**Back
          to Table of Contents**





**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**




QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE
              SECURITIES
                EXCHANGE ACT OF 1934For
                the Quarterly Period Ended: June 30, 2006Commission
                file number: 0-26013**AURIGA
                LABORATORIES, INC.**(Exact
                name of small business issueras
                specified in itscharter)Delaware
            84-1334687(State
                or other jurisdictionof
                incorporation or organization)
            (IRS
                Employer Identification No.)5555
                Triangle Parkway, Suite 300 Norcross, GA 30092(Address
                of principal executive offices)(678)
                282-1600(Issuer’
                s telephone number)Check
                whether the issuer (1) filed all reports required to be filed by
                Section
                13 or 15(d) of the Exchange Act during the past12
                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.YesýNo ̈
              
              Indicate
                by check mark whether the registrant is a shell company (as defined
                in
                Rule 12b-2 of the Exchange Act).Yes ̈NoýAs
                of August 7, 2006, there were 35,482,768 shares of common stock
                outstanding.Transitional
                Small Business Disclosure Format (Check one):Yes ̈Noý







**Back
        to Table of Contents**





**TABLE
      OF CONTENTS**




**PAGE**PART
                I.
                FINANCIAL INFORMATIONItem
                1. Financial Statements
            3Consolidated
                Balance Sheets, June 30, 2006 (unaudited) and March 31,
                2006
            3Consolidated
                Statements of Operations for the three months ended June 30, 2006
                and for
                the period from inception (April 12, 2005) to June 30, 2005
                (unaudited)
            4Consolidated
                Statements of Cash Flows for the three months ended June 30, 2006
                and for
                the period from inception (April 12, 2005) to June 30, 2005
                (unaudited)
            5Notes
                to Consolidated Financial Statements (unaudited)
            6Item
                2. Management’s Discussion and Analysis or Plan of
                Operations
            13Item
                3. Controls and Procedures
            18PART
                II. OTHER INFORMATIONItem
                6. Exhibits
            19Signatures
            20CertificationsExhibit
                31.1
            21Exhibit
                32.1
            22




-2-
 **Back
          to Table of Contents**





**PART
      I**




**FINANCIAL
      INFORMATION**




**Item
                1.**
            **Financial
                Statements**




**AURIGA
                LABORATORIES, INC. AND SUBSIDIARIES****(F/K/A
                MULTI-LINK TELECOMMUNICATIONS, INC.)****CONSOLIDATED
                BALANCE
                SHEETS**




**ASSETS**
            
            JUNE
                30, 2006
            
            MARCH
                31, 2006(unaudited)CURRENT
              ASSETSCash
                and cash equivalents
            
            $
            566,049
            
            $
            504,344Accounts
                receivable, net
            
            
            312,175
            
            
            774,722Inventory
            
            
            200,004
            
            
            214,300Prepaid
                expenses
            
            
            321,276
            
            
            213,899Other
                assets
            
            
            —Total
                Current Assets
            
            
            1,399,504
            
            
            1,707,265PROPERTY
                AND EQUIPMENT, net
            
            
            364,409
            
            
            311,125OTHER
                ASSETSGoodwill
            
            
            92,316
            
            
            92,316Deposits
            
            
            16,775
            
            
            22,724Total
                Other Assets
            
            
            109,091
            
            
            115,040**TOTAL
                ASSETS**
            
            $
            1,873,004
            
            $
            2,133,430**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**CURRENT
                LIABILITIESAccounts
                payable
            
            $
            746,697
            
            $
            504,168Accrued
                expenses
            
            
            1,069,559
            
            
            281,785Bank
                notes payable (See Note 7)
            
            
            296,222
            
            
            234,813Royalties
                payable
            
            
            202,088
            
            
            492,516Related
                party loan, current portion (See Note 7)
            
            
            518,521
            
            
            511,751Deposit
                on stock subscriptions (See Note 8)
            
            
            325,000
            
            
            578,627Total
                Current Liabilities
            
            
            3,158,087
            
            
            2,603,660LONG-TERM
                DEBTRelated
                party loan, less current portion (See Note 7)
            
            
            1,431,731
            
            
            1,414,802Total
                Long-Term Debt
            
            
            1,431,731
            
            
            1,414,802Total
                Liabilities
            
            
            4,589,818
            
            
            4,018,462COMMITMENTS
                AND CONTINGENCIES
            
            
            —
            
            
            —STOCKHOLDERS’
                DEFICITPreferred
                stock, par value 0.001 per share, 10,000,000 sharesauthorized;
                no shares issued and outstanding
            
            
            —
            
            
            —Common
                stock, par value 0.001 per share, 250,000,000 sharesauthorized;
                35,482,768 and 30,044,071 shares issuedand
                outstanding as of June 30, 2006 and March 31,2006,
                respectively
            
            
            4,136,025
            
            
            1,286,521Stock
                subscriptions receivable
            
            
            —
            
            
            (21,500
            )Accumulated
                deficit
            
            
            (6,852,839
            )
            
            (3,150,053
            )Total
                Stockholders’ Deficit
            
            
            (2,716,814
            )
            
            (1,885,032
            )**TOTAL
                LIABILITIES AND****STOCKHOLDERS’
                DEFICIT**
            
            $
            1,873,004
            
            $
            2,133,430


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


-3-
 **Back
          to Table of Contents**


**AURIGA
                LABORATORIES, INC. AND SUBSIDIARIES****(F/K/A
                MULTI-LINK TELECOMMUNICATIONS, INC.)****CONSOLIDATED
                STATEMENTS OF
                OPERATIONS**




THREE
                  MONTHS ENDED
              
              FROM
                  INCEPTION APRIL 12, 2005 TOJUNE
                  30, 2006 (unaudited)
              
              JUNE
                  30, 2005 (unaudited)REVENUESProducts
              
              $
              506,995
              
              $
              —Royalties
                  from related party
              
              
              —
              
              
              21,619Total
                  Revenues
              
              
              506,995
              
              
              21,619COST
                  OF GOODS SOLDMaterials
                  and supplies
              
              
              75,781
              
              
              —Royalties
              
              
              202,147
              
              
              —Distribution
              
              
              52,219
              
              
              —Total
                  Cost of Goods Sold
              
              
              330,147
              
              
              —GROSS
                  PROFIT
              
              
              176,848
              
              
              21,619OPERATING
                  EXPENSESSales,
                  marketing and trade expenses
              
              
              1,543,940
              
              
              45,107General
                  and administrative expenses
              
              
              1,994,090
              
              
              112,769
 Research
                  and development expenses
              
              
              266,860
              
              
              97,018Total
                  Operating Expenses
              
              
              3,804,890
              
              
              254,894OPERATING
                  LOSS
              
              
              (3,628,042
              )
              
              (233,275
              )OTHER
                  (EXPENSES)Interest
                  expense
              
              
              (44,453
              )
              
              (1,625
              )Other
                  expenses-net
              
              
              (30,292
              )
              
              —Total
                  Other (Expenses)
              
              
              (74,745
              )
              
              (1,625
              )NET
                  LOSS
              
              $
              (3,702,787
              )
              $
              (234,900
              )NET
                  LOSS PER COMMON SHARE,BASIC
                  AND DILUTED
              
              $
              (0.11
              )
              $
              (0.01
              )WEIGHTED
                  AVERAGE NUMBER OF COMMONSHARES
                  OUTSTANDING, BASIC AND DILUTED (See Note 4)
              
              
              33,385,592
              
              
              20,560,640






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


-4-
 **Back
          to Table of Contents**


**AURIGA
                LABORATORIES, INC. AND SUBSIDIARIES****(F/K/A
                MULTI-LINK TELECOMMUNICATIONS, INC.)****CONSOLIDATED
                STATEMENTS OF CASH
                FLOWS**




THREE
                MONTHS ENDED
            
            FROM
                INCEPTION APRIL 12, 2005 TOJUNE
                30, 2006
            
            JUNE
                30, 2005(unaudited)
            
            (unaudited)CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (3,702,787
            )
            $
            (234,900
            )Adjustments
                to reconcile net loss to net cashflows
                provided (used) by operating activities:Depreciation
            
            
            27,076
            
            
            —Bad
                debt expense
            
            
            364
            
            
            —Noncash
                compensation expense
            
            
            64,735
            
            
            —Warrants
                issued for services
            
            
            1,056,720
            
            
            —Amortization
                of note payable discount
            
            
            34,171
            
            
            —Changes
                in assets and liabilities:Receivables
            
            
            462,183
            
            
            40,569Inventory
            
            
            14,296
            
            
            —Prepaid
                expenses
            
            
            (107,377
            )
            
            (136,220
            )Deposits
            
            
            5,949
            
            
            (30,624
            )Accounts
                payable
            
            
            242,529
            
            
            —Accrued
                expenses
            
            
            777,303
            
            
            104,851Royalties
                payable
            
            
            (290,428
            )
            
            —Net
                cash used by operating activities
            
            
            (1,415,266
            )
            
            (256,324
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of fixed assets
            
            
            (80,360
            )
            
            (58,500
            )Net
                cash used by investing activities
            
            
            (80,360
            )
            
            (58,500
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                proceeds from stock sales
            
            
            1,149,422
            
            
            —Proceeds
                from stock subscriptions receivable
            
            
            21,500
            
            
            —Proceeds
                from bank notes payable
            
            
            305,774
            
            
            —Payments
                of bank notes payable
            
            
            (244,365
            )
            
            —Proceeds
                from deposits on stock subscriptions
            
            
            325,000
            
            
            738,829Net
                cash provided by financing activities
            
            
            1,557,331
            
            
            738,829Net
                increase in cash
            
            
            61,705
            
            
            424,005Cash,
                beginning of period
            
            
            504,344
            
            
            —Cash,
                end of period
            
            $
            566,049
            
            $
            424,005SUPPLEMENTAL
                CASH FLOW DISCLOSURES:Interest
                paid
            
            $
            10,283
            
            $
            —NON-CASH
                INVESTING AND FINANCING:Assets
                purchased by acquisition/reorganization:Receivables
            
            $
            —
            
            $
            69,015Goodwill
            
            
            —
            
            
            92,316Liabilities
                assumed by acquisition:Accounts
                payable and accrued expenses
            
            
            —
            
            
            59,947Related
                party loan
            
            
            —
            
            
            100,000


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


-5-
 **Back
          to Table of Contents**




**AURIGA
      LABORATORIES, INC.**


**(F/K/A
      MULTI-LINK TELECOMMUNICATIONS, INC.)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2006**


**(Unaudited)**







**NOTE
      1 - BASIS OF PRESENTATION**




The
      interim consolidated financial statements have been prepared from the records
      of
      Auriga Laboratories, Inc., a Delaware corporation (the “Company”) without audit.
      In the opinion of management, all adjustments, which consist of only normal
      recurring adjustments, to present fairly the financial position at June 30,
      2006
      and the results of operations and cash flows for the three months ended
      June 30, 2006 and for the period April 12, 2005 (date of inception) to June
      30, 2005, have been made. The interim consolidated financial statements should
      be read in conjunction with the audited financial statements and notes thereto
      for the period from April 12, 2005 to March 31, 2006 contained in the Company’s
      current report on Form 8-K (the “Merger 8-K”) filed by the Company on May 18,
      2006 with the Securities and Exchange Commission (“SEC”). The results of
      operations for the three months ended June 30, 2006 are not necessarily
      indicative of the results to be expected for any other interim period or for
      the
      full fiscal year.




**NOTE
      2 - REVERSE MERGER**




On
      May
      17, 2006, Auriga Laboratories, Inc., a privately held Delaware corporation
      (“Auriga”) completed a merger (the “Merger”) with Multi-Link Telecommunications,
      Inc., a Colorado corporation and a “shell” company (“Multi-Link”). The Merger
      was effected pursuant to the terms of an Agreement and Plan of Merger (“Merger
      Agreement”), entered into on May 4, 2006, by and among Auriga, Multi-Link, and
      Multi-Link Acquisition, Inc., a newly formed Delaware corporation and
      wholly-owned subsidiary of Multi-Link (the “Subsidiary”). Pursuant to the terms
      of the Merger Agreement, the Subsidiary was merged with and into Auriga, with
      Auriga as the surviving entity. Auriga continued its business under the name
      of
      Auriga Laboratories, Inc. as a subsidiary of Multi-Link. All references to
      Multi-Link Telecommunications, Inc. or the Company also refer to Auriga
      Laboratories, Inc., unless the context indicates otherwise.




Pursuant
      to the terms of the Merger, Multi-Link acquired all of the outstanding shares
      of
      Common Stock of Auriga (“Auriga Common Stock”) in exchange for shares of Series
      A Convertible Preferred Stock, par value $0.01 per share of Multi-Link
      (“Preferred Stock”). At the closing of the Merger (the “Closing”), each
      outstanding share of Auriga Common Stock held by the stockholders of Auriga
      (the
“Auriga Stockholders”) was converted into the right to receive approximately
      0.06 shares of Preferred Stock or a total of 1,000,042 shares of Preferred
      Stock, and each outstanding option and warrant to purchase shares of Auriga
      Common Stock was assumed by Multi-Link and converted into an option or warrant
      to purchase approximately 30.01 shares of Multi-Link’s Common Stock for each one
      share of Auriga’s Common Stock such option or warrant was convertible into (with
      the exercise price being adjusted accordingly).




Pursuant
      to the terms of the Preferred Stock, each share of Preferred Stock was
      convertible into approximately 494.96 shares of Multi-Link’s Common Stock.
      Accordingly, immediately following the Closing, the Auriga Stockholders owned
      1,000,042 shares of Preferred Stock (convertible into a total of 494,977,491
      shares of Multi-Link’s Common Stock). The 37,215,913 shares of Multi-Link’s
      Common Stock outstanding prior to the Merger remained outstanding following
      the
      Merger. As of the Closing, and assuming conversion in full of the Preferred
      Stock, the Auriga Stockholders owned approximately 93% of the total outstanding
      shares of Multi-Link’s Common Stock (or 95%, assuming exercise in full of the
      outstanding Auriga options and warrants that were assumed by Multi-Link in
      connection with the Merger), and the remaining stockholders of Multi-Link owned
      approximately 7% of the total outstanding shares of Multi-Link’s Common Stock,
      (or 5%, assuming exercise in full of the outstanding Auriga options and warrants
      that were assumed by Multi-Link in connection with the Merger).


-6-
 **Back
          to Table of Contents**


Pursuant
      to the terms of the Preferred Stock, the Preferred Stock was subject to
      automatic conversion into shares of Multi-Link’s Common Stock (the “Mandatory
      Conversion”) upon the approval by a majority of the holders of Multi-Link’s
      Common Stock and Preferred Stock (voting together on an
      as-converted-to-common-stock basis) of a 1-for-15 reverse stock split of
      Multi-Link’s outstanding Common Stock (the “Reverse Split”). Giving effect to
      the Mandatory Conversion and Reverse Split, the Company would have had
      35,482,768 shares of Common Stock outstanding as of June 30, 2006.




As
      described in Note 14, on July 11, 2006, the Reverse Split was
      effectuated, resulting in the Mandatory Conversion. Immediately following the
      foregoing, Multi-Link was re-domiciled in the State of Delaware, its name was
      changed to “Auriga Laboratories, Inc.” and its authorized shares of Common Stock
      and Preferred Stock were changed to 250 million shares and 10 million shares,
      respectively. Unless the context indicates otherwise, all share and other
      information in this Report has been restated to give effect to the Merger,
      the
      Reverse Split, the Mandatory Conversion, the change in the Company’s authorized
      shares and the Company’s re-domicile to the State of Delaware.




Due
      to
      the change in control of Multi-Link as a result of the Merger, the Merger was
      accounted for as an acquisition of Multi-Link by Auriga and a recapitalization
      of Auriga. Accordingly, the consolidated financial statements of the Company
      subsequent to the Merger consist of the balance sheets of both companies at
      historical cost, the historical operations of Auriga, and the operations of
      both
      companies from the Merger date of May 17, 2006. At the time of the Merger,
      Multi-Link was a shell company and had no material assets, liabilities or
      operations.




As
      a
      result of the Merger and pursuant to the Merger Agreement, the Company’s fiscal
      year was changed to March 31. Multi-Link had been reporting on a fiscal year
      ending September 30.




The
      foregoing transactions are more fully described in the Merger 8-K.




**NOTE
      3 - GOING CONCERN**




Since
      inception, the Company has incurred significant operating and net losses and
      has
      been unable to meet its cash flow needs with internally generated funds. The
      Company’s cash requirements (primarily working capital requirements and cash for
      product development activities) have been satisfied through borrowings and
      the
      issuance of securities in a number of private placements. At June 30, 2006,
      the
      Company had cash and cash equivalents on hand of approximately $566,000, a
      negative working capital position of $1,758,583 and long-term debt commitments
      of $1,431,731. Although the Company has recently taken action to significantly
      reduce operating losses by reducing operating expenses and headcount, and is
      seeking to reduce its royalty expenses by purchasing certain rights that it
      now
      licenses, any benefits that the Company may realize from the foregoing will
      not
      occur, if at all, until subsequent quarters. The present financial position
      of
      the Company raises substantial doubt about the Company’s ability to continue as
      a going concern. The accompanying consolidated financial statements do not
      include any adjustments that might result from the outcome of this uncertainty.




**NOTE
      4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




This
      summary of significant accounting policies of the Company is presented to assist
      in understanding the Company’s financial statements. The financial statements
      and notes are representations of the Company’s management, which is responsible
      for their integrity and objectivity. These accounting policies conform to
      accounting principles generally accepted in the United States of America, and
      have been consistently applied in the preparation of the financial
      statements.


-7-
 **Back
          to Table of Contents**




Estimates




The
      process of preparing financial statements in conformity with accounting
      principles generally accepted in the United States of America requires the
      use
      of estimates and assumptions regarding certain types of assets, liabilities,
      revenues, and expenses. Such estimates primarily relate to unsettled
      transactions and events as of the date of the financial statements. Accordingly,
      upon settlement, actual results may differ from estimated amounts.




Fair
      Value of Financial Instruments




The
      Company’s financial instruments as defined by Statement of Financial Accounting
      Standards No. 107, “Disclosures about Fair Value of Financial Instruments,”
include cash, receivables, prepaid expenses, payables, accrued expenses,
      royalties payable and short-term borrowings. All instruments are accounted
      for
      on an historical cost basis, which, due to the short maturity of these financial
      instruments, approximates fair value.




Reclassifications




Certain
      reclassifications have been made to the prior year to conform to the current
      presentation.




Cash
      and Cash Equivalents




The
      Company considers all highly liquid investments, with a maturity of three months
      or less at the date of acquisition, to be cash equivalents.




Revenue
      Recognition .




The
      Company recognizes revenue from the sale of pharmaceutical products, including
      shipping fees, if any, when title to the products is transferred to the customer
      (which usually occurs on delivery) and when collectibility is reasonably
      assured. Revenue from sales of the Company’s products is recorded, net of
      allowances. According to the terms of the Company’s sales contracts, a customer
      may only return up to a specified maximum amount of product under certain
      conditions. Sales return allowances for product returns and contractual rebates
      are calculated based upon current economic conditions and the underlying
      contractual terms as product is sold. Royalty revenue is recognized when
      earned.




Accounting
      for Stock Options and Warrants Granted to Employees and
      Non-Employees




In
      December 2004, the Financial Accounting Standards Board issued a revision to
      Statement of Financial Accounting Standards No. 123R, “Accounting for Stock
      Based Compensation.” This statement supercedes APB Opinion No. 25, “Accounting
      for Stock Issued to Employees,” and its related implementation guidance. This
      statement establishes standards for the accounting for transactions in which
      an
      entity exchanges its equity instruments for goods or services. It also addresses
      transactions in which an entity incurs liabilities in exchange for goods or
      services that are based on the fair value of the entity’s equity instruments or
      that may be settled by the issuance of those equity instruments. This statement
      focuses primarily on accounting for transactions in which an entity obtains
      employee services in share-based payment transactions. This statement does
      not
      change the accounting guidance for share based payment transactions with parties
      other than employees provided in Statement of Financial Accounting Standards
      No.
      123. This statement does not address the accounting for employee share ownership
      plans, which are subject to AICPA Statement of Position 93-6, “Employers’
Accounting for Employee Stock Ownership Plans.” The Company expects no changes
      to its financial reporting as a result of the application of the foregoing
      because it is already reporting and complying with the fair value method of
      SFAS
      No. 123.


-8-
 **Back
          to Table of Contents**




Provision
      for Taxes




Income
      taxes are provided based upon the liability method of accounting pursuant to
      Statement of Financial Accounting Standards No. 109, “Accounting for Income
      Taxes” (“SFAS No. 109”). Under this approach, deferred income taxes are recorded
      to reflect the tax consequences in future years of differences between the
      tax
      basis of assets and liabilities and their financial reporting amounts at each
      year-end. A valuation allowance has been recorded against deferred tax assets
      as
      management does not believe the Company has met the “more likely than not”
standard imposed by SFAS No. 109 to allow recognition of such an asset.




Basic
      and Diluted Earnings Per Share




The
      Company has adopted Statement of Financial Accounting Standards Statement No.
      128, “Earnings Per Share”. Basic earnings per share is computed by dividing net
      income (loss) by the weighted average number of common shares outstanding for
      the period. Diluted earnings per share is computed by dividing the net income
      (loss) by the weighted average number of basic shares outstanding increased
      by
      the number of shares that would be outstanding assuming conversion of the
      exercisable stock options and warrants. Diluted net loss per share is the same
      as basic net loss per share as of June 30, 2006 and June 30, 2005 as inclusion
      of the common stock equivalents would be antidilutive. A total of 14,021,995
      and
      850,390 shares of common stock were issuable upon exercise of outstanding
      options and warrants at June 30, 2006 and June 30, 2005,
      respectively.




Recent
      Accounting Pronouncements




There
      have not been any Financial Accounting Standards issued by the Financial
      Accounting Standards Board since preparation of the Company’s audited financial
      statements at March 31, 2006. The most recently adopted standard issued prior
      to
      preparation of such audited financial statements was Statement of Financial
      Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
      amendment of FASB Statement No. 140”, which management believes will have no
      immediate impact on the Company’s financial condition or results of operations.




**NOTE
      5 - ACCOUNTS RECEIVABLE**




Accounts
      receivable as of June 30, 2006 and March 31, 2006 were as follows:





**June
                30,**
              **2006**
            
            **March
                31,**
              **2006**Accounts
                receivable
            
            $
            312,525
            
            $
            774,722Less:
                allowance for doubtful accounts
            
            
            350
            
            
            —Accounts
                receivable-net
            
            $
            312,175
            
            $
            774,722





Bad
      debt
      expense for the three months ended June 30, 2006 and for the period from April
      12, 2005 (inception) to June 30, 2005 was $364 and $0,
      respectively.




**NOTE
      6 - INVENTORY**




Inventory
      as of June 30, 2006 and March 31, 2006 consisted of finished pharmaceutical
      products of $200,004 and $214,300, respectively.




**NOTE
      7 - NOTES PAYABLE**




Bank
      Notes Payable




On
      November 22, 2005, the Company obtained an asset-based line of credit
      (“Facility”) from Silicon Valley Bank (“SVB”) in the amount of $1,000,000. As of
      June 30, 2006 and March 31, 2006, the Company owed


-9-
 **Back
          to Table of Contents**


$233,887
      and $172,519, respectively under the Facility. Advances under the Facility
      were
      subject to finance charges based on an interest rate of 1.5% to 2.00% over
      prime
      and a collateral handling fee with a minimum monthly charge of $2,500 per
      month.




Amounts
      advanced under the Facility were subject to automatic repayment if the loan
      covenants were no longer maintained by the Company. As of June 30, 2006 the
      Company was not in compliance with the loan covenant regarding the required
      quick ratio. As discussed in Note 14, on August 4, 2006 all amounts due on
      the
      Facility were repaid and the Facility was terminated.




The
      Company has a short-term financing facility with Wells Fargo, which as of June
      30, 2006 and March 31, 2006 had outstanding balances of $62,335 and $62,294,
      respectively.




Related
      Party Loan




On
      December 15, 2005, the Company repurchased 1,500,000 shares of its common
      stock held by a resigning director and his affiliates. The purchase price was
      paid in the form of an unsecured subordinated promissory note (“the “Note”). The
      remaining loan principal is payable in annual installment of $600,000, $750,000
      and $750,000 due January 2, 2007, January 2, 2008 and January 2, 2009,
      respectively. As a result of this transaction, the Company recorded imputed
      loan
      interest, “loan discount,” in order to realize a 7.5% effective interest rate.
      The remaining loan discount will be realized as interest expense based upon
      the
      outstanding principal. Interest accrues at a rate equal to 2% per annum on
      the
      unpaid principal amount of the Note. Interest is payable in arrears in cash
      by
      the Company and included with each annual principal installment.




**NOTE
      8 - DEPOSIT ON STOCK SUBSCRIPTIONS**




In
      June
      2006, the Company received subscriptions for the purchase of 325,000 units
      for
      aggregate consideration of $325,000 from three investors. Each unit consisted
      of
      one share of common stock and a warrant to purchase one share of common stock
      at
      an exercise price of $1.25 per share. Because the stock and warrants had not
      been issued as of June 30, 2006, the Company recorded this subscription as
      a
      deposit on stock subscriptions. See Note 14 for additional information.




**NOTE
      9 - CAPITAL STOCK**




Preferred
      Stock




The
      Company is authorized to issue 10,000,000 shares of preferred stock, par value
      $0.001 per share. As of June 30, 2006, there were no shares of preferred stock
      issued or outstanding.




Common
      Stock




The
      Company is authorized to issue 250,000,000 shares of common stock, par value
      $0.001 per share. As of June 30, 2006, there were 35,482,768 shares of common
      stock issued and outstanding.




The
      holders of shares of common stock are entitled to one vote for each
      share.




Private
      Placement




In
      April
      2006, the Company completed a private placement of its common stock to
      accredited investors. Pursuant to this private placement, the Company issued
      approximately 2,957,636 shares of common stock and received gross proceeds
      of
      $2,734,444, of which $578,627 was received as of March 31, 2006. The Company
      incurred $289,550 in costs associated with this private placement. Sorrento
      Financial Group, LLC, an entity owned by the Company’s CEO (“Sorrento”),
      received $250,000 for its financial services in structuring the Private
      Placement described below in Note 9.


-10-
 **Back
          to Table of Contents**




Reverse
      Merger Costs




In
      connection with the Reverse Merger (see Note 2) on May 17, 2006, the Company
      incurred $716,845 in costs which were charged against Common Stock.




Treasury
      Stock




Pursuant
      to the terms of the Merger Agreement, the Company retired all shares of common
      stock held in treasury stock on May 17, 2006.




**NOTE
      10 - STOCK OPTIONS**




Pursuant
      to the terms of the Merger Agreement, the Company assumed each outstanding
      option under the 2005 Stock Option Plan (“2005 Stock Plan”) to purchase shares
      of pre-Merger Auriga Common Stock and each of which option became an option
      to
      purchase approximately 30.01 shares of the Company’s common stock with the
      exercise price being adjusted accordingly.




During
      the three months ended June 30, 2006, stock options granted under the 2005
      Stock
      Plan to purchase approximately 410,188 shares of common stock were issued to
      participants. The options are exercisable any time at prices ranging from $0.50
      to $0.93 per share. The shares issuable upon exercise of the options are subject
      to a repurchase right of the Company in the event the grantee fails to meet
      certain vesting requirements. The options vest 12/48ths after one year of
      continuous service and 1/48th for each month thereafter until fully vested.
      For
      the three months ended June 30, 2006, the average fair value of the options
      issued of $0.21 each was estimated using the Black Scholes Option model. The
      following assumptions were made to value the stock options: risk free interest
      rate between 4.55% and 4.60% ; expected life of 10 years; and expected
      volatility of 39% with no dividends expected to be paid.




During
      the three months ended June 30, 2006, stock options issued under the 2005 Stock
      Plan to purchase approximately 461,211 shares of common stock were forfeited
      as
      a result of employee terminations. As of June 30, 2006, stock options
      outstanding under the 2005 Stock Plan were approximately 5,503,523 of which
      approximately 212,597 were vested.




For
      the
      three months ended June 30, 2006, compensation expense associated with stock
      options that vested during the period was approximately $64,735.




**NOTE
      11 - COMMON STOCK WARRANTS**




Pursuant
      to the terms of the Merger Agreement, the Company assumed each outstanding
      warrant to purchase shares of pre-Merger Auriga Common Stock, each of which
      warrant became a warrant to purchase approximately 30.01 shares of the Company’s
      common stock with the exercise price being adjusted accordingly.




During
      the three months ended June 30, 2006, the Company issued warrants to acquire
      a
      total of up to 3,297,278 shares of common stock to consultants for services.
      As
      of June 30, 2006, 8,518,472 warrants were outstanding.




The
      charge for common stock warrants for the current period using the Black Scholes
      Option model was $1,056,720. The following assumptions were made to value the
      warrants: risk free interest rate between 4.00% and 4.71%, expected lives of
      10
      years; and expected volatility of 39%.


-11-
 **Back
          to Table of Contents**




**NOTE
      12 - RELATED PARTY TRANSACTIONS**




Pursuant
      to an employment agreement dated March 29, 2006, the Company’s CEO earned a
      bonus of $250,000 as a result of the Company becoming publicly
      traded.




During
      the three months ended June 30, 2006, the Company paid royalties to Cornerstone
      BioPharma, Ltd. (“Cornerstone”) associated with the revised license agreement
      whereby the Company is responsible for sales of Extendryl and the Company will
      pay Cornerstone a royalty. The royalty expense for the periods ended June 30,
      2006 and June 30, 2005 amounted to approximately $132,252 and $0, respectively.
      Cornerstone’s CEO is a significant stockholder of the Company




During
      the three months ended June 30, 2005 the Company received royalty income
      associated with the Extendryl licensing agreement of $21,619 from Cornerstone.
      This Extendryl licensing agreement was revised effective August 1, 2005 whereby
      the Company is responsible for the sales of Extendryl and the Company pays
      a
      royalty to Cornerstone.




As
      described in Note 7, the Company repurchased shares of Common Stock held by
      a former director and his affiliates in exchange for the issuance of a note
      to
      such individual.




Sorrento
      Financial Group, LLC, an entity owned by the Company’s CEO (“Sorrento”),
      received $250,000 for its financial services in structuring the Private
      Placement described below in Note 9.




**NOTE
      13 - SIGNIFICANT CUSTOMERS**




During
      the three months ended June 30, 2006, one customer accounted for approximately
      24% and a second customer accounted for approximately 57% of gross sales. No
      other customer accounted for more than 10% of the Company’s sales during the
      quarter.




**NOTE
      14 - SUBSEQUENT EVENTS**




At
      a
      Special Meeting of Stockholders held on July 8, 2006, Multi-Link’s
      stockholders approved (i) the 1-for-15 Reverse Split described in
      Note 2 above, which resulted in the Mandatory Conversion of each share of
      Multi-Link Preferred Stock into approximately 494.9 shares of common stock
      (on a
      pre-split basis), (ii) the reincorporation of the Company from the State of
      Colorado to the State of Delaware and (iii) the 2006 Stock Option Plan. The
      Reverse Split, Mandatory Conversion and reincorporation became effective on
      July 11, 2006.




The
      foregoing transactions are described in more detail in the Company’s Current
      Report on Form 8-K filed with the SEC on July 18, 2006.




Subsequent
      to June 30, 2006, the Company appointed a new chief operating officer and
      secretary of the Company pursuant to the terms of an employment agreement dated
      July 11, 2006 and elected a new director to its board.




On
      July
      20, 2006 the Company announced its new trading symbol of ARGA is on the OTC
      bulletin board (ARGA.OB). Previously the Company’s trading symbol on the OTC
      Bulletin Board was MLNK.




On
      July
      26, 2006 the Company entered into a letter agreement (“Letter Agreement”) with
      Athlon Pharmaceuticals, Inc. (“Athlon”) that sets forth the proposed material
      terms of the Company’s proposed purchase of all of Athlon’s rights to the
      LEVALL® Product Line, which consists of various pharmaceutical products that
      provide relief from coughing, congestion and rhinitis associated with
      respiratory infections such as the common cold, influenza, bronchitis and
      sinusitis. The proposed purchase price consists of $2.5 million cash payable
      at
      closing and $2.5 million of the Company’s common stock, and additional cash
      payments based


-12-
 **Back
          to Table of Contents**




upon
      net
      sales of the LEVALL® Product Line. The Letter Agreement does not constitute a
      definitive agreement. The Letter Agreement provides that the Company and Athlon
      will use their best efforts to execute a definitive agreement by August 15,
      2006
      and close the transactions contemplated in the definitive agreement by August
      31, 2006. There can be no assurance that the Company will be able to raise
      the
      financing necessary to consummate this transaction.




Subsequent
      to June 30, 2006, the Company received $20,000 in stock subscriptions as
      described in Note 8. These stock subscriptions were part of a private placement
      whereby each shareholder received one share of common stock and one warrant
      to
      purchase one share of common stock per dollar of investment. The warrants have
      an exercise price of $1.25 per share.




On
      August
      7, 2006, the Company paid off the outstanding line of credit balance with SVB
      and terminated the Facility with SVB.




On
      August 4, 2006, the Company issued to Sorrento an 8% Senior Secured
      Convertible Note (the “Note”) in the principal amount of $632,000. The Note
      bears interest at the rate of 8% per annum and is due and payable in full on
      May 15, 2007. Accrued interest on the Note is payable monthly in arrears.
      The Company’s Chief Executive Officer, Chief Financial Officer and Chairman of
      the Board, is the beneficial owner of Sorrento. Of the Note’s principal amount
      of $632,000, (i) $400,000 represents funds advanced by Sorrento to the
      Company, and (ii) $232,000 represents an accrued bonus that is owed by the
      Company to its CEO and that our CEO has agreed will henceforth be payable on
      the
      terms and conditions described in the Note. At Sorrento’s option, the note is
      convertible, in whole or in part and at any time after August 4, 2006 and
      prior to the Note’s full repayment, into shares of the Company’s common stock.
      The number of shares that are issuable upon a conversion of the Note will be
      equal to the amount determined by dividing (i) the outstanding principal
      amount of the Note to be converted by (ii) the conversion price of
      $1.388.




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATIONS**




Investors
      should read the following discussion and analysis in conjunction with our
      consolidated financial statements and related notes in this Form 10-QSB and
      our
      Form 8-K filed May 18, 2006, which includes our audited financial statements
      and
      related notes for the period from April12, 2005 (“Inception”) through March 31,
      2006 (under the name of Multi- Link Telecommunications, Inc). This Quarterly
      Report on Form 10-QSB contains forward-looking statements that reflect
      management’s current views and expectations with respect to our business,
      strategies, products, future results and events and financial performance.
      All
      statements other than statements of historical fact, including future results
      of
      operations or financial position, made in this Quarterly Report on Form 10-QSB
      are forward looking. In particular, the words “expect,” “anticipate,”
“estimate”, “desire”, “goal”, “ believe”, “may”, “will”, “should”, “intend”,
“objective”, “seek”, “plan”, “strive”, variations of such words, or similar
      expressions, or the negatives of these words, are intended to identify
      forward-looking statements, but are not the exclusive means of identifying
      such
      statements and their absence does not mean that the statement is not
      forward-looking. Examples of forward-looking statements include statements
      as to
      our estimates for future revenues and cost of revenues, our expectations
      regarding future expenses, including research and development and sales and
      marketing expenses, our estimates regarding the adequacy of our capital
      resources, our capital requirements and our needs for additional financing,
      planned capital expenditures, use of our working capital, sources of revenue
      and
      anticipated revenue, including licenses of intellectual property, technology
      development and service contracts, our business development efforts, future
      acquisitions or investments, the impact of economic and industry conditions
      on
      us and our clients, the anticipated growth of our business, our ability to
      attract clients, expectations regarding competition and the impact of recent
      accounting pronouncements.




The
      forward-looking statements contained in this Report are subject to risks and
      uncertainties, including those discussed below, which could cause actual results
      to differ materially from those projected. These risks and uncertainties
      include, but are not limited to, the concentration of business with large
      clients, the ability to develop new technology and introduce new products,
      competition, fluctuations in general


-13-
 **Back
          to Table of Contents**




economic
      conditions, the risk of product liability claims, and changes in policies by
      governmental authorities and regulatory agencies. For additional factors that
      can affect these forward-looking statements, see the “Risk Factors” section
      within the Merger 8-K. The forward-looking statements contained in this Report
      speak only as of the date hereof. We caution readers not to place undue reliance
      on any such forward-looking statements. We expressly disclaim any obligation
      or
      undertaking to release publicly any updates or revisions to any forward-looking
      statements contained in this Report to reflect any change in management’s
      expectations with regard thereto or any change in events, conditions or
      circumstances on which any such statement is based.




**Overview**




Auriga
      Laboratories, Inc. (“the Company”) is a specialty pharmaceutical company with
      stand-alone sales, marketing, and development capabilities. The Company
      currently markets the Extendryl® family of products through our nationwide sales
      and marketing force in approximately 40 territories, targeting high-prescribing
      allergists, pediatricians, and select primary care physicians. The Company
      has
      an exclusive license to the Extendryl® product line. Currently there are seven
      separate products marketed under the Extendryl® name by the Company. This
      product line is indicated for treatment and relief of cough, cold and allergy
      symptoms. These products offer different combinations of antihistamines,
      expectorants, decongestants, anticholinergics, and anti-tussive that are
      designed to provide symptomatic relief for several patient types in the acute
      respiratory disease area.




The
      Company’s business strategy is to become a fully integrated pharmaceutical
      company by acquiring its own manufacturing and development capabilities. Since
      the launch of its first product line in August 2005, the Company has achieved
      approximately $7.1 million in revenue, comprised of $6.6 million of revenue
      for
      the period from inception through March 31, 2006 and $507,000 for the three
      months ended June 30, 2006. Moving forward, the Company will seek to
      acquire and/or in-license additional products and technologies to further grow
      revenues.




Over
      time, the Company’s strategy is to build three therapeutically focused product
      franchises in the areas of respiratory diseases, gastrointestinal (GI)
      disorders, and the central nervous system (CNS)/pain areas. The conceptual
      framework for this strategy is to initially acquire/license a mature product
      for
      each therapeutic area with brand equity that is no longer the primary focus
      of
      its originator. The Company has already done this in the respiratory space
      with
      its Extendryl® product line, but will also seek to acquire and/or developing a
      GI and CNS/pain product. It is hope that these opportunities will then provide
      the impetus for expansion of the sales force, allowing for additional
      promotional reach and geographic scope. Simultaneously, the Company’s
      development team, through collaboration with the Company’s commercial team,
      plans to identify and develop new products as well as enhance existing products
      with proprietary technologies in order to introduce additional products for
      each
      therapeutic division. In addition, the Company intends to file for regulatory
      approval for these newly developed products (and enhanced existing products)
      in
      order to achieve both regulatory and intellectual property (IP) exclusivity
      in
      the market.




Ultimately,
      as these therapeutic divisions expand and mature in the marketplace, the Company
      hopes to realize synergies between divisions and to be able to “cross-promote”
each division’s products in an effort to enhance product launches, intensify
      promotion during seasonal peaks and react to competitive pressures, among other
      things.




**Critical
      Accounting Policies and Estimates**




There
      have been no material changes to our critical accounting policies and estimates
      since the end of our 2006 fiscal year. For detailed information on our critical
      accounting policies and estimates, see our financial statements and notes
      thereto included in this Quarterly Report and the audited financial statements
      as of and for the period from April 12, 2005 (inception) to March 31, 2006,
      included in the May 18, 2006 8-K filing.


-14-
 **Back
          to Table of Contents**


The
      following discussion and analysis of our financial condition and results of
      operations is based upon our consolidated financial statements, which have
      been
      prepared in accordance with the standards of the Public Company Accounting
      Oversight Board (United States). The preparation of these financial statements
      requires us to make estimates and judgments that affect the reported amounts
      of
      assets, liabilities, revenues and expenses, and related disclosure of contingent
      assets and liabilities. On an on-going basis we evaluate our estimates
      including, among others, those affecting revenues, the allowance for doubtful
      accounts, and the useful lives of tangible and intangible assets. The discussion
      below is intended to be a brief discussion of some of the judgments and
      uncertainties that can impact the application of these policies and the specific
      dollar amounts reported on our financial statements. We base our estimates
      on
      historical experience and on various other assumptions that we believe to be
      reasonable under the circumstances, the results of which form our basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions, or if management made
      different judgments or utilized different estimates. Many of our estimates
      or
      judgments are based on anticipated future events or performance, and as such
      are
      forward-looking in nature, and are subject to many risks and uncertainties,
      including those discussed below and elsewhere in this Quarterly Report. We
      do
      not undertake any obligation to update or revise this discussion to reflect
      any
      future events or circumstances.




We
      have
      identified below some of our accounting policies that we consider critical
      to
      our business operations and the understanding of our results of operations.
      This
      is neither a complete list of all of our accounting policies, nor does it
      include all the details surrounding the accounting policies we have identified.
      There are other accounting policies that are significant to our company. For
      a
      more detailed discussion on the application of these and our other accounting
      policies, see “Note 4 to the Consolidated Financial Statements” included in this
      Report and “Note 2 to Consolidated Financial Statements” included in the May 18,
      2006 8-K filing.




*Revenue
      Recognition*




The
      Company recognizes revenue from the sale of pharmaceutical products, including
      shipping fees, if any, when title to the products is transferred to the customer
      (which usually occurs on delivery) and when collectibility is reasonably
      assured. Revenue from sales of the Company’s products is recorded, net of
      allowances. According to the terms of sales contracts, a customer may only
      return up to a specified maximum amount of product under certain conditions.
      Sales return allowances for product returns and contractual rebates are
      calculated based upon current economic conditions and the underlying contractual
      terms as product is sold. Royalty revenue is recognized when
      earned.




*Operating
      Expenses*




We
      have
      segregated our recurring operating expenses among four categories: cost of
      goods
      sold, including royalties; sales, marketing, and trade expenses; general and
      administrative expenses; and research and development. Cost of goods sold
      include the direct costs associated with materials and supplies, royalties,
      and
      distribution. Sales, marketing, and trade expenses include salaries for sales
      and marketing staff, advertising and promotional expenses, samples used by
      the
      sales force, market research and travel expenses. General and administrative
      expenses includes salaries and benefits for the executives, business
      development, human resources, finance, and information technology staffs and
      general operating expenses. General operating expenses includes overall
      corporate expenses, such as rent, supplies, and corporate financial promotion
      activities. Research and development expenses includes research into development
      of proprietary patents, development of applications for rapid-dissolve
      technology, partnerships with third parties in developing proprietary drug
      delivery technologies, and development of line extensions to the existing
      Extendryl® line. These expenses also include salaries and benefits, legal fees
      for patent reviews, and scientific advisory board stipends.


-15-
 **Back
          to Table of Contents**




**Results
      of Operations for the Three-Month Period Ended June 30, 2006 and for April
      12,
      2005 (Date of Inception) through June 30, 2005**




Net
      Revenue .
      Net
      revenue increased to $507,000 for the three months ended June 30, 2006 compared
      to $22,000 for the period from inception through June 30, 2005. The Company
      began operations in April, 2005 and at the end of June, 2005 had five employees,
      two being in sales functions. In comparison, during the first quarter of 2006,
      the Company operated with a sales force of 40 persons. No significant sales
      existed in the prior fiscal year until the three-month period ended September
      30, 2005.




Cost
      of Goods Sold, including Royalties .
      Cost of
      goods for the three months ended June 30, 2006 was $330,000 compared to $0
      for
      the period from inception through June 30, 2005. This increase in cost of goods
      sold expenses was a result of the increase in revenues for the three months
      ended June 30, 2006. No cost of goods sold expenses were incurred for the period
      from inception through June 30, 2005 as there were no sales during this
      period.




Sales,
      Marketing, and Trade Expenses .
      Sales,
      marketing, and trade expenses for the three months ended June 30, 2006 increased
      $1.45 million to $1.5 million compared with $45,000 for the period from
      inception through June 30, 2005. There were only nominal salary expenses for
      a
      start-up sales staff for the period from inception through June 30, 2005. The
      increase in sales, marketing, and trade expenses in comparing the two periods
      was due primarily to the addition of 40 sales representatives and significant
      increases in market research and overall sales and marketing activities,
      including advertising, sample distribution, and promotion. Salary and benefit
      expenses for the quarter ended June 30, 2006 were $782,000 or 51% of overall
      sales, marketing, and trade expense while marketing activities were $453,000
      or
      29% of overall sales and marketing expenses.




During
      the current quarter, management performed an internal review of overall
      operations, particularly in the sales and marketing area, and determined there
      were expenses that needed to be reduced. As a result of this review, effective
      June 30, 2006, the Company reduced its sales force to a core group of top
      performers. This reduction is expected to considerably reduce salary and benefit
      expenses as well as related auto and travel expenses. The Company expects
      overall sales and marketing savings of $650,000 to $675,000 in the second fiscal
      quarter based on its existing product lines as a result of the reduction in
      salaried staff and other cost savings measures. In July 2006, the Company
      announced its initiative to add to its sales force with experienced
      commission-only sales representatives. The Company plans for this sales force
      to
      grow to as many as 100 representatives in the future, while maintaining a
      significantly reduced sales and marketing cost structure.




General
      and Administrative Expense .
      General
      and administrative expenses increased $1.88 million to $1.99 million for the
      three months ended June 30, 2006, compared to $113,000 for the period from
      inception through June 30, 2005. Of the $1.99 million expense in the current
      quarter, $1.1 million of this or 56% was related to noncash expenses in the
      form
      of stock warrants issued to Company vendors for services rendered or to be
      rendered in the future and noncash compensation expense associated with vested
      stock options. The balance of the increase was due primarily to salary and
      benefit expenses for the executive, finance, information technology, human
      resources, and administrative staff that did not exist during the period from
      inception through June 30, 2005. These salary and benefit costs comprised
      $244,000 or 12% of overall G&A costs. Travel, consulting, and legal fees
      associated with the Company becoming publicly traded as a result of the
      May 17, 2006 Merger and expenses related to the initial proxy filing in
      preparation for the special July 8, 2006 stockholders meeting resulted in higher
      than normal general and administrative costs. These expenses were $360,000
      for
      the current quarter or 18% of general and administrative expenses. Expenses
      for
      these cost categories were unusually high due to the non-recurring activities
      in
      May and June, 2006 mentioned above. Overall general and administrative costs
      in
      this area were also reviewed internally and as a result staff reductions and
      cost control measures were implemented. Results of these measures to reduce
      costs are expected to be realized beginning in the next fiscal
      quarter.


-16-
 **Back
          to Table of Contents**




Research
      and Development Expense .
      Research and development expenses increased $170,000 or 275%, to $267,000 for
      the three months ended June 30, 2006, compared to $97,000 for the period from
      inception through June 30, 2005. This increase was primarily related to staff
      additions and the Company’s increased investment in development projects. The
      Company expects expenses in this area to continue to increase in the future,
      as
      we develop new products designed to significantly increase our market share
      in
      our targeted market areas. The internal review of Company expenditures did
      not
      result in any significant reduction in research and development activity and
      we
      expect expenditures in this area to continue to increase as further new products
      are brought online.




Interest
      expense .
      Interest expense was $44,000 for the three months ended June 30, 2006 compared
      to $1,600 for the period from inception through June 30, 2005. The interest
      expense is primarily related to the note payable due to a related party and
      the
      interest incurred in financing accounts receivables with the Company’s
      bank.




**Liquidity
      and Capital Resources:**




Since
      inception, the Company has incurred significant operating and net losses and
      has
      been unable to meet its cash flow needs with internally generated funds. The
      Company’s cash requirements (primarily working capital requirements and cash for
      product development activities) have been satisfied through borrowings and
      the
      issuance of securities in a number of private placements. At June 30, 2006,
      the
      Company had cash and cash equivalents on hand of approximately $566,000, a
      negative working capital position of $1,758,583 and long-term debt commitments
      of $1,431,731. Although the Company has recently taken action to significantly
      reduce operating losses by reducing operating expenses and headcount, and is
      seeking to reduce its royalty expenses by purchasing certain rights that it
      now
      licenses, any benefits that the Company may realize from the foregoing will
      not
      occur, if at all, until subsequent quarters. The present financial position
      of
      the Company raises substantial doubt about the Company’s ability to continue as
      a going concern. The accompanying consolidated financial statements do not
      include any adjustments that might result from the outcome of this uncertainty.




On
      a
      going forward basis, the Company’s primary business strategy is to continue to
      focus on its existing Extendryl® line of products, acquire profitable product
      lines that will provide positive cash flow, develop the effectiveness of the
      current sales force, staff a new commission-only sales force to complement
      the
      salaried sales force, monitor and reduce operating expenses, and continue the
      research and development projects currently in process. The Company will need
      to
      raise additional equity or debt financing to adequately fund these strategies
      and to satisfy its on-gong working capital requirements. If the Company is
      unable to obtain such financing in a timely manner, it could be forced to
      curtail or cease operations. Even if it is able to pursue these strategies,
      there can be no assurances that the Company will ever attain
      profitability.




Our
      cash
      and cash equivalents were $566,000 on June 30, 2006. Net cash used by operating
      activities for the three months ended June 30, 2006 was $1.4 million. This
      use
      of cash was the result of a net loss of $2.5 million for the quarter (adjusted
      for non-cash items), an increase in prepaid expenses of $112,000; and a decrease
      in royalties payable of $290,000. These uses of cash were partially offset
      by a
      decrease in accounts receivable of $463,000 a decrease in inventory of $18,000;
      a decrease in deposits of $18,000; an increase in accounts payable of $243,000;
      and an increase in accrued expenses of $755,000.




Our
      cash
      and cash equivalents were $424,000 on June 30, 2005. Net cash used by operating
      activities for the period from inception through June 30, 2005 was $256,000.
      This use of cash was the result of a net loss for the period of $235,000, an
      increase in prepaid expenses of $136,000; and an increase in deposits of
      $31,000. Partially offsetting the use of cash from operations was cash generated
      from a decrease in accounts receivable of $41,000; and an increase in accrued
      expenses of $105,000.




Net
      cash
      used in investing activities for the three months ended June 30, 2006 was
      $80,000. The uses of cash were for purchases of property and equipment of this
      amount. Net cash used in investing activities for


-17-
 **Back
          to Table of Contents**




the
      period from inception through June 30, 2005 was $58,000, which was also used
      to
      purchase property and equipment.




Net
      cash
      provided by financing activities was $1.58 million for the quarter ended June
      30, 2006 resulting from net proceeds from a private stock placement offering
      to
      qualified investors of $1.15 million; proceeds from bank notes payable of
      $306,000; and proceeds from stock subscription deposits and receivables of
      $346,000 . The Company used $244,000 for payments of bank notes payable.




Net
      cash
      provided by financing activities was $739,000 for the period from inception
      through June 30, 2005. All cash provided was from proceeds received from
      deposits on stock subscriptions as part of a private placement offering to
      qualified investors.




As
      of
      June 30, 2006, the Company was not in compliance with its line of credit
      agreement with Silicon Valley Bank (“SVB”) as regards the required quick ratio
      of 0.85:1.0. On August 4, 2006, the Company paid off all outstanding amounts
      due
      to SVB and terminated the financing arrangement with them.




On
      August
      7, 2006, the Company executed an 8% senior secured convertible note
      (“convertible note”) with Sorrento Financial Partners, LLC, an entity owned by
      the Company’s CEO. The principal sum of the convertible note is $400,000 and is
      due on May 15, 2007. The Company will pay interest on the aggregate unconverted
      and then outstanding principal amount of the convertible note monthly in arrears
      beginning in September 2006.




The
      Company is in the process of closing a private placement in which the Company
      has received to date $365,000 of which $345,000 was received as of June 30,
      2006
      in stock subscriptions. These stock subscriptions were part of a private
      placement whereby each shareholder receives one share of common stock and one
      warrant to purchase one share of common stock per dollar of investment. The
      warrant received has an exercise price of $1.25 per share of common stock.
      The
      number of shares and the price per share take into account the reverse split.




**Item
                3.**
            **CONTROLS
                AND PROCEDURES**




We
      maintain disclosure controls and procedures designed to ensure that information
      required to be disclosed in our reports filed or submitted under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in the Securities and Exchange Commission’s rules and
      forms, and that such information is accumulated and communicated to our
      management, including our Chief Executive Officer and Chief Financial Officer,
      as appropriate, to allow timely decisions regarding required
      disclosure.




In
      designing and evaluating the disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well conceived and
      operated, can provide only reasonable, not absolute, assurance of achieving
      the
      desired control objectives, and management is required to apply its judgment
      in
      evaluating the cost-benefit relationship of possible controls and
      procedures.




As
      of the
      end of the period covered by this Report on Form 10-QSB, we carried out an
      evaluation, under the supervision and with the participation of management,
      including our Chief Executive Officer and Chief Financial Officer, of the
      effectiveness of the design and operation of our disclosure controls and
      procedures pursuant to Exchange Act Rule 13a-15(b).




Based
      on
      the foregoing, our Chief Executive Officer and Chief Financial Officer concluded
      that, as of the end of the period covered by this report, our disclosure
      controls and procedures were effective in ensuring that the information required
      to be disclosed in reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC’s rules and forms, and that such information is accumulated and
      communicated to our management, including the Chief




-18-
 **Back
          to Table of Contents**




Executive
      Officer and the Chief Financial Officer, as appropriate, to allow timely
      decisions regarding required disclosure.




During
      the quarterly period covered by this report, there have been no changes in
      our
      internal controls over financial reporting or in other factors that have
      materially affected, or are reasonably likely to materially affect our internal
      controls over financial reporting. In response to the Sarbanes-Oxley Act of
      2002, we are continuing a comprehensive review of our disclosure procedures
      and
      internal controls and expect to make minor modifications and enhancements to
      these controls and procedures.




**PART
      II**




**OTHER
      INFORMATION**




**Item
      6****EXHIBITS**




31.1
            Certification
                of the Chief Executive Officer and Chief Financial Officer, pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.




-19-
 **Back
          to Table of Contents**


**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




Dated:August
                10, 2006
            /s/ 
                Philip S. Pesin
              
              Name:Philip
                S. Pesin
              Title:Chief
                Executive Officer




-20-