$ (1,709,081) $ (1,761,063)

Weighted-average common shares

Outstanding (Basic)

4,359,100 2,800,537

Weighted-average common stock

Equivalents

Series A1 Preferred Stock

2,000,000

Stock options

1,200,000

20,000

Warrants

- -

Weighted-average commons shares

Outstanding (Diluted)

7,559,100 4,820,537

Stock-Based Compensation

In 2006, the Company adopted the provisions of ASC 718-10 “Share Based Payments". The adoption of this principle had no effect on the Company’s operations.

ASC 718-10 requires recognition of stock-based compensation expense for all share-based payments based on fair value. Prior to January 1, 2006, the Company measured compensation expense for all of its share-based compensation using the intrinsic value method.

F-9

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock-Based Compensation (Continued)

The Company has elected to use the modified-prospective approach method. Under that transition method, the calculated expense in 2006 is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. For common stock issuances to non-employees that are fully vested and are for future periods, the Company classifies these issuances as prepaid expenses and expenses the prepaid expenses over the service period. At no time has the Company issued common stock for a period that exceeds one year.

Segment Information

The Company follows the provisions of ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information". This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company operates in five distinct reporting segments, as of June 30, 2010 and 2009 and for the six months ended June 30, 2010 and 2009.

Inventory

Inventory is valued at the lower of cost (on a first-in, first-out (FIFO) basis) or market. Inventory of $190,353 as of June 30, 2010 consists of donor’s sperm samples. Based on the method in which these samples are contained, it is very rare that a sample would spoil. Samples are cleared for cryopreservation after rigorous laboratory testing. Samples are cryopreserved in nitrogen vapor and are maintained frozen until purchased by a client. There has been no reserve for obsolescence of inventory and inventory is only removed upon use. The Company, to date has never destroyed any samples in inventory, or sold samples that were not viable (alive after been thawed for use).

Beneficial Conversion Features

ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.

Recent Accounting Pronouncements

F-10

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

F-11

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

ASC 815-40, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock" (“ASC 815-40"), provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock and it applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative. ASC 815-40 also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock. The Company is determining what impact, if any, ASC 815-40 will have on its financial position, results of operations and cash flows.

In May 2009, the FASB published ASC 855, “Subsequent Events" (“ASC 855"). ASC 855 requires the Company to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. ASC 855 is effective for financial periods ending after June 15, 2009. Management has evaluated subsequent events through August 9, 2010, the date the financial statements were issued.

F-12

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 3 -FIXED ASSETS

Fixed assets as of June 30, 2010 (unaudited) and December 31, 2009 were as follows:

Estimated

Useful Lives June 30, December 31,

(Years) 2010 2009

Computer Equipment

$ 13,281

Machinery and Equipment

5-7

5,868 5,868

Leasehold Improvement

20,980 20,980

Furniture and fixtures

28,350 28,350

68,479 68,479

Less: accumulated depreciation

(31,976) (27,402)

Fixed assets, net

$ 36,503 $ 41,077

There was $4,574 and $4,575 charged to operations for depreciation expense for the six months ended June 30, 2010 and 2009, respectively.

NOTE 4 - PATENTS AND TRADEMARKS

Intangible assets as of June 30, 2010 (unaudited) and December 31, 2009 were as follows:

Estimated

Useful Lives June 30, December 31,

(Years) 2010 2009

Patents and Trademarks

$47,566

Less: accumulated amortization (14,105) (11,727)

Intangible assets, net $ 33,461 $ 35,839

There was $2,378 and $2,378 charged to operations for amortization expense for the six months ended June 30, 2010 and 2009, respectively.

NOTE 5 - PROMISSORY NOTES

The Company had outstanding $0 in promissory notes payable and $0 in accrued interest as of June 30, 2010. The Company entered into promissory notes for $392,675 between April and July 2007 with six individuals/companies. On December 31, 2008, the Company renegotiated these notes. In the process of this, the Company added $57,675 in interest that was unpaid during 2008. The Company also issued shares to the noteholders to cure a default under the note and extended the due date to January 30, 2009. The notes accrued interest at annual interest rates of 10% and were to mature from October 2007 to January 2008. The Company negotiated a full settlement on April 15, 2010 and issued 354,070 shares for all principal and interest due the promissory note holders.

The Company had issued 16,500 warrants with these notes that have since been converted to shares of common stock and none of the warrants remain outstanding as of June 30, 2010.

F-13

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 6 - RELATED PARTY LOANS

The Company has unsecured loans and advances with officers of $689,832 as of June 30, 2010. The loans and advances are typically repaid through conversions to shares of common stock. The advances are short-term and typically repaid within 6 months. The officers have not accrued interest on these amounts as the repayment of the advances are made on a recurring basis. These loans were made to fund the Company with working capital during the process of securing contracts. All loans and advances are due on demand and are included in current liabilities. In addition, the Company has other related party payables outstanding that consist of accrued compensation and related expenses to the President and CFO of the Company totaling $1,200,814 as of June 30, 2010. This amount has been included in current liabilities on the condensed consolidated balance sheets.

NOTE 7 - LICENSING AGREEMENTS

The John Hopkins University

On November 14, 2005, the Company entered into an intellectual property licensing agreement with The John Hopkins University (“JHU"). The license agreement relates to certain patents pending and contains royalty payment arrangements as well as funding guarantees.

Due to certain internal JHU intellectual property timeline issues regarding technology development with the Company and the Company’s failure to pay fees in connection with the development, JHU discontinued the Company’s research plan and terminated the agreement.

During 2005 and 2006, $296,250 was recognized as license fees and remained outstanding as of December 31, 2007. During 2008, the Company and JHU negotiated a settlement agreement which was executed on September 24, 2008. The settlement agreement stipulated that should a $10,000 payment be made, the total amount due would be reduced to $190,000. The Company made the payment and the Company recognized $96,250 in forgiveness of the JHU payable. As of June 30, 2010, the Company has $190,000 outstanding, respectively to JHU under the terms of the agreement.

The Company is currently in default on the John Hopkins $190,000 obligation, but the Company anticipates being able to meet the new terms of the obligation before it comes due September 1, 2010.

The Stromal Cell Technology License

F-14

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 8 - COMMITMENTS

Lease Agreement

The Company has entered into an oral lease agreement for its research and development, manufacturing, warehousing and administrative offices on a month to month basis. The Company estimates that the monthly obligation is approximately $2,500 per month.

Employment Agreements with Officers

The Company has entered into an employment agreement with its President and CEO. The agreement obligates the Company to pay this officer base compensation of $325,000 per year which includes a $75,000 bonus. The Company and the officer can terminate this agreement, and can adjust compensation at anytime during the length of the contract. In addition, the officer is to receive 50,000 shares of common stock for each patent filed in which he is named as inventor or investigator. The Company has issued all shares under this agreement through June 30, 2010.

On July 1, 2009, the Company and its President and CEO, modified the employment agreement to include: a) the Company’s recognition of the assignment by the President and CEO at no additional consideration by the Company of the technologies, including the patent applications to the Company’s subsidiary, National Stem Cell, Inc.; b) for the transfer of the 2 Proteoderm patents and future patent applications related to inventions and discoveries related to stem cell derived cosmetics and cosmeceuticals, 50,000 Series C Preferred Shares with a par value of $0.001 (see Note 9) and the right to receive 20% of the outstanding shares of the Company’s subsidiary, Proteoderm, Inc. in the event it shall become a public company. The right set forth above shall be non-transferable except to the JSM Family Trust; and c) an increase in the vehicle allowance to $1,000 per month.

On July 1, 2009, we entered into an employment agreement with Robert Kohn, pursuant to which Mr. Kohn serves as Chief Financial Officer until June 29, 2012. Pursuant to the agreement, Mr. Kohn is entitled to receive a salary of $150,000 per annum which accrues until the Company receives $1,500,000 in equity, debt or joint venture funding. Mr. Kohn will receive an additional $50,000 per annum if the Company receives $3,000,000 in debt, equity or joint venture funding and an additional $50,000 per annum if the Company receives $10,000,000 in debt, equity or joint venture funding. In addition, Mr. Kohn is entitled to the issuance of 250,000 shares of common stock upon the execution of the employment agreement as a signing bonus.

Mr. Kohn also receives an additional 250,000 shares upon the spin-off of any subsidiary as a public company in the event such spin-off occurs during the term of the agreement.

In addition, Mr. Kohn receives a benefits package including health insurance, vision, dental, and life insurance. In addition, pursuant to his employment agreement, Mr. Kohn is entitled to reimbursement for all medical and dental expenses for himself and his immediate family which are not covered by insurance. The agreement is for a term of three years from July 1, 2009, unless terminated by the Company or Mr. Kohn by written notice given 90 days prior to the expiration of the agreement. The agreement may also be terminated by us for "cause," as such term is defined in the agreement. Upon termination, Mr. Kohn will only be entitled to accrued salary, and benefits which have vested at the time of termination.

Consulting Agreements

The Company has entered into consulting agreements with consultants to assist in developing the Company’s business. The agreements range in term from one year to three years. The agreements call for the issuance of common stock as the Company does not have sufficient cash flow to compensate its consultants with cash.

In December 2009, the Company entered into a three year agreement with the Company’s Chief Scientific Officer and Vice-President, Ian McNiece, PhD. Under the terms of the agreement Mr. McNiece will receive $4,000 per month for three years which is accrued until the Company has received $3,000,000 in equity or convertible debt financing. Furthermore, Mr. McNiece will receive 200,000 shares of common stock- 50,000 shares on the first and second anniversary of the signing of the agreement and 100,000 shares at the end of the agreement.

F-15

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 8 - COMMITMENTS (CONTINUED)

Consulting Agreements (Continued)

Effective June 1, 2010, the Company entered into a one year agreement at $7,500 per month with Wolfe, Axelrod and Weinberger to provide marketing services. Wolfe, Axelrod and Weinberger will receive 75,000 stock options @$5.00 per share ratably over twelve months commencing July 1, 2010. The Company has a right to terminate the agreement after three months including all fees and stock options. The maximum stock options to be issued, if terminated, would be 18,750 shares.

License Agreement

In January 2009, the Company entered into a three-year license and purchase agreement with two China based companies for the exclusive license of the Proteoderm products in China, Hong Kong and Taiwan (the “territory"). The agreement includes pricing, delivery and minimum purchase requirements for the China-based companies of these products. Through June 30, 2010, no products have been purchased. The Company did not meet the terms of the agreement due to delays in financing.

Litigation

The Company has been threatened to be sued by Fred Grant, a consultant who introduced the Company to Ice Cold Stocks.com. The Company denies the claim.

NOTE 9 -STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

In April 2009, the Company had determined that it had not obtained the proper authorization required to issue any classes of its preferred stock. As a result, it was determined that the issuance of the Company’s Class A and Class B Preferred Stock were never legally executed, as such, do not exist. Therefore, as of January, 2005, the Company established an unsettled obligation to the holders of any aforementioned Class A and Class B Preferred Stock.

As of June 30, 2010, the Company has 10,000,000 shares of preferred stock authorized with a par value of $.001. The Company increased the authorized shares from 4,000,000 to 10,000,000 on July 21, 2008. The preferred stock may be issued from time to time, in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issue of any shares thereof. In August 2008, the Company’s board of directors approved a 1:10 reverse split. All shares reflected in the condensed consolidated financial statements are shown post-split.

In May 2009, the Company formally designated three series of preferred stock; the Series A Convertible Preferred Stock consists of 200,000 shares, convertible into common stock, each share for 10 shares of common stock; the Series B Preferred Stock which consists of 6 shares; and the Series C Preferred Stock which consists of 50,000 shares.

Each share of Series A Preferred Stock is convertible into 10 shares of common stock. The Company, prior to realizing that the preferred stock had not been properly authorized, assumed that it had issued 200,000 shares of Series A Preferred Stock in 2005 to its President. The 200,000 shares were thought to have been issued for a value of a $2,000 (par) as founders’ shares. As a result, the Company performed an informal valuation and determined there was no increase in the value of the preferred stock and as of December 31, 2008, there was a $2,000 obligation to issue preferred shares on the consolidated balance sheets, respectively. These shares were issued in May 2009.

The Company also had assumed that it had properly issued 6 shares of Series B Preferred Stock. Each share of the Series B Preferred Stock enables the holder to nominate and appoint one member to the board of directors. The Company’s President was to be the holder of the six shares of Series B Preferred Stock, and upon proper authorization, the Company formally issued these shares to the President in May 2009. The Series B Preferred Shares value is par.

F-16

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 9 -STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Preferred Stock (Continued)

On July 1, 2009, Michael Cohen and Jacob Cohen entered into a technology license agreement with Company relating to stem cell based cosmetic and cosmeceutical technologies they developed. The license agreement provides that they receive a) 50,000 Shares of the Company’s Series C Preferred Stock, par value $.001 per share and (b) the right to receive 20% of the outstanding shares of the Company’s subsidiary, Proteoderm, Inc. in the event it shall become a public company. The right set forth above shall be non-transferable except to the JSM Family Trust. Each share of Series C Preferred Stock shall be entitled to one hundred votes on all matters submitted to a vote of the Corporation’s shareholders. The 50,000 shares of the Series C Preferred Stock were issued in July 2009.

June 30, 2010



Preferred Stock	Authorized Date	Issue Date	Number of Shares	Par Value	Fair Value	Intrinsic Value	Conversion to Common Stock
Series “A" (1)	January 2005	May, 2009	200,000	$.001	$2,000	$2,000	10:1
Series “B" (1)	January 2005	May, 2009	6	$.001	<$1	<$1	None
Series “C" (2)	July 1, 2009	July 1, 2009	50,000	$.001	$50	$50	None

(1) Issued to the President and CEO, Michael Cohen authorized in January 2005 as Founder’s shares.

(2) Issued equally to the President & CEO, Michael Cohen and his brother Jacob Cohen for the development of the Proteoderm products. Michael Cohen and Jacob Cohen have the right to receive 20% of the outstanding shares of the Company’s subsidiary, Proteoderm, Inc. in the event it shall become a public company.

Common Stock

As of June 30, 2010, the Company has 240,000,000 shares of common stock authorized with a par value of $.001. On July 21, 2008, the Company amended its certificate of incorporation to increase the authorized shares from 50,000,000 to 240,000,000.

The Company has 4,897,734 shares issued and outstanding as of June 30, 2010.

The Company has had its common stock reverse split twice since 2006. In May 2006, the Company reverse split its shares 1:37 and then again in August 2008, the Company’s board of directors approved a 1:10 reverse split. All shares reflected in the condensed consolidated financial statements are shown post-split.

During 2007, the Company issued 124,987 shares of common stock for various services, marketing and interest valued at fair value at the time the services were performed. These services were valued at $685,676. In addition, the Company recorded a capital contribution of $30,000 from a third party with no shares of common stock being issued. The Company recorded this directly to additional paid in capital.

During 2008, the Company issued 224,106 shares of common stock for various services, marketing and interest valued at fair value at the time the services were performed or interest accrued. These services were valued at $1,320,414. In addition, the Company issued 582,200 shares of common stock (on April 14, 2008, approved for issuance on June 4, 2007) in conversion of loans from the Company’s President and accrued compensation to the Company’s President in the amount of $1,318,617. The value was determined based on average pricing at the times the liabilities were incurred.

In the year ended December 31, 2009, the Company issued 1,137,990 shares of common stock to consultants due for obligations arising from various marketing services and professional fees for services rendered from November 30, 2007 to November 18, 2008, for fair value at the time services were performed, valued at $5,082,780. The Board had authorized the shares to consultants at the time services were performed but the obligation was not satisfied until the share issuance in 2009.

F-17

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 9 -STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Common Stock (Continued)

During 2009, the Company authorized and issued 615,800 shares for various services including professional fees and marketing valued at $1,464,390 for the fair value at the time the services were performed. In addition, the Company issued 100,000 shares of common stock on November 18, 2009 in conversion of loans from the Company’s President for $150,000 and conversion of advances from our past Secretary of $75,000 in exchange for 50,000 shares of common stock. The shares were issued at fair value at the time of conversion.

During the six months ended June 30, 2010 the Company issued 633,070 shares of common stock including 29,000 shares for professional fees for services rendered during the second quarter of 2010, for fair value at the time services were performed, valued at $73,950. The Board had authorized the shares to the professionals at the time services were performed. 250,000 shares were issued to Robert Kohn, our CFO, due November 1, 2009 under the terms of his employment contract. The Board had authorized the shares at November 1, 2009 but the obligation was not satisfied until the share issuance June 4, 2010. 354,070 shares were issued on April 15, 2010 to satisfy the outstanding promissory notes including settlement of all principal and interest. (See Note 5- Promissory Notes).

The shares issued are exempt from registration under Sec. 4(2) of the Securities Act of 1933.

Warrants

The Company had granted 16,500 warrants to holders of certain of the promissory notes. The warrants were issued in 2007 and were to expire five years later. The exercise price of the warrants was $20.00 per share. The warrants were valued at a value of $108,854 utilizing the Black-Scholes method. The warrants were converted into shares of common stock for issuance in 2008. These shares have not been issued as of June 30, 2010. At June 30, 2010, there are no warrants outstanding.

The value of the warrants has been determined using the Black-Scholes pricing model using the following assumptions:



Expected term (in years)	5 years
Expected stock volatility	100%
Expected stock dividend yield	0%
Risk-free interest rate	3%
Fair value per warrant	$6.60
Number of warrants	16,500
Value of warrants	$108,854
Relative value of warrants	$82,158

The warrant agreements contained no clauses regarding adjustments to exercise price, net settlement provisions, and registration rights or liquidated damages clauses. The entire $82,158 was reflected as a discount on the notes and was amortized completely in 2007 and included as interest expense.

F-18

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Options

The Company had granted 20,000 options to a consultant in May 2009 for her work related to Proteoderm products. Of the 20,000 options, 10,000 were exercisable immediately with the remaining 10,000 exercisable upon completion of the consultant’s engagement. The options are to expire in five years.

The exercise price of the options is $2.50 per share. The options were valued utilizing the Black-Scholes method and have a put option value of $1.5395, calculated based on an expected term of 5 years, expected stock volatility of 100%, expected stock dividend yield of 0%, and risk-free interest rate of 3%. The value of the 10,000 options that are expensed in May 2009 is $15,395.

The Company had granted 15,000 options to a consultant in April 2010 for his work related to Proteoderm products. Of the 15,000 options, 5,000 were exercisable immediately with an additional 5,000 exercisable upon completion of certain requirements under the terms of the contract and the remaining 5,000 exercisable upon completion of the consultant’s engagement. The options are to expire in five years.

The exercise price of the options is $3.50 per share. The options were valued utilizing the Black-Scholes method and have a put option value of $2.6987, calculated based on an expected term of 5 years, expected stock volatility of 180.50%, expected stock dividend yield of 0%, and risk-free interest rate of 1.75%. The value of the 5,000 options that are expensed in April, 2010 is $13,494.

The Company had granted 1,000,000 options to its President, Michael Cohen, on April 26, 2010 exercisable immediately. The options are to expire in five years. These were issued pursuant to a license agreement for Stromal Cell.

The exercise price of the options is $3.55 per share. The options were valued utilizing the Black-Scholes method and have a put option value of $3.4019, calculated based on an expected term of 5 years, expected stock volatility of 180.5%, expected stock dividend yield of 0%, and risk-free interest rate of 1.75%. The value of the 1,000,000 options that are capitalized as license on the condensed consolidated balance sheet at June 30, 2010 is $3,401,891.

The Company had granted 75,000 options to a U.S. based investor relations firm on June 1, 2010 exercisable ratably over 12 months commencing July 1, 2010. The options are to expire in five years. If Proteonomix cancels the contract after a three month trial period, then the maximum amount of options exercisable is 18,750. No stock based compensation has been recognized on this option agreement as of June 30, 2010.

The Company had granted 100,000 options to a European investor relations firm on June 15, 2010 exercisable ratably over 12 months commencing July 15, 2010. The options are to expire in June 2011. No stock based compensation has been recognized on this option agreement as of June 30, 2010.

F-19

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

Options


June 30, 2010
Stock Options	Number	Exercise Price (1)	Relative Value (2)	Fair Value	Term
Outstanding at Beginning of the Year (3)	20,000	$2.50	$15,395	$50,000	5 Years
Options Granted in First Quarter	0
Options Granted in Second Quarter
Kishore Ahuja, M.D. (4)	15,000	$3.50	$13,494	$52,500	5 Years
Michael Cohen, President (5)	1,000,000	$3.55	$3,401,891	$3,550,000	5 Years
Wolfe, Axelrod & Weinberger (6)	75,000	$5.00	0	$375,000	5 Years
Logoform AG (7)	100,000	$5.00	0	$500,000	1 Year
Options Outstanding at the End of the Period	1,210,000

(1) The exercise price is based on the Fair Market Value of the common stock at date of grant.

(2) Relative value is based on the Black-Scholes method.

(3) 20,000 options were granted in May 2009 at $2.50 per share.

(4) 15,000 options were granted on April 1, 2010 at $3.50 per share. 10,000 options will be exercisable upon the completion of certain requirements of the contract, and 5,000 are exercisable as of April 2010.

(5) Michael Cohen, the President of Proteonomix was granted 1,000,000 options on April, 26, 2010 at $3.55 per share.

(6) 75,000 options were issued on June 1, 2010 at $5.00 per share. These are vested equally over a 12 month period starting July 1, 2010 and can be cancelled after a 90 day period except for 18,750 shares, which cannot be cancelled.

(7) 100,000 options were issued on June 15, 2010 @ $5.00 per share vested equally over 12 months beginning July 2010.

NOTE 10 -

PROVISION FOR INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return.

Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. At June 30, 2010, deferred tax assets consist of the following:

Net operating losses

$ 5,986,403

Valuation allowance

(5,986,403)

$ -

F-20

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 10 -

PROVISION FOR INCOME TAXES (CONTINUED)

At June 30, 2010, the Company had a net operating loss carry-forward in the amount of $17,607,069 available to offset future taxable income through 2030. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods. A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended June 30, 2010 and 2009 is summarized as follows:

June 30, 2010 June 30, 2009

Federal statutory rate

(34.0%)

State income taxes, net of federal benefits

3.3

Valuation allowance

30.7

NOTE 11 -

FAIR VALUE MEASUREMENTS

On January 1, 2008, the Company adopted ASC 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs: Quoted prices for identical instruments in active markets.

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs: Instruments with primarily unobservable value drivers.

The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010:


	Level 1	Level 2	Level 3	Total

Cash	3,960	-	-	3,960

Total assets	3,960	-	-	3,960

F-21

PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 12 - SEGMENT INFORMATION

The Company operates and the chief decision maker for the Company segregates the operations into five separate distinct reporting segments. These segments are the sperm bank division, the stem-cell division, and includes the minimal operating expenses of Proteoderm, the skin care products division, PRTMI and StromaCel.

Operating segment data for the six months ended June 30, 2010 is as follows:


	Stem-Cell	Proteoderm	Sperm Bank	PRTMI & PRTMI RD(1)	StromaCel	Total
Sales	$ -	$ -	$47,325	$ -	$ -	$47,325
Cost of sales	$ -	$ -	$2,112	$ -	$ -	$2,112
Gross profit	$ -	$ -	$45,213	$ -	$ -	$45,213
Operating expenses	$1,671,899	$18,188	$35,285	$2,100	$844	$1,728,316
Depreciation and amortization	$6,952	$ -	$ -	$ -	$ -	$6,952
Other income (expense)	($19,026)	$ -	$ -	$ -	$ -	($19,026)
Net income (loss)	($1,697,877)	(18,188)	$9,928	($2,100)	($844)	($1,709,081)
Segment assets	$71,862	($737)	$227,518	$2,900	$3,401,891	$3,703,434
Fixed Assets, net of depreciation	$36,503	$ -	$ -	$ -	$ -	$36,503

(1)

PRTMI RD is a wholly-owned subsidiary of PRTMI.

For the six months ended June 30, 2009



	Stem-Cell	Sperm Bank	Total
Sales	$ -	$55,125	$55,125
Cost of sales	$ -	$3,552	$3,552
Gross profit	$ -	$51,573	$51,573
Operating expenses	$1,742,358	$46,576	$1,788,934
Depreciation and amortization	$6,952	$ -	$6,952
Other income (expense)	($16,750)	$ -	($16,750)
Net income (loss)	($1,766,060)	$4,997	($1,761,063)

Segment assets	$105,073	$371,236	$476,939
Fixed Assets, net of depreciation	$45,652	$ -	$45,652

NOTE 13 – SUBSEQUENT EVENTS

On July 30, 2010, the Company failed to make a payment pursuant to a Settlement Agreement with Johns Hopkins University ("JHU"). The Company owed JHU the sum of $190,000. JHU has stated its intention to reduce the default amount of $190,000 to judgment. However, JHU has also agreed to wait until September 1, 2010 to proceed with collection efforts on the judgment. Further, JHU will accept installment payments totaling $190,000 if the Company pays $70,000 to JHU via wire transfer before the end of the day on August 3, 2010, and pays the balance of the $190,000 debt before September 1, 2010. However, JHU expressly did not waive any right to which it is entitled under the Settlement Agreement.

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PROTEONOMIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009 (UNAUDITED)

NOTE 13 – SUBSEQUENT EVENTS (CONTINUED)

On August 6, 2010 the Company formed a new subsidiary X Gen Medical LLC, a Nevis Virgin island entity. X Gen Medical has been established with the intention of conducting business in the global medical marketplace. Proteonomix plans on utilizing X Gen Medical to serve as a platform for joint ventures with medical facilities worldwide. It is anticipated that new relationships formed with X Gen Medical will create medical facilities capable of not just attracting treatments locally, but also acting as hubs for medical tourism. Medical tourism is constantly on the rise and anticipated to continue to grow substantially due to current high costs of health care for certain procedures and improvements in both technology and standards of care in many countries. The establishment of a separate subsidiary, X Gen Medical LLC., is essential in order to allow Proteonomix to properly enter global markets with the intention of soliciting business through our proprietary PRTMI model. We anticipate closing on some of these negotiations in the near future, which we anticipate will include the necessary funding required to firmly establish X Gen Medical as a PRTMI provider.

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