CONSULTING AGREEMENT

Exhibit 10.4

CONSULTING AGREEMENT

     This Consulting Agreement (this “ Agreement ”) is made as of October 2, 2007 by and between NovaRay, Inc. (the “ Company ”) and Fountainhead Capital Partners Limited (“ Consultant ”) (each a “ Party ” and collectively referred to hereafter as the “ Parties ”).

WITNESSETH :

     WHEREAS, the Company and Consultant previously entered into a letter of interest agreement dated April 27, 2006 (the “ LOI Agreement ”), pursuant to which Consultant agreed to provide certain services to the Company.

     WHEREAS, the Company and Consultant wish to terminate the LOI Agreement and replace it with this Agreement.

     WHEREAS, the Company is desirous of completing a “reverse merger” transaction whereby a public shell company to be identified (“ PubCo ”) will acquire by merger the business of the Company (the “ Reverse Merger ”), and, concurrently therewith, a financing with aggregate proceeds to the Company or its successors of not less than $12,000,000 (the “ Financing ,” and with the Reverse Merger, collectively the “ Proposed Transaction ”).

     WHEREAS, Consultant has substantial expertise and experience in the area of “reverse mergers” and related transactions.

     WHEREAS, to further facilitate pursuing the Proposed Transaction, the Company desires to engage Consultant to serve as a consultant to provide advice related to the Proposed Transaction on the terms and for the services specified in this Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree in good faith as follows:

     1.  Services . The services which Consultant shall provide under this Agreement shall include the following (collectively, the “ Services ”):

          (a) Consultant will work with the Company to identify the PubCo for the Reverse Merger;

          (b) Consultant will assist the Company in negotiating the terms of the Reverse Merger;

          (c) Consultant will assist the Company in identifying potential investors which might have an interest in participating in the Financing; and

          (d) Consultant will assist the Company in negotiating the terms of the Financing.

     2.  Restrictions . In connection with its provision of the Services, the Consultant agrees that:

          (a) the Consultant shall not engage in any general solicitation, general advertising or other activity that would jeopardize the availability of the exemption from registration under the Securities Act of 1933, as amended, pursuant to Regulation D promulgated thereunder and the qualification or registration requirements of any applicable state or foreign securities or blue sky laws or regulations;

          (b) the Company shall determine, in its sole and absolute discretion, when it will consummate the Reverse Merger with PubCo, which investors shall participate in the Financing; the price, amount and terms of the securities to be sold in the Financing; the allocation of securities among investors in the Financing; and whether or not to consummate the Proposed Transaction; and

          (c) the Company shall have no authority to make offers to sell the Company’s securities, make any representations or warranties on the Company’s behalf or bind the Company in any way.

     3.  Termination of LOI Agreement . The LOI Agreement is terminated and replaced by this Agreement. No sections of the LOI Agreement shall survive the termination of the LOI Agreement and no sections of the LOI Agreement shall be of any further force or effect.

     4.  Term and Termination; Survival .

          (a) The term of this engagement shall be for a period commencing with the date of this Agreement and terminating on the earlier of (i) the closing date of the Financing or (ii) December 31, 2007. The term may only be extended upon the mutual written agreement of the Parties.

          (b) Section 6 (Taxes), Section 7 (Independent Contractor), Section 8 (Indemnification), Section 9 (Nonsolicitation), and Section 10 (Confidentiality) will survive termination of this Agreement.

     5.  Fees . In connection with the Services described above, the Company shall pay to Consultant the following compensation (referred to herein as the “ Consulting Fees ”):

          (a) if the Proposed Transaction is consummated, (i) a cash fee in the amount of $600,000, payable at closing of the Financing; (ii) 463,697 shares (the “ Consultant Shares ”) of the Company’s common stock (the “ Common Stock ”); and (iii) warrant to purchase 200,000 shares of Common Stock at a price of $12.75 per share exercisable in whole or in part over a period of five years from the date of issuance (the “ Consultant Warrants ” and with the Consultant Shares, the “ Consultant Securities ”). The Company will issue the Consultant Securities to Consultant pursuant to securities purchase agreements in a form reasonably acceptable to the Company and Consultant immediately prior to the Reverse Merger; provided, however, that such agreements shall provide that the Company shall have the right to redeem all of the Consultant Securities at a redemption price equal to $0.001 per share in the event that the Proposed Transaction is not consummated prior to the termination of this Agreement. The

exercise price of the Consultant Warrants assumes a conversion price for the convertible debentures to be issued to new investors in the Financing of $2.00. The exercise price will be adjusted accordingly if the conversion price is other than $2.00; and

          (b) if the Financing is consummated but the Reverse Merger is not consummated, (a) a cash fee payable at closing of the Financing in the amount of 10% of the aggregate purchase price paid by the purchasers in the Financing that the Consultant first introduced to the Company, and (b) a warrant to purchase that number of shares of Common Stock (or such other security sold in the Financing) equal to 10% of the aggregate number of shares of Common Stock or such other security sold in the Financing (the “ Financing Warrants ”). The Financing Warrants shall have an exercise price per share equal to the price per share paid by the investors in the Financing and an exercise period of five years. Notwithstanding the foregoing, if, at any time during the 24-month period following consummation of the Financing the Company elects to pursue a Reverse Merger, the Consultant shall have the right to act as an adviser to the Company to identify a prospective public shell company for such transaction on such terms and conditions as shall be negotiated by the Parties in good faith.

     6.  Taxes . Consultant is ultimately liable and responsible for all taxes owed by the Consultant in connection with the Consulting Fees, regardless of any action the Company or its successors takes with respect to any tax withholding or reporting obligations that arise in connection with the Consulting Fees. Neither the Company nor it successors makes any representation or undertaking regarding the tax treatment of the Consulting Fees or tax treatment of the issuance, exercise or subsequent sale of the Consultant Securities or the Financing Warrants. The Company and its successors do not commit and are under no obligation to structure the Consulting Fees to reduce or eliminate any of Consultant’s tax liability.

     7.  Independent Contractor. It is the express intention of the Company and Consultant that Consultant perform the Services as an independent contractor to the Company. Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company. Without limiting the generality of the foregoing, Consultant is not authorized to bind the Company to any liability or obligation or to represent that Consultant has any such authority. Consultant agrees that it will be responsible for all expenses it incurs in providing the Services pursuant to the terms of this Agreement.

     8.  Indemnification . Consultant agrees to indemnify and hold harmless the Company and its directors, officers and employees from and against all taxes, losses, damages, liabilities, costs and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with (i) any reckless or intentionally wrongful act of Consultant or Consultant’s assistants, employees or agents, (ii) a determination by a court or agency that the Consultant is not an independent contractor, (iii) any breach by the Consultant or Consultant’s assistants, employees or agents of any of the covenants contained in this Agreement, (iv) any failure of Consultant to perform the Services in accordance with all applicable laws, rules and regulations, or (v) any violation or claimed violation of a third party’s rights resulting in whole or in part fr