UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

               |X| ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        FOR THE TRANSITION PERIOD FROM   TO

                        COMMISSION FILE NUMBER: 000-26807

                                 CYTOGENIX, INC.
             (Exact name of registrant as specified in its charter)

                Nevada                                      76-0484097
(State or other jurisdiction of incorporation)   (I.R.S. Employer Identification
                                                  or organization No.)

          3100 WILCREST, SUITE 140, HOUSTON, TEXAS           77042
         (Address of principal executive offices)          (Zip Code)

          Issuer's telephone number, including area code: 713-789-0070

      Securities registered under Section 12 (b) of the Exchange Act: NONE

         Securities registered under Section 12 (g) of the Exchange Act:

                        COMMON STOCK WITH $.001 PAR VALUE
                                (Title of Class)

Indicate  by check mark if the  Registrant  is a well known  seasoned  issuer as
defined in Rule 405 of the securities Act. Yes |_| No |X| Indicate by check mark
if Registrant is not required to file reports  pursuant to Section 13 or Section
15 (d) of the Act. Yes |_| No |X|

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|


<PAGE>


Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer |_|   Accelerated Filer |X|   Non-accelerated filer |_|


Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of June 30, 2006 (the last business day of the  Registrant's  most
recently  completed second fiscal quarter) was approximately  $143,119,897.  The
number of outstanding shares of the Registrant's Common Stock as of the close of
business on March 30, 2007 was 140,663,961.

                       DOCUMENTS INCORPORATED BY REFERENCE

Selected  portions of the definitive  Proxy Statement of CytoGenix,  Inc., which
will be filed with the Securities and Exchange  Commission within 120 days after
December 31, 2006, are incorporated by reference in Part III of this form 10-K.











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                                 CYTOGENIX, INC.
                                 FORM 10-K INDEX

                                     PART I
                                                                            Page
Item 1.   Description of Business..........................................   5

Item 1A.  Risk Factors.....................................................  18

Item 1B.  Unresolved Staff Comments........................................  25

Item 2.   Description of Property .........................................  25

Item 3.   Legal Proceedings................................................  25

Item 4.   Submission of Matters to a Vote of Security Holders..............  26

                             PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.........  26

Item 6.   Selected Financial Data .........................................  28

Item 7.   Management's Discussion and Analysis of Financial Conditions and
          Results of Operations ............................................ 28

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk........ 36

Item 8.   Financial Statements ............................................  37

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure.............................................  59

Item 9A.  Controls and Procedures..........................................  59

Item 9B.  Other Information................................................  59

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant...............  59

Item 11.  Executive Compensation...........................................  63

Item 12.  Security Ownership of Certain Beneficial Owners and Management
          And Related Stockholder Matters..................................  63

Item 13.  Certain Relationships and Related Transactions...................  63

Item 14.  Principal Accountant Fees and Services...........................  63



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<PAGE>

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K..  64

          Signatures ......................................................  66























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<PAGE>

                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

CytoGenix,  Inc.  ("CytoGenix" or "the Company") is a biopharmaceutical  company
whose primary focus is the development and  commercialization of its proprietary
technology for  identifying  and silencing  disease causing genes and expressing
proteins for applications such as vaccines.  The Company's  technology  includes
gene  silencing  techniques  applicable  to genes from  pathogenic  organisms or
selected  genes  from a host to prevent  the  expression  of  harmful  proteins,
thereby  preventing or  ameliorating  disease.  The Company also has developed a
novel cell free  process to produce DNA for use in its own products and for sale
to the  biopharmaceutical  market.  The Company  seeks to generate  revenues and
improve the health and well-being of humans, animals and plants by utilizing its
technology  to produce  molecular  therapies.  In  addition to  development  and
commercialization  of  therapeutic  compounds,  the Company seeks to provide the
service  of custom  DNA  manufacturing  as well as to sell  and/or  license  its
technology to other  research  facilities  and companies  seeking to research or
regulate a specific gene function and to consumers of plasmid DNA.

The Company was formed in 1995 as a biomedical research and development company.
The  original  name of the  Company was  Cryogenic  Solutions,  Inc.,  until the
Company changed its name to CytoGenix,  Inc. in January 2000. Equity funding has
been the primary source of operational,  research and commercialization  working
capital since the Company's inception. The Company made a transition to research
and development of its present technologies in 1998. Since then, the Company has
dedicated  itself to engineering  DNA-based  molecules for  therapeutic and drug
target  identification   purposes.  The  Company's  expertise  in  nucleic  acid
technology  enables  it to  focus on the  development  of new  types of  nucleic
acid-based therapeutics.

GENE EXPRESSION AND HUMAN DISEASE

Widely published  scientific studies conducted over the last 20 years by leading
universities,  government research  laboratories such as the National Institutes
of Health and the National Cancer Institute,  and private research laboratories,
have established that most diseases are the result of malfunctioning genes in an
organism's  genome,  or the  activities of genes  affected by pathogens  such as
viruses,  bacteria or fungi.  This genetic  activity  causes the  production  of
harmful proteins that lead to the symptoms and destructive  results of diseases.
Examples of diseases caused by the production of such harmful  proteins  include
cancer,  herpes,  sepsis (blood  poisoning)  and a host of others.  To produce a
protein,  a cell first  makes a  positive  copy of the DNA code  containing  the
information  necessary  to produce the  protein.  This  messenger  RNA (mRNA) is
called  the  "sense"  molecule.  This  message-carrying  molecule  then moves to
another  part  of  the  cell  where  it  participates  in  the  assembly  of the
biochemical components to produce proteins.

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<PAGE>


In many  instances  it is possible to inhibit the  production  of these  harmful
proteins by  introducing  or  producing  small  molecules  of  specific  genetic
material into the cells  themselves.  Fortunately,  this genetic activity can be
interrupted  and controlled at three levels with the  introduction of a specific
sequence of single  stranded  DNA  ("ssDNA")  into the cells at the level of the
genomic DNA itself, interfering with the messenger RNA (mRNA) transcribed by the
genome (antisense  regulation);  and by directly binding to a protein to disable
it.

CYTOGENIX GENE SILENCING TECHNOLOGY

CytoGenix owns patented  intracellular  expression  system technology to produce
desired  sequence-specific,  ssDNA molecules in individual cells for the purpose
of triplex, antisense, catalytic DNA, and aptamer applications.

         1.       Triplex:  As mRNA is transcribed and the DNA strands are still
                  separated,  a single strand of  complementary  DNA is inserted
                  into the gap forming a triple helix (triplex) structure,  thus
                  preventing the future production of mRNA from that segment.

         2.       Antisense:   Messenger  RNA  is  intercepted  en  route  by  a
                  complementary  ssDNA  sequence that it binds to and results in
                  the  destruction of the mRNA by enzymes within the cell,  thus
                  preventing the mRNA from producing the undesired protein.

         3.       Catalytic  DNA:  Similar  to  antisense,   an  ssDNA  sequence
                  containing  sequence  regions  binds  to the  mRNA,  but  also
                  contains a unique sequence region that acts to cut and destroy
                  the mRNA,  thus  preventing  it from  producing  the undesired
                  protein.

         4.       Aptamer: The ssDNA binds to the protein itself in the cell and
                  causes  the  undesired   protein  to  become   inactivated  or
                  dysfunctional.

The key to success with these genetic interventions is to insure that sufficient
quantities of the ssDNA  molecules  ultimately are produced in targeted cells or
induced from external sources.  CytoGenix has invented a compound that functions
as a tiny  biological  "factory"  and  after  its  introduction  into the  cell,
actually  produces many copies of specific ssDNA  molecules in the cell. A major
element of CytoGenix's business is to refine this technology and apply it to the
delivery of various  patented DNA  molecules  for the  development  of effective
therapeutic drugs.

DEVELOPMENTS TO DATE (RESEARCH AND DEVELOPMENT)

The ssDNA expression vector  technology  originated with the work of Dr. Charles
Conrad,  which he developed while at InGene,  Inc. This technology is originally
protected by issued United States Patent No.  6,054,299  entitled,  "Methods and
Compositions for Producing  Single-stranded  cloned DNA in eukaryotic cells." In
1999,  CytoGenix  purchased the rights to Dr.  Conrad's  patent as well as other
proprietary  information from InGene,  and has since instituted a broad research
and development  program to advance single  stranded DNA expression  technology.


                                       6
<PAGE>

Applications to protect subsequent improvements and therapeutic  applications of
this  technology  have  since  been  filed  to  expand  the  protection  of this
technology  in both the US and foreign  markets.  In  addition  to the  original
issued patent,  CytoGenix currently holds a patent portfolio of approximately 46
domestic  and  foreign  issued or pending  patent  applications  protecting  its
technology.  This assertive  approach to protection of the Company's  technology
has enabled  CytoGenix to expand and refine the development of therapeutics  for
human,  animal and  agricultural  use. The Company  currently has eleven granted
patents which protect the Company's  broad-based  single stranded DNA expression
technology.

These patents are  important to the Company  because they help form the basis of
the  technology  needed  for  the  production  of  the  Company's  complementary
technology  and other  products.  The  technology  has been  proven in  numerous
laboratory  and animal  experiments  and has been widely  published as set forth
below.  It has  been  reported  in  scientific  literature,  such as in  Reuters
Business Insight 2000  publication,  Antisense  Therapy:  Technical  Aspects and
Commercial  Opportunities  by Prof.  Dr. K.K.  Jain,  M.D.  that other  molecule
delivery   methods  have  failed  to  provide   sufficient   quantities   to  be
therapeutically  effective  except  in  limited  applications.  Laboratory  cell
culture studies have demonstrated that the Company's ssDNA expression vector can
adequately  deliver sequence specific DNA molecules in sufficient  quantities in
virtually all cell types,  thereby overcoming many of the challenges  previously
experienced. As described under "CytoGenix Gene Silencing Technology" above, the
Company's  technology  is not limited to only  antisense  applications,  but can
target and enzymatically  cleave target mRNA using DNA enzyme  formulations.  As
described above, the technology can also be used to (i) generate triplex forming
oligonucleotides  that bind to  specific  sites in the genome  itself to inhibit
expression by the gene at that site,  (ii) generate ssDNA that bind to specific,
targeted  proteins to neutralize  them and (iii)  competitively  inhibit genetic
expression/transcription   of  targeted  genes.  The  Company  has  successfully
extended the results achieved in cell cultures to cells in live animals.

The genomics field has vastly expanded the number of potential drug targets. The
Company  has  utilized  its ssDNA  expression  technology  to  develop a library
screening technique for gene target identification and validation. The CytoGenix
proprietary  gene  neutralization  system is a powerful tool in confirming  gene
target function.  The screening  library  technique enables efficient testing of
multiple  oligonucleotide  sequences.  When a sequence silences a targeted gene,
the construct for  introducing  the  identified  sequence in cellular and animal
experiments  is readily  produced.  Use of the screening  library has led to the
discovery  of  sequences  that have  been  useful in  several  of the  Company's
products under development.

The Company has developed a separate  technology  against bacteria using mimetic
oligonucleotides  as sequences to silence  targeted  bacterial  genes.  Targeted
genes include those necessary for the bacteria's  survival,  reproduction and/or
for the expression of various toxins.

The Company has also  developed a novel  technique for  producing  cell free DNA
thus  bypassing the  fermentation  process.  The cell free  synthesis of DNA has
numerous  advantages:  CytoGenix's  synDNA(TM)  is  virtually  free of bacterial
endotoxins,  as well as bacterial DNA, RNA and protein which must be laboriously
removed from DNA manufactured using traditional  fermentation process using live


                                       7
<PAGE>

bacteria. CytoGenix's process does not require the use of antibiotic markers and
does not require genetic  sequences  comprising the usual bacterial  backbone of
plasmid  DNA.  Elimination  of the  bacterial  backbone  enables  production  of
synDNA(TM)  construct that are  approximately  half the size of the plasmid DNA.
More  importantly,  synDNA(TM)  can be  produced  more  rapidly  and with  fewer
complications than in the traditional fermentation methods.

Using its expanding  technological base, the Company is seeking to develop drugs
that address  significant  and unmet  medical  needs.  The Company is conducting
research and/or preclinical development with product candidates in the following
areas:  infectious  disease  (anti-virals  and  anti-bacterials),  inflammation,
cancer and vaccines.

PRODUCTS UNDER DEVELOPMENT:

INFECTIOUS DISEASE PROGRAM

CY301 SIMPLIVIR(TM) anti-herpes topicals are anticipated to address the needs of
70 million  infected  Americans.  Today's  marginally  effective  products  have
revenues  in  excess of $1  billion.  The most  likely  methods  of use  include
prophylactic and neonatal  applications.  The Company's  proprietary plasmid DNA
sequences  are  believed to turn-off  the  expression  of the HSV ICP4 and ICP47
genes.  Found in HSV-1, -2 and Herpes Zoster,  the ICP4 gene is critical for the
replication  of the virus in the host cell.  The ICP47  gene  produces a protein
that assists the virus in interfering with a host's immune system in recognizing
the virus  and  eliminating  it.  Pre-clinical  in vitro  studies  have  shown a
100-fold  reduction  in HSV viral load in test cells  containing  the  Company's
proprietary plasmid DNA coded with an ICP4 knockdown sequence. Mouse trials were
initiated in August,  2003 and are continuing.  Pre-clinical  toxicology studies
are being  designed  and will enable the filing of an  Investigational  New Drug
(IND) application with the Food & Drug Administration (FDA) in 2008.

The Company is also in the process of developing  compounds against  methicillin
resistant staphylococcus aureaus (MRSA).

INFLAMMATORY DISEASE PROGRAM

CY303 is a topical  anti-inflammatory  product  that  blocks the  activity of an
adhesion  molecule  known as  intercellular  adhesion  molecule  or ICAM-1.  The
initial medical condition for this topical anti-inflammatory product is moderate
to  severe   psoriasis.   Other   medical   conditions   where  CY303  could  be
therapeutically beneficial include contact dermatitis,  acne, decubitus, rosacea
and joint swelling.

CANCER PROGRAM

The Company has entered into a sponsored research agreement with scientists at a
university medical center for preclinical  experiments using the Company's ssDNA
expression  vector  technology  to  silence a gene that has been  shown to cause
malignant transformation of tumor cells.

NUCLEIC ACID DELIVERY TECHNOLOGY


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<PAGE>


DNA  delivery  into  cells is a  rapidly  developing  area in gene  therapy  and
biotechnology.   Viral  methods  of  DNA  delivery  are  well-characterized  and
efficient,  but little is known about the toxicity and  immunogenicity  of viral
vectors.  As a result, the Company is continuing  investigation of viral vectors
but  concentrating  its  efforts  on  non-viral,  transfection  methods  of  DNA
delivery.  The Company is investigating  targeted  delivery using established as
well as innovative DNA delivery systems containing  histidine-rich  peptides and
polypeptides  and  self-assembled  delivery systems based on cationic lipids and
polymers.

synDNA(TM) PROCESS

As briefly  noted above,  the Company has developed a novel method for producing
large amounts of high quality  therapeutic  DNA  (synDNA(TM))  with  significant
reductions  in  residual  contaminants  compared  to  traditional   fermentation
methods.  Specifically, the Company has identified and optimized a method for in
vitro DNA synthesis and amplification  for the production of good  manufacturing
practice-grade (GMP) drug substances.

Cell-free  amplification of DNA sequences has many important  benefits beginning
with the size and  composition  of the plasmid.  Under this system,  there is no
need for  bacterial  replication  genes or selection  markers such as antibiotic
resistant  genes.  In most  cases,  this will  reduce the size and weight of the
therapeutic  DNA  by  at  least  3,000  base  pairs  or a  molecular  weight  of
approximately  2,000 kilo  Daltons  (kDa).  The Dalton is a measure of molecular
weight or mass.  The total  absence of bacteria  and growth  media  assures that
there is no need to  employ  mechanical  or  chemical  purification  methods  to
extract cell or animal proteins,  RNA, genomic DNA and backbone molecules.  This
feature allows the designer more control of coding for non-specific and specific
immune responses.

Greater biological activity

The Company's  experiments have shown that the biological  response to DNAs with
no  vector  backbone  is  approximately  one  and  one-half  times  higher  than
traditional plasmids.  Other investigators have reported greater activity levels
of in vivo studies  using "DNA mini  circles."  At the  molecular  level,  a 100
nanogram of  traditional  plasmid DNA is equal to 60ng of  synDNA(TM).  This may
explain the result of the Company's  transfection  experiments  and suggest that
less  synDNA(TM)  may be able to  generate  the same  biological  effect  as its
plasmid  counterpart.  This would translate in to substantial  savings and lower
costs.

Low risk, low cost and fast cycle time

The Company's novel process is bench scale and requires less equipment, space or
human intervention in comparison to bioprocess  manufacturing  facilities.  This
process lends itself to  liquid-handling  automation  and one  technician can in
most cases  synthesize  gram  quantities  in a matter of days  working in custom
manufacturing  suites.  The Company believes that this synthetic process will be
more  consistent,  yield material of higher purity,  and will enable delivery of
higher concentrations of Active Pharmaceutical Ingredient (API) if needed.


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<PAGE>


Improved regulatory profile

Benefits provided by the cell-free synthesis from a regulatory agency review and
compliance  perspective  are  significant.  Similarly,  product  certified  good
manufacturing  practice (cGMP) procedures detailing methods for cell collection,
processing  and  culture  conditions  would no  longer  be  necessary  and would
substantially   reduce  quality   assurance  and  quality  control  (QA/QC)  and
compliance overhead costs. The synDNA(TM) process yields DNA with markedly lower
levels of endotoxin, bacterial genomic DNA, RNA and proteins.

CytoGenix  is  carrying  out a  multi-pronged  strategy  with the  objective  of
commercializing  this technology within the next year. The following  summarizes
the Company's plans:

          o    PROCESS OPTIMIZATION AND SCALE-UP,  continued  experimentation to
               achieve  yield  optimization,  reduced  reagent usage and reduced
               costs.  Manufacture  milligram quantities  consistently,  conduct
               several   animal   studies  with   various   plasmids  to  verify
               bioactivity  equal  to or  greater  than  plasmids  produced  via
               traditional methods. Scale-up to produce gram quantities.

          o    DEVELOP REAGENT SUPPLIERS AND SOURCING,  establish  relationships
               with manufacturers of enzymes. Develop quality parameters.

         o        CONSTRUCT  CGMP  PRODUCTION   FACILITY,   build  and  equip  a
                  side-by-side  manufacturing lines for simultaneous  production
                  of batches cGMP synDNA(TM).

          o    BUSINESS DEVELOPMENT, the Company is currently evaluating options
               for industry partnership for continued development of the process
               including contract manufacturing.

The Company is currently supporting five Sponsored Research Agreements (SRA):

          1.   Dr. Cy Stein's  laboratory at Montefiore  Medical Center is using
               CytoGenix's  proprietary gene silencing DNA technology  against a
               gene found in  melanoma  cells that  produces a protein  known to
               counteract  the  effect  of  several  chemotherapeutic  agents in
               difficult to treat cancers.

          2.   Dr. Frank  Orson's  laboratory  at Baylor  College of Medicine is
               conducting  animal trials to determine the effect of  CytoGenix's
               gene  silencing  technology  on cancer in the lungs of mice using
               aerosol gene delivery system.

          3.   Dr.  Jeffrey  Actor's  laboratory  at  University of Texas Health
               Science  Center  in  Houston  is  conducting   animal  trials  to
               determine     efficacies     of     CytoGenix's     antimicrobial
               oligodeoxynucleotides (ODN) compounds.

          4.   Dr. David Weiner's  laboratory at University of  Pennsylvania  is
               conducting  animal trials to determine  efficacies of CytoGenix's
               synDNA(TM) vaccines against Smallpox and other targets.


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<PAGE>


          5.   Dr.  Slobodan  Paessler at the University of Texas Medical Branch
               at  Galveston is  conducting  animal  trials to test  CytoGenix's
               synDNA(TM) vaccine against avian flu (H5N1).

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS

The Company is  currently  working in a  cooperative  research  and  development
agreement  (CRADA) with the United States  Department of  Agriculture to develop
and test a DNA vaccine against brucellosis.

The Company has  completed  the details of protocols for a CRADA with the United
States Army Medical  Research  Institute for Infectious  Diseases to develop and
test DNA vaccines for strains of ebola,  equine  encephalitis and alpha and beta
subunits of E. coli heat labile toxin.

PARTNERSHIPS

The Company  currently has several industry and government  agency  partnerships
and is actively  seeking  out-licensing  opportunities in the application of the
Company's  core  technologies  to promote  the  development  of new  therapeutic
products  in  the  fields  of  infectious  diseases,  inflammation  and  cancer.
CytoGenix is also seeking  partnerships  in the  development  of products in the
areas of animal health and agriculture.  The Company's  cell-free method for the
cGMP production of therapeutic-grade DNA is also available for licensing.

The Company currently has several academic and government agency  collaborations
to promote the research and  development of new  therapeutic  products.  Current
collaborators include:

USDA

Dr. Steven Olsen at USDA is currently  testing DNA vaccines against  Brucellosis
Abortus, prepared by CytoGenix using synDNA(TM) technology, in animal models.

ALDEVRON, LLC.

CytoGenix  has  teamed  up with  Aldevron,  LLC,  a leader  in the  field of DNA
vaccines,  to evaluate a synDNA(TM)  vaccine derived from a plasmid  provided by
Aldevron.  The  synDNA(TM)  vaccine was  designed to produce a Hepatitis B viral
surface antigen and was evaluated in a rabbit model using Aldevron's proprietary
immunization process.

GE HEALTHCARE BIO-SCIENCE CORPORATION

The Company has  entered an  agreement  with GE  Healthcare  Bio-Sciences  Corp.
whereas GEHC will provide the Company  with DNA  production  reagents for use in
the  manufacture of vaccines and  therapeutic  compounds.  The Company is in the
process of negotiating  with GEHC to renew and extend the  Agreement.  As of the
date of this filing no agreement has been finalized.


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Technology - Sponsored Research

It is the  policy of the  Company to seek  outstanding  scientific  leaders  and
independent  investigators as collaborators in mutually beneficial projects. The
following projects are sponsored in part by the Company:

          o    Jeffery Actor,  UT Health Science Center in Houston,  In vivo and
               in vitro studies of  oligonucleotide  compounds  against MRSA and
               TB;

          o    Slobodan Paesseler, UT Medical Center in Galveston, In vivo study
               of DNA vaccines against H5N1;

          o    Cy Stein,  Montefiore  Medical  Center,  New York,  Inhibition of
               cancer genes using single-stranded DNA expression vector;

          o    Frank Orson,  Baylor  College of  Medicine,  In vivo study of DNA
               vaccine against H1N1;

          o    David Weiner,  University of Pennsylvania,  In vivo studies (mice
               and monkeys) of DNA vaccines against HIV and smallpox.

PUBLICATIONS

The Company and its cooperating university scientists have published a number of
scientific  papers and  presented at  scientific  meetings.  These  publications
include:

          1.   Benimetskaya,  L.,  Ayyanar,  K. Kornblum,  N.,  Castanotto,  D.,
               Rossi,  J., Wu, S., Lai, J., Brown, B., Popova,  N., Miller,  P.,
               McMicken,  H.,  Chen,  Y. &  Stein,  C.  Bcl-2  protein  in 518A2
               melanoma cells in vivo and in vitro.  Clinical  Cancer  Research,
               12:4940-4948, 2006.
          2.   Xing-Xin  Tan & Yin  Chen,  Discovery  of  Novel  Antibiotics  By
               screening of an Oligodeoxynucleotide Expression Library, (invited
               review article,  submitted)  "New Research on Antisense  Elements
               (Genetics)."  Frank  Columbus,   Editor-in-Chief,   Nova  Science
               Publishers, Inc.
          3.   Tan, X. & Chen, Y., A novel genomic approach identifies bacterial
               DNA-dependent  RNA  polymerase as the target of an  antibacterial
               oligodeoxynucleotide, RBL-1 Biochemistry, 44:6708-6714, 2005.
          4.   Tan, X., Actor,  J.K., & Chen,  Y., PNA  antisense  oligomer as a
               therapeutic  strategy  against  bacterial  infection:   proof  of
               principle using mouse peritonitis model,  Antimicrobial Agent and
               Chemotherapy, 49: 3203-3207, 2005.
          5.   Tan,  X.,  & Chen,  Y.,  Discovery  of  novel  antibiotics  using
               cell-based screening (Review), Current Drug Discovery, pp. 21-23,
               April, 2004.
          6.   Tan,  X.,  Knesha,  R.,  Margolin,  W. and Chen,  Y.,  DNA enzyme
               generated  by  a  novel  single-stranded  DNA  expression  vector
               inhibits expression of the essential bacterial cell division gene
               ftsZ, Biochemistry, 43:1111-1117, 2004.
          7.   McMicken, H., Bates, P. and Chen, Y., Antiproliferative  activity
               of  G-quartet-containing  oligonucleotides  generated  by a novel
               single-stranded  DNA  expression  system,  Cancer  Gene  Therapy,
               10(12):867-869, 2003.


                                       12

                                       1
<PAGE>

          8.   Chen, Y. and McMicken, H., Intracellular production of DNA enzyme
               by a novel  single-stranded  DNA expression vector, Gene Therapy,
               10:1776-1780, 2003.
          9.   Chen, Y., Ji, Y. and Conrad,  C.,  Expression of  single-stranded
               DNA in mammalian cells, Biotechniques, 34:167-171, 2003.
          10.  Chen,  Y.,  Novel  Technologies  for target  validation,  Genetic
               Engineering News, 23(11):7-9, 2003.
          11.  Chen, Y., A novel  single-stranded  DNA (ssDNA) expression vector
               (Review), Expert Opinion on Biological Therapy, 2:735-740, 2002.
          12.  Chen, Y., Meeting  highlights,  10th International  conference on
               gene therapy of cancer,  Expert  Opinion on  Biological  Therapy,
               2:443-445, 2002.
          13.  Chen,  Y., Growth of  oligo-based  drugs,  Genomics & Proteomics,
               October, 2002.
          14.  Datta,   H.  and  Glazer,   P.,   Intracellular   generation   of
               single-stranded DNA for chromosomal triplex formation and induced
               recombination,  Nucleic  Acid  Research,  29:5140-5147,  2001.  A
               marvel of  biochemical  engineering  means  cells can produce DNA
               enzyme to attach cancer, New Scientist, January, 2001.
          15.  Chen, Y., Ji, Y., Roxby, R. and Conrad, C., In vivo expression of
               single-stranded  DNA in mammalian cells with DNA enzyme sequences
               targeted  to c-raf,  Antisense & Nucleic  Acid Drug  Development,
               10:415-422, 2000.

BUSINESS STRATEGY

The goal and the focus of the Company are to leverage its proprietary technology
to maximize investor value. The Company is developing skin creams that should be
safer  and more  effective  than  systemic  drugs  (pills)  for  Herpes  related
diseases.  Upon  successful  completion of FDA Phase I/II clinical  trials,  the
Company  intends to seek license and  distribution  agreements with domestic and
foreign pharmaceutical companies.

          o    The  Company  intends to  independently  develop  oligonucleotide
               mediated therapeutic applications in several disease areas.

          o    The Company will pursue partnerships with other pharmaceutical or
               biotechnology   companies   to   develop   DNA   expression-based
               therapeutics.

          o    The Company will seek to maintain and expand its patent portfolio
               and  proprietary  technology.  The Company  aggressively  pursues
               patent  protection to maintain  worldwide  rights relating to the
               development,   manufacture   and  sale  of   oligodeoxynucleotide
               mediated  therapeutics  and services and products  related to the
               manufacture of synDNA(TM).

          o    The Company  intends to leverage  its  oligonucleotide  expertise
               through licensing,  process development and pilot  manufacturing.
               The Company  believes that it has  established one of the leading
               nucleic  acid  chemistry   groups  that  can  provide   medicinal
               chemistry,  process  development and  manufacturing  to others in
               need of this expertise. The Company believes that it will be able
               to capitalize on its continuing investment in oligonucleotide and
               nucleic  acid  technology  by entering  into  licensing,  process


                                       13



<PAGE>


               development   and   pilot    manufacturing    arrangements   with
               collaborators   to  generate   revenues,   while  retaining  this
               capability for its own drug development.

          o    The  Company  plans to  expand  its  customer  base for  sales of
               synDNA(TM)  as it  advances  the  ability to  amplify  and purify
               diverse sequences. The sales will come from excess capacity above
               the material the Company  needs for its own product  development.
               The Company will seek strategic partners to expand the production
               and distribution of synDNA(TM) based products.

MARKETING STRATEGY

The Company plans to market initial products,  when developed,  and for which it
will  obtain  regulatory  approval,  through  marketing  arrangements  or  other
licensing  arrangements with  pharmaceutical  companies.  Implementation of this
strategy  will depend on many  factors,  including  the market  potential of any
products the Company develops,  and its financial resources.  To market products
that will serve a large, geographically diverse patient population, we expect to
enter into licensing, distribution, or partnering agreements with pharmaceutical
companies that have large,  established sales  organizations.  The timing of the
Company's entry into marketing arrangements or other licensing arrangements with
large pharmaceutical companies will depend on successful product development and
regulatory approval within the regulatory  framework  established by the Federal
Food,  Drug and Cosmetics Act, as amended,  and  regulations  promulgated  there
under. Although the implementation of initial aspects of the Company's marketing
strategy may be undertaken before this process is completed, the development and
approval  process  typically  is not  completed in less than three to five years
after the  filing  of an  Investigational  New Drug  (IND)  application  and its
marketing strategy therefore may not be implemented for several years. See "Drug
Approval Process and Other Governmental Regulation."

NEW FACILITY

The Company  signed an earnest  money  contract with GSL  Constructors,  Ltd. to
design and build the project located in the Westchase  District of Houston.  The
contract is for 2.274 acres of land  together  with a facility.  The Company has
engaged the services of Luwa USA to design and construct the cGMP portion of the
new 20,000 sq ft facility.  Groundbreaking  for this project is  anticipated  to
occur in 2007 subject to financing.

INTELLECTUAL PROPERTY RIGHTS

The  Company has  developed  or acquired a  comprehensive  body of  intellectual
rights. The proprietary nature of, and protection for, the Company's technology,
processes  and know-how  are  important to its  business.  The Company  plans to
prosecute and aggressively  defend its patents and proprietary  technology.  The
Company's policy is to patent the technology,  inventions, and improvements that
are  considered  important  to the  development  of its  business  and  that are
patentable.   The  Company  also  depends  upon  trade  secrets,  know-how,  and
continuing  technological  innovation  to develop and maintain  its  competitive
position.


                                       14
<PAGE>


A patent  portfolio  including  approximately  46 domestic and foreign issued or
pending patent  applications  protects the Company's  technologies.  The Company
intends  to  protect  its  proprietary  technology  with  additional  filings as
appropriate.

DRUG APPROVAL PROCESS AND OTHER GOVERNMENT REGULATION

The system of reviewing and  approving  drugs in the United States is considered
the most rigorous in the world. Estimates of the upper range of costs to bring a
single product from research  through  market  approval and launch into commerce
range from $800 million (Pharmaceutical Research and Manufacturers  Association)
to $1.7 billion in 2000  through 2002 (FDA),  with the timing to do so typically
ranging between 10 and 15 years. The  Pharmaceutical  Research and Manufacturers
Association  estimates that of every 5,000 medicines  tested,  on average,  only
five are tested in clinical trials,  and only one of those is approved for human
use.  These  estimates  may vary  depending  on the  nature  of the drug and the
mechanism by which it works.

DRUG DISCOVERY

The drug  discovery  process can take several  years.  Once a company  locates a
screening lead, or starting point for drug development, isolation and structural
determination  may begin. The development  process results in numerous  chemical
modifications  to  the  screening  lead  in  an  attempt  to  improve  its  drug
properties.  After a compound emerges from the above process, the next steps are
to conduct further  preliminary  studies on the mechanism of action,  further in
vitro (test tube) screening  against  particular  disease targets and,  finally,
some in vivo (animal)  screening.  If the compound  passes these  barriers,  the
toxic  effects of the compound,  if any, are analyzed by performing  preliminary
exploratory animal toxicology. If the results are positive, the compound emerges
from the basic research mode and moves into the pre-clinical phase.

Preclinical Testing

During  the  pre-clinical  testing  stage,  laboratory  and animal  studies  are
conducted  to show  biological  activity of the  compound  against the  targeted
disease,  and the compound is evaluated for safety,  stability,  biodistribution
(where  the  drug  goes  in the  body  and  in the  case  of  DNA  based  drugs,
bioincorporation  (where the DNA is  incorporated  in any of the  body's  cell's
genome).  These tests typically take  approximately  three and one-half years to
complete.

Investigational New Drug Application

During the  pre-clinical  testing,  an IND is filed with the FDA to begin  human
testing of the drug. The IND becomes active if not rejected by the FDA within 30
days. The IND must indicate the results of previous experiments,  how, where and
by whom the studies were conducted,  the chemical structure of the compound, the
method by which it is believed to work in the human body,  any toxic  effects of
the compound found in the animal  studies and how the compound is  manufactured.
Progress reports  detailing the results of the clinical trials must be submitted
at least annually to the FDA.

Phase I Clinical Trials


                                       15
<PAGE>


After an IND becomes  active,  Phase I human  clinical  trials may begin.  These
tests,  involving  usually  between 20 and 80  patients  or healthy  volunteers,
typically take  approximately one year to complete and cost between $300,000 and
$500,000 per trial.  The Phase I clinical  studies also  determine how a drug is
absorbed, distributed, metabolized and excreted by the body, and the duration of
its action.  Phase I trials are not normally  conducted for  anticancer  product
candidates.  A Phase Ib study involves patients with the targeted disease cancer
and is focused on safety.

Phase II Clinical Trials

In Phase II Clinical trials,  controlled  studies are conducted on approximately
100 to 300 volunteer patients with the targeted disease. The preliminary purpose
of these tests is to evaluate  the  effectiveness  of the drug on the  volunteer
patients as well as to determine if there are any side  effects.  These  studies
generally take  approximately two years and cost between $500,000 and $4 million
per trial. In addition, Phase I/ II clinical trials may be conducted to evaluate
not  only  the  efficacy  of the drug on the  patient  population,  but also its
safety.

Phase III Clinical Trials

This phase  typically lasts about three years,  usually  involves 1,000 to 3,000
patients  and costs  between $5 million and $50  million  per trial.  During the
Phase III clinical trials, physicians monitor the patients to determine efficacy
and to observe and report any  reactions  that may result from  long-term use of
the drug.

New Drug Application

After the completion of the requisite  three phases of clinical  trials,  if the
data indicate that the drug has an acceptable  benefit to risk assessment and it
is found to be safe and effective,  a New Drug  Application  (NDA) is filed with
the FDA. The  requirements  for  submitting an NDA are defined by the FDA. These
applications are comprehensive,  including all information  obtained  throughout
all clinical  trials as well as all data  pertaining  to the  manufacturing  and
testing of the product. In general,  these filings can far exceed 100,000 pages.
With the  implementation of the Prescription Drug Users Fee Act (PDUFA),  review
fees are  provided at the time of NDA filing.  In 2007,  each NDA with  clinical
data must be  accompanied  by a $896,200  review  fee. If the NDA is assessed as
unacceptable in the initial 30 day review, it is returned to the submitter, with
50% of the fee. The historical  average  review time for a New Molecular  Entity
(NME) has remained static at approximately 16 months,  however, a new NME can be
approved in as little as six months.

Marketing Approval

If the FDA  approves  the NDA,  the drug becomes  available  for  physicians  to
prescribe. Periodic reports must be submitted to the FDA, including descriptions
of any adverse reactions reported. The FDA may request additional studies (Phase
IV) to evaluate long-term effects.


                                       16
<PAGE>


Phase IV Clinical Trials and Post Marketing Studies

In addition to studies  requested  by the FDA after  approval,  these trials and
studies are  conducted to explore new  indications.  The purpose of these trials
and studies and related  publications  is to broaden the  application and use of
the drug and its acceptance in the medical community.

COMPETITION

The  pharmaceutical  and biotechnology  industries are highly  competitive.  The
Company faces competition from biotechnology and pharmaceutical  companies using
more   traditional   approaches  to  treating  human  diseases.   The  Company's
competitors  may  develop  safer,  more  effective  or  less  costly  gene-based
therapeutics.  In  addition,  the  Company  faces  and  will  continue  to  face
competition   from   other   companies   for   corporate   collaborations   with
pharmaceutical and biotechnology companies, for establishing  relationships with
academic and research  institutions and for licenses to proprietary  technology,
including intellectual property.

Many of the Company's  competitors and potential  competitors have substantially
greater   product   development   capabilities   and   financial,    scientific,
manufacturing,  managerial and human resources than the Company. There can be no
assurance that research and  development by others will not render the Company's
products,  or the products  developed by corporate  partners  using its licensed
technologies  obsolete,  or non-competitive,  or that any product the Company or
its  corporate  partners  develop  will be  preferred  to any  existing or newly
developed  technologies.  In  addition,  there  can  be no  assurance  that  the
Company's  competitors  will not develop  safer,  more  effective or less costly
cardiovascular  therapies,  gene delivery systems,  gene therapeutics,  non-gene
therapies,  or other  therapies,  achieve  superior patent  protection or obtain
regulatory approval of product  commercialization  earlier than the Company, any
of which  could  have a  material  adverse  effect  on its  business,  financial
condition or results of operations.

RESEARCH AND DEVELOPMENT

The Company  expensed  $2,199,148,  $1,724,317,  and  $831,472  on research  and
development activities during the years ended December 31, 2006, 2005, and 2004,
respectively.  Research and development (R&D) expenses include related salaries,
contractor fees, materials, and utilities.

R&D expenses also consist of  independent  R&D costs and costs  associated  with
collaborative   development  arrangements  with  other  companies  and  research
institutions. Research and development costs are expensed as incurred.

EMPLOYEES

As of December 31, 2006,  the Company has 11 employees,  5 of whom hold advanced
degrees.  None of the Company's  employees are covered by collective  bargaining
agreements, and the Company considers relations with its employees to be good.

HOW YOU CAN FIND ADDITIONAL INFORMATION


                                       17
<PAGE>


The  Company is a  reporting  company and files  annual,  quarterly  and current
reports,  proxy  statements  and other  information  with the SEC.  For  further
information  with  respect to the  Company,  you may read and copy its  reports,
proxy statements and other information, at the SEC public reference rooms at 100
F.  Street,  N.E.,  Washington,  D.C.  20549,  as well as at the SEC's  regional
offices at 500 West Madison  Street,  Suite 1400,  Chicago,  IL 60661 and at 233
Broadway,  New York,  NY 10279.  You can request  copies of these  documents  by
writing to the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330  for more information about the operation of the public reference
rooms.  The  Company's  SEC filings are also  available at the SEC's web site at
http://www.sec.gov. In addition, you can read and copy the Company's SEC filings
at the office of the National Association of Securities Dealers,  Inc. at 1735 K
Street, N.W., Washington, D.C. 2006.

Copies of  CytoGenix's  Annual  Reports on Form 10K,  Quarterly  Reports on Form
10-Q,  Current  Reports on Form 8-K, and  amendments  to those  reports filed or
furnished  pursuant to Section 13(a) or 15(d) of the Securities  Exchange Act of
1934 are all  available  on its  website  (www.cytogenix.com)  or by  sending  a
request for a paper copy to: CytoGenix,  Inc. 3100 Wilcrest, Suite 140, Houston,
TX 77042, attn. Investor Relations.

ITEM 1A. RISK FACTORS

RISKS AFFECTING FUTURE OPERATING RESULTS

The Company  does not provide  forecasts  of its future  financial  performance.
While the Company is  optimistic  about its long-term  prospects,  the following
factors  should be considered in evaluating  its outlook.  If the  possibilities
described as risks below actually  occur,  the Company's  operating  results and
financial  condition  would  likely  suffer and the trading  price of its common
stock may fall,  causing a loss of some or all of an  investment  in its  common
stock.

CYTOGENIX'S  PRODUCTS  ARE IN AN  EARLY  STAGE  OF  DEVELOPMENT  AND  MAY NOT BE
DETERMINED TO BE SAFE OR EFFECTIVE.

The   Company   is  only  in  the   early   stages  of   development   with  its
biopharmaceutical  products.  The Company has devoted  almost all of its time to
research  and  development  of  its  technology  and  products,  protecting  its
proprietary rights and establishing strategic alliances.  The Company's proposed
products  are in  the  pre-clinical  stages  of  development  and  will  require
significant  further  research,  development,  clinical  testing and  regulatory
clearances.  The proposed products are subject to development risks. These risks
include  the  possibilities  that  any of the  products  could  be  found  to be
ineffective or toxic, or could fail to receive necessary regulatory  clearances.
The Company has not received any significant  revenues from the sale of products
and the Company  may not  successfully  develop  marketable  products  that will
increase sales and, given adequate margins, make it profitable.  Competitors may
develop superior or equivalent,  but less expensive,  products.  The Company has
incurred  net losses  since its  inception,  and the  Company may not achieve or
sustain profitability.


                                       18
<PAGE>


The Company incurred a net loss of $4.09 million in 2006 and of $3.53 million in
2005. As of December 31, 2006, total shareholder's equity was $2,901,753. Losses
have resulted  principally from expenses incurred in research and development of
technology  and  products,  and general  and  administrative  expenses  that the
Company has incurred  while  building its business  infrastructure.  The Company
expects to continue to incur  significant  operating  losses in the future as it
continues its research and  development  efforts and seeks to obtain  regulatory
approval of its products. The Company's ability to achieve profitability depends
on  its  ability  to  raise  additional  capital,  complete  development  of its
products, obtain regulatory approvals and market those products. It is uncertain
when, if ever, the Company will become profitable.

IF THE COMPANY FAILS TO ATTRACT SIGNIFICANT  ADDITIONAL CAPITAL, THE COMPANY MAY
BE UNABLE TO CONTINUE TO SUCCESSFULLY DEVELOP ITS PRODUCTS.

Since the Company began  operations,  the Company has obtained  operating  funds
primarily by selling common stock.  Based on its current plans, the Company does
not believe that current cash  balances will be sufficient to meet its operating
and capital needs throughout 2007. Furthermore,  the actual amount of funds that
will be needed will be determined by many factors,  some of which are beyond the
Company's  control.  These  factors  include  the  success of its  research  and
development efforts, the status of its pre-clinical and clinical testing,  costs
relating to securing regulatory  approvals and the costs and timing of obtaining
new  patent  rights,   regulatory   changes,   competition   and   technological
developments  in the market.  The Company may need funds  sooner than  currently
anticipated.

If necessary,  potential  sources of additional  funding could include strategic
relationships,  public or  private  sales of  shares of common  stock or debt or
other  arrangements.  The Company  may not obtain  additional  funding  when the
Company  needs it on  terms  that  will be  acceptable  to it or at all.  If the
Company raises funds by selling  additional shares of common stock or securities
convertible into common stock, the ownership  interest of existing  shareholders
will be diluted.  If the Company is unable to obtain financing when needed,  its
business and future prospects could be materially adversely affected.

If the Company fails to receive necessary regulatory approvals, the Company will
be unable to  commercialize  its  products.  All of the  Company's  products are
subject  to   extensive   regulation   by  the  United   States  Food  and  Drug
Administration,  or FDA, and by comparable agencies in other countries.  The FDA
and comparable  agencies require new pharmaceutical  products to undergo lengthy
and detailed  clinical  testing  procedures and other costly and  time-consuming
compliance  procedures.  The Company does not know when or if it will be able to
submit its products for  regulatory  review.  Even if the Company  submits a new
drug application,  there may be delays in obtaining regulatory approvals, if the
Company obtains them at all. Sales of the Company's  products outside the United
States will also be subject to regulatory requirements governing clinical trials
and product approval.  These requirements vary from country to country and could
delay  introduction of products in those  countries.  The Company cannot provide
assurance that any of its products will receive marketing  approval from the FDA
or comparable foreign agencies.




                                       19
<PAGE>


THE COMPANY MAY FAIL TO COMPETE  EFFECTIVELY,  PARTICULARLY AGAINST LARGER, MORE
ESTABLISHED PHARMACEUTICAL COMPANIES, CAUSING ITS BUSINESS TO SUFFER.

The  biotechnology  industry is highly  competitive.  The Company  competes with
companies in the United States and abroad that are engaged in the development of
pharmaceutical   technologies   and  products.   They  include:   biotechnology,
pharmaceutical,   chemical  and  other   companies;   academic  and   scientific
institutions;   governmental   agencies,   and  public  and   private   research
organizations.

Many of these companies and many other  competitors have much greater  financial
and technical  resources and  production  and  marketing  capabilities  than the
Company  does.  The  biopharmaceutical  industry is  characterized  by extensive
research and  development  and rapid  technological  progress.  Competitors  may
successfully develop and market superior or less expensive products which render
the Company's products less valuable or unmarketable.

THE COMPANY HAS LIMITED OPERATING EXPERIENCE.

The  Company  has  engaged  solely  in  the  development  of   biopharmaceutical
technology.  Although  some  members  of  the  Company's  management  team  have
experience in biotechnology  operations,  the Company has limited  experience in
manufacturing or selling  biopharmaceutical  products. The Company also has only
limited experience in negotiating and maintaining strategic  relationships,  and
in conducting  clinical  trials and other  later-stage  phases of the regulatory
approval  process.  The  Company may not  successfully  engage in some or all of
these activities.

THE COMPANY HAS LIMITED MANUFACTURING CAPABILITY.

While the Company believes that it can produce materials for clinical trials and
produce products for human use at its recently completed  synDNA(TM)  production
suite, the Company may need to expand its commercial manufacturing  capabilities
for products in the future if the Company  elects not to or cannot  successfully
partner with others to  manufacture  its products.  This  expansion may occur in
stages,  each of which would require  regulatory  approval,  and product  demand
could at times exceed supply  capacity.  The Company has selected a site for any
expanded  facilities but it can not be assured whether the Company will have the
financing needed for such construction. The Company does not know if or when the
FDA  will  determine  that  such  facilities  comply  with  Good   Manufacturing
Practices. The projected location and construction of any facilities will depend
on  regulatory  approvals,  product  development,  pharmaceutical  partners  and
capital resources,  among other factors. The Company has not obtained regulatory
approvals for any production  facilities  for its products,  nor can the Company
assure investors that it will be able to do so.

IF  THE  COMPANY  LOSES  KEY  PERSONNEL  OR IS  UNABLE  TO  ATTRACT  AND  RETAIN
ADDITIONAL,  HIGHLY SKILLED PERSONNEL REQUIRED FOR ITS ACTIVITIES,  ITS BUSINESS
WILL SUFFER.

Competition  for  qualified  personnel  in  the  biopharmaceutical  industry  is
intense,  and the  Company's  success  will depend on its ability to attract and
retain highly skilled  personnel.  The Company is not aware of any key personnel


                                       20
<PAGE>

who plan to retire or otherwise  leave the Company in the near future other than
Malcolm  Skolnick  who has  expressed  his  desire to retire  after the  Company
identifies a new Chief Executive Officer.

ASSERTING,  DEFENDING AND MAINTAINING THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS
COULD BE  DIFFICULT  AND  COSTLY,  AND FAILURE TO DO SO WILL HARM ITS ABILITY TO
COMPETE.

The  Company's  success will depend on existing  patents and  licenses,  and its
ability  to obtain  additional  patents in the  future.  A patent  portfolio  of
approximately 46 domestic and foreign patents and patent  applications  protects
the Company technologies.

The Company cannot assure  investors that its pending patent  applications  will
result in patents  being issued in the United  States or foreign  countries.  In
addition,  the  patents  which  have  been  or  will be  issued  may not  afford
meaningful  protection for its technology and products.  Competitors may develop
products similar to the Company's which do not conflict with its patents. Others
may  challenge  the  Company's  patents and, as a result,  the patents  could be
narrowed or invalidated. The patent position of biotechnology firms generally is
highly uncertain, involves complex legal and factual questions, and has recently
been the subject of much litigation.  No consistent  policy has emerged from the
United States Patent and Trademark  Office (USPTO),  or the courts regarding the
breadth  of  claims   allowed  or  the  degree  of  protection   afforded  under
biotechnology   patents.  In  addition,   there  is  a  substantial  backlog  of
biotechnology  patent applications at the USPTO and the approval or rejection of
patents may take several years.

CytoGenix's  success will also depend  partly on its ability to operate  without
infringing  upon the  proprietary  rights of others,  as well as its  ability to
prevent others from  infringing on its  proprietary  rights.  The Company may be
required at times to take legal  action to protect its  proprietary  rights and,
despite its best efforts,  the Company may be sued for  infringing on the patent
rights of others.  The  Company has not  received  any  communications  or other
indications  from owners of related  patents or others that such persons believe
the  Company's  products  or  technology  may  infringe  their  patents.  Patent
litigation  is  costly  and,  even if the  Company  prevails,  the  cost of such
litigation could adversely affect its financial  condition.  If the Company does
not  prevail,  in addition to any  damages  the Company  might have to pay,  the
Company could be required to stop the  infringing  activity or obtain a license.
Any required license may not be available to the Company on acceptable terms, or
at all.  If the  Company  fails  to  obtain a  license,  its  business  might be
materially adversely affected.

To help protect its proprietary rights in unpatented trade secrets,  the Company
requires its  employees,  consultants  and  advisors to execute  confidentiality
agreements.  However,  such agreements may not provide the Company with adequate
protection  if  confidential  information  is used or disclosed  improperly.  In
addition, in some situations,  these agreements may conflict with, or be subject
to, the rights of third parties with whom the Company's  employees,  consultants
or advisors have prior employment or consulting  relationships.  Further, others
may independently develop substantially  equivalent proprietary  information and
techniques, or otherwise gain access to the Company's trade secrets.




                                       21
<PAGE>


IF CYTOGENIX'S STRATEGIC  RELATIONSHIPS ARE UNSUCCESSFUL,  ITS BUSINESS COULD BE
HARMED.

The Company's strategic relationship with GE Healthcare and others are important
to its success.  The  development,  improvement and marketing of many of its key
therapeutic  products are or will be  dependent,  in part, on the efforts of the
Company's strategic partners. For example, under the GE Healthcare relationship,
the Company may fail to achieve product  development  milestones;  GE Healthcare
may fail to perform  its  obligations  under the  agreement,  such as failing to
produce an  adequate  supply of  sufficient  quality  raw  materials  to produce
synDNA(TM);  and the agreement  with GE Healthcare may be subject to termination
in the event of a breach. The Company may not be commercially  successful in its
effort to produce and/or sell synDNA(TM).  The transactions  contemplated by its
agreements  with  strategic  partners,   including  equity  purchases  and  cash
payments, are subject to numerous risks and conditions. The occurrence of any of
these events could severely harm CytoGenix's business.

The  Company's  near-term  strategy  is to develop  its own  products as well as
co-develop products with strategic partners,  or to license the marketing rights
for its products to  pharmaceutical  partners after the Company completes one or
more Phase II clinical  trials.  In this manner,  the extensive costs associated
with late-stage clinical  development and marketing will be shared with, or will
be the responsibility of, the Company's strategic partners.

To  fully  realize  the  potential  of  its  products,   including  development,
production  and  marketing,  the Company may need to establish  other  strategic
relationships.

THE COMPANY HAS LIMITED  SALES  CAPABILITY  AND MAY NOT BE ABLE TO  SUCCESSFULLY
COMMERCIALIZE ITS PRODUCTS.

The Company has been  engaged  solely in the  development  of  biopharmaceutical
technology.  Although some of its management  have  experience in  biotechnology
company  operations,  the Company has limited  experience  in  manufacturing  or
selling pharmaceutical products. The Company also has only limited experience in
negotiating and maintaining strategic relationships,  and in conducting clinical
trials and other later-stage phases of the regulatory  approval process.  To the
extent the  Company  relies on  strategic  partners to fully  commercialize  its
products,  the Company will be dependent on their  efforts.  The Company may not
successfully engage in any of these activities.

THE COMPANY MAY BE SUBJECT TO PRODUCT  LIABILITY  LAWSUITS AND ITS INSURANCE MAY
NOT BE ADEQUATE TO COVER DAMAGES.

The Company believes it carries adequate  insurance for the product  development
research it  currently  conducts.  In the future,  when the Company has products
available for commercial sale and use, the use of its products will expose it to
the risk of product  liability  claims.  Although the Company  intends to obtain
product  liability  insurance  coverage,  product  liability  insurance  may not
continue to be available to it on  acceptable  terms and its coverage may not be
sufficient  to cover all claims.  A product  liability  claim,  even one without
merit or for  which  the  Company  has  substantial  coverage,  could  result in


                                    22
<PAGE>


significant legal defense costs, thereby increasing expenses,  lowering earnings
and, depending on revenues, potentially resulting in additional losses.

CONTINUING EFFORTS OF GOVERNMENT AND THIRD PARTY PAYERS TO CONTAIN OR REDUCE THE
COSTS OF HEALTH CARE MAY  ADVERSELY  AFFECT THE  COMPANY'S  REVENUES  AND FUTURE
PROFITABILITY.

In addition to obtaining regulatory approval,  the successful  commercialization
of its products will depend on the Company's ability to obtain reimbursement for
the cost of the product and treatment.  Government  authorities,  private health
insurers and other organizations,  such as health maintenance  organizations are
increasingly  challenging the prices charged for medical  products and services.
Also, the trend toward  managed health care in the United States,  the growth of
healthcare  organizations  such as HMOs,  and  legislative  proposals  to reform
healthcare and government  insurance programs could significantly  influence the
purchase of  healthcare  services  and  products,  resulting in lower prices and
reducing  demand for products.  The cost  containment  measures that  healthcare
providers are instituting  and any healthcare  reform could affect the Company's
ability  to sell  its  products  and  may  have a  material  adverse  effect  on
operations.  Reimbursement in the United States or foreign  countries may not be
available for any of the Company's  products,  any reimbursement  granted may be
reduced or discontinued,  and limits on reimbursement available from third-party
payers may reduce the demand  for,  or the price of, its  products.  The lack or
inadequacy of third-party  reimbursements for its products could have a material
adverse effect on the Company's operations. Additional legislation or regulation
relating to the healthcare  industry or third-party  coverage and  reimbursement
may be enacted in the future that adversely  affects the Company's  products and
its business.

IF  THE  COMPANY  FAILS  TO  ESTABLISH   STRATEGIC   RELATIONSHIPS  WITH  LARGER
PHARMACEUTICAL PARTNERS, ITS BUSINESS MAY SUFFER.

The Company  does not intend to conduct  late-stage  (Phase III) human  clinical
trials on its own. The Company  anticipates  entering  into  relationships  with
larger  pharmaceutical  companies  to  conduct  later  trials  and to market its
products.  The Company also plans to continue to use contract  manufacturing for
late stage clinical and commercial  quantities of its products.  The Company may
be unable to enter into corporate partnerships which could impede its ability to
bring its products to market. Any such corporate partnerships,  if entered into,
may not be on favorable  terms and may not result in the successful  development
or  marketing  of the  Company's  products.  If the Company is  unsuccessful  in
establishing   advantageous   clinical  testing,   manufacturing  and  marketing
relationships,  it is not likely to  generate  significant  revenues  and become
profitable.

RISKS RELATED TO SHARE OWNERSHIP

CYTOGENIX'S  RIGHT TO ISSUE  PREFERRED  STOCK  AND/OR  ITS  CLASSIFIED  BOARD OF
DIRECTORS  MAY DELAY A TAKEOVER  ATTEMPT AND PREVENT OR FRUSTRATE ANY ATTEMPT TO
REPLACE OR REMOVE THE THEN CURRENT MANAGEMENT OF THE COMPANY BY SHAREHOLDERS.

Authorized capital consists of 300,000,000 shares of common stock and 50,000,000
shares of preferred stock. The Company's board of directors, without any further


                                       23
<PAGE>

vote by the  shareholders,  has the authority to issue  preferred  shares and to
determine the price, preference,  rights and restrictions,  including voting and
dividend rights, of these shares.  The rights of the holders of shares of common
stock may be affected by the rights of holders of any preferred  shares that the
board of directors may issue in the future. For example,  the board of directors
may allow the  issuance of  preferred  shares with more  voting  rights,  higher
dividend payments or more favorable rights upon dissolution,  than the shares of
common stock or special rights to elect directors.

The  Company  has a  "classified"  board of  directors,  which  means  that only
one-third of its directors are eligible for election  each year.  Therefore,  if
shareholders wish to change the composition of the Board of Directors,  it could
take at least two years to remove a majority of the existing  directors or three
years to change all  directors.  Having a classified  board of directors may, in
some cases,  delay mergers,  tender offers or other possible  transactions which
may be favored by some or a majority of the Company's shareholders and may delay
or  frustrate  action  by  shareholders  to  change  the then  current  Board of
Directors and management.

CYTOGENIX'S  STOCK PRICE IS VOLATILE AND MAY FLUCTUATE DUE TO FACTORS BEYOND ITS
CONTROL.

Historically,  the market price of the Company's  stock has been highly volatile
as reflected in the table in Part II, Item 5 of this report. The following types
of announcements  could have a significant  impact on the price of the Company's
common stock: positive or negative results of testing and clinical trials by the
Company or its  competitors;  delays in entering  into  corporate  partnerships;
technological  innovations or commercial product introductions by the Company or
its  competitors;  changes in government  regulations;  developments  concerning
proprietary  rights,  including patents and litigation  matters;  public concern
relating to the  commercial  value or safety of any of the  Company's  products;
financing or other corporate transactions; or general stock market conditions.

Further, the stock market experiences significant price and volume fluctuations.
These  fluctuations  have  particularly  affected  the  market  prices of equity
securities  of many  biopharmaceutical  companies  that are not yet  profitable.
Often,   the  effect  on  the  price  of  such   securities   is   unrelated  or
disproportionate  to the operating  performance of such  companies.  These broad
market fluctuations may adversely affect the ability of a shareholder to dispose
of his or her shares at a price  equal to or above the price at which the shares
were purchased.

THE  SIGNIFICANT  NUMBER OF THE  COMPANY'S  SHARES OF COMMON STOCK  ELIGIBLE FOR
FUTURE SALE MAY CAUSE THE PRICE OF ITS COMMON STOCK TO FALL.

The Company has  outstanding  140,663,961  shares of common stock as of December
31,  2006 and  substantially  all are  eligible  for sale  under Rule 144 or are
otherwise freely tradable.

CytoGenix's  employees  have been granted  options to buy a total of  22,179,000
shares of common  stock as of  December  31,  2006.  The  options  granted  have
exercise  prices  between $.185 and $1.01 per share.  The shares of common stock


                                       24
<PAGE>

granted in the options  under the stock option plan have not been  registered as
of December  31, 2006.  The options for these shares may not be exercised  until
such registration.

The Company may issue options to purchase up to an additional  13,821,000 shares
of common stock as of December 31, 2006 under its stock option plans.

Sales of  substantial  amounts of shares into the public  market could lower the
market price of the common stock.

THE COMPANY DOES NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.

The Company has never paid  dividends on its shares of common stock and does not
intend to pay  dividends in the  foreseeable  future.  Therefore,  an investment
should only be made with the  expectation of realizing a return through  capital
appreciation.  An investment should not be made with the expectation of dividend
income.


ITEM 1B. UNRESOLVED STAFF COMMENTS

None


ITEM 2.  DESCRIPTION OF PROPERTY

The Company's  corporate  executive offices are located at 3100 Wilcrest,  Suite
140, Houston,  Texas 77042. The Company has occupied  approximately  6000 square
feet of executive  office and laboratory space since December 2003. The facility
is in new condition and is adequate for the Company's current  operations.  Rent
on the  facility  averages  to be $5,701  per  month  with a lease  term  ending
September 2009. The Company  believes it's current and contracted for facilities
are suitable and adequate  for its present and  foreseeable  future  operational
requirements.

ITEM 3.  LEGAL PROCEEDINGS

PHANUEL PURSUITS, LLC

Phanuel  Pursuits  - Suit was filed in  October  2004  claiming  that  CytoGenix
(licensor) had breached a license agreement with Phanuel Pursuits (licensee) for
use  of  the  CytoGenix  ssDNA  expression  technology  in  Indian  and  Chinese
therapeutics.  The licenses were dependent upon foreign regulatory approval. The
case was dismissed  prior to trial for lack of evidence and no appeal was filed.
Action on this matter was therefore finalized in March of 2006.

WILLIAM B. WALDROFF AND APPLIED VETERINARY GENOMICS, INC. V. CYTOGENIX, INC.

Waldroff and Applied Veterinary  Genomics,  Inc. - Litigation initiated in March
2004 over the validity of license  agreements  between CytoGenix  (licensor) and
William Waldroff (licensee) for use of CytoGenix ssDNA expression  technology in


                                       25
<PAGE>

shrimp and horse  therapeutic  applications.  AVGI, as sublicensee,  was a third
party in this action.  A jury trial held in February 2005 resulted in entry of a
judgment against CytoGenix requiring performance on the contracts and payment of
attorney  fees.  CytoGenix  subsequently  appealed this decision and in December
2006 the 1st Court of Appeals  reversed the trial court's  judgment,  finding no
need for  CytoGenix to perform on the  contracts and no need for either party to
pay the opposing party's attorney fees. Waldroff and Applied Veterinary Genomics
filed a motion for a rehearing  and  CytoGenix  filed a timely  response to that
motion. On March 3, 2007, the Court of Appeals denied Waldroff/AVGI's Motion for
Rehearing. As of the date of this filing, Waldroff/AVGI has not filed a petition
for review by the Supreme Court of Texas.

DEFAMATORY ACTIONS

The Company is actively  pursuing legal action against various parties  involved
in the  posting of  defamatory  comments  about the  Company  and several of its
officers on public  investor  chat-room  websites.  A  settlement  proposal  was
completed with one of the parties who has published an apology on Investor's Hub
(www.investorshub.com)

EMPLOYMENT ACTIONS

In  November  of 2006,  the  former  Chief  Financial  Officer  (CFO),  Lawrence
Wunderlich,  and the former  Chief  Operations  Officer  (COO),  Frank  Vazquez,
resigned  from the  Company.  The  Company  and former  officers  are  currently
pursuing  arbitration  to resolve  claims by Messrs  Vazquez and  Wunderlich and
counterclaims  by  the  Company.   In  conjunction  with  the  former  officers'
resignations,  the  former  CFO  filed a SOX  Whistleblower  Complaint  with the
Department  of Labor in January of 2007.  The action is against  the Company and
the Chief Executive Officer, Malcolm Skolnick. The SEC has requested information
from the Company  addressing  the  allegations  and the Company has responded in
compliance  with that  request.  The Company's  Board of Directors  instituted a
special  committee of independent  directors who have appointed an  independent,
outside  counsel to conduct an independent  investigation.  As of March 30, 2007
this  investigation is in progress.  Management intends to vigorously defend the
actions brought by the former CFO and COO.

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

There were no  matters  submitted  to a vote of  securities  holders  during the
fourth quarter of our fiscal year ended December 31, 2006.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Authorized  capital stock  consists of 300,000,000  shares of common stock,  par
value $0.001 per share,  and  50,000,000  shares of preferred  stock,  par value
$0.001 per share. There were 140,663,961 shares of common stock and no shares of
preferred stock  outstanding as of March 16, 2007. The Company's common stock is
traded on the NASDAQ, OTC Bulletin Board under the ticker symbol CYGX.OB.


                                       26
<PAGE>


The high and low bid  prices for the  Company's  common  stock for each  quarter
within the last two fiscal years, as quoted by the OTC Bulletin  Board,  were as
follows.  The quotations reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.



Fiscal Year Ending December 31, 2004
Quarter 1                                               $0.94             $0.55
Quarter 2                                               $0.80             $0.41
Quarter 3                                               $0.45             $0.21
Quarter 4                                               $0.81             $0.22

Fiscal Year Ending December 31, 2005
Quarter 1                                               $0.95             $0.43
Quarter 2                                               $0.79             $0.46
Quarter 3                                               $0.67             $0.34
Quarter 4                                               $1.15             $0.44

Fiscal Year Ending December 31, 2006
Quarter 1                                               $1.54             $0.73
Quarter 2                                               $1.54             $0.85
Quarter 3                                               $1.09             $0.67
Quarter 4                                               $0.88             $0.56
===============================================================================
Quarter 1 to March 19, 2007                             $0.66             $0.37
STOCKHOLDERS

As of March 19,  2007 there were  approximately  660  shareholders  of record of
Common Stock, one of which is Cede & Co., a nominee for Depository Trust Company
(or DTC). All of the shares of Common Stock held by brokerage firms,  banks, and
other  financial  institutions  as nominees for beneficial  owners are deposited
into  participant  accounts at DTC, and are  considered  to be held of record by
Cede & Co. as one  shareholder.  The Company has not paid any  dividends  on its
Common  Stock and the Board  does not  intend to declare  any  dividends  in the
foreseeable future.

CHANGES IN SECURITIES

All of the  Company's  securities  sold during 2006 have been either  previously
reported on its Form 10-Qs and Form 8-Ks filed with the  Securities and Exchange
Commission.

The  Company   issued   966,751   shares  of  common  stock  to  individuals  in
consideration for their services in a $.40 per share private placement completed
in the fourth  quarter of 2006. The shares were recorded as a cost of capital in
conjunction with the fourth quarter fundraising.




                                       27
<PAGE>

<TABLE>



ITEM 6.  SELECTED FINANCIAL DATA
----------------------------------------------------

The following selected financial data should be read in conjunction with Item 7.
"Management's   Discussion   and  Analysis  or  Plan  of  Operation"   and  Item
8."Financial Statements."

Operating Data:                                               As of December 31,

                                            2006          2005             2004         2003            2002
                                            ----          ----             ----         ----            ----
<S>                                                                   <C>            <C>            <C>
Gross Margin                            $    31,446    $      --      $      --      $  (184,893)   $     1,700

Research and Development                 (2,199,148)    (1,724,317)      (831,472)      (454,433)      (187,040)

General and administrative               (1,534,830)    (1,495,454)    (1,434,893)    (1,213,780)    (1,386,218)

Consulting Expense                         (345,637)      (290,000)       (60,926)      (415,869)      (816,947)

Depreciation                                (48,754)       (25,391)       (38,125)       (38,445)       (40,699)

Other Income/ Expense                         1,389          2,037             40         (9,805)          --
                                        -----------    -----------    -----------    -----------    -----------
Net Loss                                 (4,095,534)    (3,533,125)    (2,365,376)    (2,317,225)    (2,429,204)

Weighted Average number of common
 shares outstanding basic and diluted   $     (0.03)   $     (0.03)   $     (0.02)   $     (0.03)   $     (0.04)

Balance sheet data:
     Cash and Cash Equivalents            2,854,197      1,307,965        453,235        236,962           --
     Capital Expenditures                   254,846         16,987         12,964         45,358         10,387
     Working Capital                      2,030,112        226,930       (586,518)      (339,866)      (658,541)
     Total assets                         4,209,684      1,509,948        524,693        353,958        101,329
     Total liabilities                    1,307,931      1,102,427      1,039,753        597,202        666,755
     Shareholders' Equity                 2,901,753        407,525       (515,060)      (243,244)      (565,426)
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD-LOOKING INFORMATION

This report contains  forward-looking  statements regarding the Company's plans,
expectations, estimates and beliefs. Actual results could differ materially from
those   discussed   in,  or  implied  by,  these   forward-looking   statements.
Forward-looking   statements   are   identified  by  words  such  as  "believe,"
"anticipate,"  "expect,"  "intend,"  "plan,"  "will,"  "may," and other  similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements.  The Company has based these  forward-looking  statements largely on
its expectations. Forward-looking statements in this report include, but are not
necessarily limited to, those relating to the Company's:
          o    intention to introduce new products,
          o    receipt of any required FDA or other regulatory  approval for its
               products,
          o    expectations about the markets for its products,



                                       28
<PAGE>

          o    acceptance of its products, when introduced, in the marketplace,
          o    future capital needs, and
          o    success of its patent applications.

Forward-looking  statements are subject to risks and  uncertainties,  certain of
which are beyond the Company's  control.  Actual results could differ materially
from  those  anticipated  as a result  of the  factors  described  in the  "Risk
Factors" and detailed in the Company's other Securities and Exchange  Commission
filings, including among others:

          o    the  effect  of  regulation  by the  FDA and  other  governmental
               agencies,
          o    delays in obtaining,  or its inability to obtain, approval by the
               FDA or other regulatory authorities for its products,
          o    research and development efforts, including delays in developing,
               or the failure to develop, its products,
          o    the development of competing or more effective  products by other
               parties,
          o    the results of pre-clinical and clinical testing,
          o    uncertainty of market of acceptance of its products,
          o    problems  that  it may  face  in  manufacturing,  marketing,  and
               distributing its products,
          o    inability to raise additional capital when needed,
          o    delays in the issuance of, or the failure to obtain,  patents for
               certain of its products and technologies, and
          o    problems with important suppliers and business partners.

Because  of these  risks  and  uncertainties,  the  forward-looking  events  and
circumstances  discussed in this report or  incorporated  by reference might not
transpire.  Factors that cause actual results or conditions to differ from those
anticipated  by these and other  forward-looking  statements  include those more
fully described in the "Risk Factors" section and elsewhere in this report.

OVERVIEW

From its inception in 1995,  the Company has devoted its resources  primarily to
fund its research and  development  efforts.  The Company has been  unprofitable
since  inception  and, other than limited  interest and grant  revenue,  has had
minimal  revenues  from the sale of  products  and other  sources.  The  Company
anticipates an increase in revenues for 2007. The Company expects to continue to
incur losses for the  foreseeable  future as it continues to expand its research
and  development  efforts  and enter  additional  collaborative  efforts.  As of
December 31, 2006, the Company's accumulated deficit was $27,153,588.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005

For the year  ended  December  31,  2006,  the  Company  reported  a net loss of
$4,095,534,  or less than $0.03 per share,  and  $76,993 of revenue as  compared
with a net loss of $3,533,125,  or less than $0.03 per share, and no revenue for
the twelve months ended December 31, 2005.


                                       29
<PAGE>


Research and Development  Expenses.  Research and development expenses increased
approximately  28% to $2,199,148  for the twelve months ended  December 31, 2006
compared to  $1,724,317  for the same period in 2005  primarily due to increased
research  activity and consultant  assistance in obtaining  communications  with
several  federal  agencies of the US Government.  Approximately  $310,660 of the
additional amount results from the increased activity costs of antibacterial and
DNA vaccine research and the remaining  $164,171 of the increase were additional
costs incurred for R&D consultants.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased to $1,534,830  for the twelve months ended  December 31, 2006 compared
to  $1,495,454  for the same  period in 2005.  The  increase  of  $39,376 is due
primarily  to  the  increased  costs  in  accounting  fees  for   Sarbanes-Oxley
compliance.

Consulting  Expenses.  Consulting  expenses increased to $345,637 for the twelve
months ended December 31, 2006 compared to $290,000 for the same period in 2005.
This  increase is primarily  attributed  to the  services of Jacobs  Engineering
relating to the  proposed  construction  of office and  manufacturing  facility.
Other  costs  included  commissions  paid for  synDNA(TM)  sales  referrals  and
consulting cost used to evaluate  development of existing research platforms and
business  directives for the Company.  In 2006 the Company issued 320,000 shares
of  common  stock  valued  at $.86 per  share for  services  for  preparing  and
coordinating  with the Company and others in the  development of business plans,
investor  presentations,  and financial models, which represents $275,200 of the
$345,637.  In 2005,  the Company issued 500,000 shares of common stock valued at
$.58 per share for service for preparing and  coordinating  with the Company and
others  in the  development  of  business  plans,  investor  presentations,  and
financial models, which represents the entire $290,000.

Depreciation and Amortization  Expense.  Depreciation and amortization  expenses
increased to $48,754 for the twelve  months ended  December 31, 2006 compared to
$25,391 for the same period in 2005  primarily  due to  equipment  purchased  to
expand the lab to accommodate synDNA(TM) sales production.  In 2006, the Company
also installed a new server to optimize security and data retention.

YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004

For the year  ended  December  31,  2005,  the  Company  reported  a net loss of
$3,533,125,  or less than $0.03 per share, and no revenue as compared with a net
loss of $2,365,376,  or less than $0.02 per share, and no revenue for the twelve
months ended December 31, 2004.

Research and Development  Expenses.  Research and development expenses increased
to $1,724,317 for the twelve months ended December 31, 2005 compared to $831,472
for the same period in 2004  primarily due to hiring of additional R&D employees
and increased  research  activity.  Approximately  $673,000 of the increase is a
result of the increased staff and the remaining $220,000 of the increase results
from the increased activity cost of antibacterial and DNA vaccine research.


                                       30
<PAGE>


General  and  Administrative  Expenses.   General  and  administrative  expenses
increased to $1,495,454  for the twelve months ended  December 31, 2005 compared
to $1,434,893 for the same period in 2004. The increase  includes an increase in
legal fees of $244,000,  of which $199,000 is due to increased  patent  attorney
fees and litigation fees for the legal  proceeding  described in Part II, Item 3
above. An increase in staff along with increases in officer salaries contributed
to an  increase  of  $305,000  in payroll  costs.  These  costs were offset by a
decrease in third party investor relations and advertising fees of approximately
$489,000.

Consulting  Expenses.  Consulting  expenses increased to $290,000 for the twelve
months ended  December 31, 2005 compared to $60,926 for the same period in 2004.
This increase is primarily  attributed to a one year  consulting  contract where
CytoGenix engaged a firm to consult on various investor  relations and financial
business matters.

Depreciation and Amortization  Expenses.  Depreciation and amortization expenses
decreased to $25,391 for the twelve  months ended  December 31, 2005 compared to
$38,125  for  the  same  period  in 2004  primarily  due to  office  furnishings
purchased in previous years becoming fully depreciated in 2005.


LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations since inception primarily through equity
sales totaling  $17,000,000,  and from grants and contract  research  funding of
$200,000 from various  sources.  The Company expects to continue to incur losses
as it expands its research and  development  activities  and related  regulatory
work and increases its  collaborative  efforts.  For 2007,  the Company  expects
expenditures  for  operations,  including  its  collaborative  efforts,  and its
building of a GMP facility to be  approximately  $5 to $6 million.  The increase
compared to 2006  expenditures  is  expected  to result from the  purchase of an
additional  building for the GMP facility  coupled  with  additional  production
staff and expansion of preclinical product development efforts. However, if need
be in 2007, the Company could reduce its expenditures  because the vast majority
of  its  costs  are  variable.  Those  estimated  expenditures  include  amounts
necessary to fulfill its obligations under various  collaborative,  research and
licensing agreements during 2007.

On December 4, 2006, Lawrence  Wunderlich,  the Company's former Chief Financial
Officer and a former  director,  and Frank Vazquez,  the Company's  former chief
operating  officer and a former  director,  filed a complaint  with the American
Arbitration Association to recover over $800,000 in severance payments that they
allege the Company owes them.  In the event Messrs.  Wunderlich  and Vazquez are
successful  in their claims  against the Company or the dispute  continues for a
lengthy period of time, which would result in the Company  incurring  additional
legal fees  defending  itself,  it would have a material  adverse  impact on the
liquidity  of the  Company.  See Part I, Item 3,  Legal  Proceedings  for a more
detailed description of this dispute.

Because  of the  cost  (up to  $1.7  billion)  and  timeframe  (up to 15  years)
traditionally  associated  with  developing a potential  drug or  pharmaceutical
product  to where  FDA  approval  for human  sales is  received,  the  Company's
business strategy is to develop its products to initial Phase III human clinical


                                       31
<PAGE>

trials  and look for third  parties to fund  completion  of  development  of the
product  and  market  the  product  through  strategic   partnerships,   license
agreements or other relationships.  The Company also looks for collaborative and
other  efforts  utilizing  its  technology to increase  shareholder  value.  The
Company  currently  uses this strategy to limit the  potential  cost the Company
would incur in  developing a product.  The  Company's  expected  costs under our
various contracts and for various drug development products can be estimated for
the  next  year or two,  but not much  beyond  that  due to the  uncertainty  of
clinical  trial  results and research  results.  Because of the various  factors
noted above and the  expectation  that,  until the Company  establishes  revenue
sources,  the  Company  will  license  to, or jointly  develop  its  prospective
products with, strategic partners, the Company reviews, at least annually,  each
research  program and clinical  trial,  based on results and progress during the
prior  year and  estimates  its needs for that  program  or trial for the coming
year,  making  adjustments based on the progress of the program during the year.
The Company does not set long-term  development budgets or development schedules
for bringing  its  products to market or track its  research  costs on a product
basis.

Cash and cash  equivalents  were $2,854,197 at December 31, 2006,  compared with
$1,307,965 at December 31, 2005. The increase of $1,546,232 was due primarily to
net proceeds from a private  placement of 10,369,990  shares of its common stock
at $.40 per share.  The sale closed  November 30, 2006. The securities were sold
in a private  placement to accredited  investors  pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.

To fund operations in 2007 and beyond the Company will need to raise  additional
capital.  The Company  will  continue to look for  opportunities  to finance its
ongoing  activities and operations  through accessing  corporate partners or the
equity markets,  as the Company  currently has no credit facility,  nor does the
Company currently intend to seek one.

CONTRACTUAL PAYMENT OBLIGATIONS

The Company's off-balance sheet arrangements are limited to rents on its primary
facility.  These  off-balance  sheet  arrangements  are expensed as incurred.  A
summary of contractual commitments and obligations as of December 31, 2006 is as
follows:

                             PAYMENTS DUE BY PERIOD

CONTRACTUAL
OBLIGATION                       Total        2007        2008          2009

Operating leases              $  228,390   $   74,806   $   76,792   $   76,792
GSL Earnest Money Contract    $3,322,315   $  474,572   $2,847,743   $     --

The Company's future  expenditures and capital  requirements  depend on numerous
factors,  most of  which  are  difficult  to  project  beyond  the  short  term,
including,   without  limitation,  the  progress  of  research  and  development
programs,  the progress of pre-clinical and clinical trials,  the time and costs
involved in obtaining  regulatory  approvals,  the cost of filing,  prosecuting,
defending  and  enforcing  any  patent  claims and other  intellectual  property
rights,  competing  technological  and  market  developments,   its  ability  to
establish collaborative arrangements and the terms of any such arrangements, and
the costs associated with  commercialization of its products.  Cash requirements


                                       32
<PAGE>

are  expected  to continue  to  increase  each year as the  Company  expands its
activities and operations. There can be no assurance,  however, that the Company
will  ever  be  able  to  generate   product  revenues  or  achieve  or  sustain
profitability.

NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in GAAP, and expands  disclosures  about fair
value measurements.  This statement is effective for financial statements issued
for fiscal years  beginning  after  November 15, 2007.  Management  is currently
evaluating  the  impact  SFAS  No.  157  will  have on the  Company's  financial
position, results of operations, and cash flows.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - including  an amendment of FASB
statement No. 115." This Statement  permits all entities to choose, at specified
election  dates,  to measure  eligible  items at fair  value  (the  "fair  value
option").  A business entity shall report  unrealized  gains and losses on items
for which the fair  value  option  has been  elected  in  earnings  (or  another
performance  indicator if the business entity does not report  earnings) at each
subsequent reporting date. Upfront costs and fees related to items for which the
fair value option is elected shall be recognized in earnings as incurred and not
deferred.  If an entity elects the fair value option for a  held-to-maturity  or
available-for-sale  security in conjunction with the adoption of this Statement,
that security shall be reported as a trading  security under  Statement 115, but
the accounting for a transfer to the trading  category under  paragraph 15(b) of
Statement  115 does not apply.  Electing  the fair value  option for an existing
held-to-maturity security will not call into question the intent of an entity to
hold  other debt  securities  to  maturity  in the  future.  This  statement  is
effective as of the first fiscal year that begins after  November 15, 2007.  The
Company is currently  analyzing  the effects of SFAS 159 but does not expect its
implementation  will  have  a  significant  impact  on the  Company's  financial
condition or results of operations.

In July 2006, the FASB issued FASB Interpretation  ("FIN") No. 48 Accounting for
Uncertainly in Income Taxes - An  Interpretation  of FASB Statement No. 109. FIN
48  prescribes  detailed  guidance  for  the  financial  statement  recognition,
measurement,  and  disclosure  of  uncertain  tax  positions  recognized  in  an
enterprise's  financial  statements in accordance with SFAS No. 109,  Accounting
for Income Taxes.  Tax positions  must meet a  more-likely-than-not  recognition
threshold at the effective date to be recognized upon the adoption of FIN 48 and
in subsequent periods. FIN 48 will be effective for fiscal years beginning after
December 15, 2006, and the provisions of FIN 48 will be applied to all positions
upon the adoption of the Interpretation.  The cumulative effect of this applying
the provisions of this  Interpretation  will be reported as an adjustment to the
opening  balance of  retained  earnings  for that  fiscal  year.  Management  is
currently  evaluating the impact of FIN 48 on the financial  statements but does
not  believe  that its  adoption  will have a material  effect on the  Company's
financial position, results of operations, or cash flows.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering
the  Effects of Prior  Year  Misstatements  when  quantifying  Misstatements  in


                                       33
<PAGE>

Current Year Financial  Statements  ("SAB 108").  SAB 108 requires  companies to
evaluate the  materiality  of  identified  unadjusted  errors on each  financial
statement and related  financial  statement  disclosure  using both the rollover
approach and the iron curtain  approach,  as those terms are defined in SAB 108.
The rollover approach quantifies  misstatements based on the amount of the error
in the current  year  financial  statement,  whereas the iron  curtain  approach
quantifies  misstatements  based on the effects of correcting  the  misstatement
existing in the balance  sheet at the end of the current year,  irrespective  of
the  misstatement's  year(s)  of  origin.  Financial  statements  would  require
adjustment  when either approach  results in quantifying a misstatement  that is
material. Correcting prior year financial statements for immaterial errors would
not require previously filed reports to be amended. If a Company determines that
an  adjustment to prior year  financial  statements is required upon adoption of
SAB 108 and does not elect to restate its previous financial statements, then it
must  recognize  the  cumulative  effect  of  applying  SAB 108 in  fiscal  2006
beginning  balances of the affected assets and liabilities  with a corresponding
adjustment to the fiscal 2006 opening balance in retained  earnings.  SAB 108 is
effective for interim periods of the first fiscal year ending after November 15,
2006,  and will be adopted  by the  Company  in the first  quarter of 2007.  The
Company does not expect the adoption of this interpretation to have an impact on
its financial position or results of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of the Company's  financial condition and results of
operations are based upon its financial statements,  which have been prepared in
accordance with accounting  principles  generally accepted in the 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
ongoing basis, the Company  evaluates its estimates,  including those related to
valuation  of  investments,  long-lived  assets,  and revenue  recognition.  The
Company  bases their  estimates on  historical  experience  and on various other
assumptions.  Actual  results may differ from these  estimates  under  different
assumptions  or  conditions.   The  Company  believes  the  following   critical
accounting   policies  and  the  related  judgments  and  estimates  affect  the
preparation of its financial statements.
Cash and Cash Equivalents

Cash and cash  equivalents  include  highly liquid,  temporary cash  investments
having original maturity dates of three months or less. For reporting  purposes,
such  cash   equivalents  are  stated  at  cost  plus  accrued   interest  which
approximates fair value.

Accounts Receivable

The  company's  accounts  receivable  primarily  consist  of trade  receivables.
Management  reviews  accounts  receivable on a monthly basis to determine if any
receivables will potentially be uncollectible. The company includes any accounts
receivable balances that are determined to be uncollectible in its allowance for
doubtful  accounts.  As of December 31, 2006 and 2005 the allowance for doubtful
accounts is zero.

Inventory


                                       34
<PAGE>


Inventory  includes raw materials  (liquid buffers and enzyme mix) that are used
to produce  enzymatically  synthesized DNA (synDNA(TM)).  Inventory is stated at
the lower of cost or market, cost being determined using the first-in, first out
("FIFO")  method.  Reserves are established for excess or obsolete  inventories.
Inventory is included in the cost of revenue when sold.

Property and Equipment

Property and equipment is recorded at cost and  depreciation  is computed  using
the straight-line method over the useful lives of the assets. Major renewals and
improvements are capitalized;  minor  replacements,  maintenance and repairs are
charged to current operations.

Impairment of Long-lived Assets

CytoGenix  performs  reviews for the  impairment of long-lived  assets  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.

Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment of or Disposal of Long-Lived  Assets,  sets forth guidance as to when
to  recognize  an  impairment  of  long-lived  assets  and how to  measure  such
impairment.  The standards  require  certain  assets be reviewed for  impairment
whenever  events  or  circumstances  indicate  the  carrying  amount  may not be
recoverable.

Revenue Recognition

CytoGenix's  revenues are primarily derived from selling  synDNA(TM).  CytoGenix
recognizes revenue when persuasive evidence of an arrangement  exists,  delivery
has occurred,  the sales price is fixed or determinable  and  collectibility  is
probable.

Research and Development

Internal research and development  costs are expensed as incurred.  Research and
development  costs include salaries and  personnel-related  costs,  supplies and
materials,  facility  costs,  depreciation  of  facility  property,  and outside
services required to conduct the preclinical development.

Income Taxes

The  asset  and  liability  approach  is used to  account  for  income  taxes by
recognizing  deferred tax assets and  liabilities  for the  expected  future tax
consequences of temporary  differences  between the carrying amounts and the tax
bases of assets and  liabilities.  CytoGenix  records a valuation  allowance  to
reduce the  deferred tax assets to the amount that is more likely than not to be
realized.

Earnings Per Common Share



                                       35
<PAGE>


Basic and  diluted  net loss per share  excludes  dilution  and is  computed  by
dividing net loss by the weighted  average  number of common shares  outstanding
for the period presented

Stock-Based Compensation

Effective  January  1,  2006,  the  Company  adopted  SFAS  No.  123  (revised),
"Share-Based Payment" (SFAS 123(R)) utilizing the modified prospective approach.
Prior to the  adoption of SFAS 123(R) we  accounted  for stock  option  grant in
accordance with APB Opinion No. 25,  "Accounting for Stock Issued to Employees,"
and accordingly,  recognized  compensation expense for stock option grants using
the intrinsic value method.

Under the modified prospective  approach,  SFAS 123(R) applies to new awards and
to awards  that  were  outstanding  on  January  1,  2006 that are  subsequently
modified,  repurchased or cancelled.  Under the modified  prospective  approach,
compensation  cost  recognized  in the first  quarter  of fiscal  2006  includes
compensation  cost for all  share-based  payments  granted prior to, but not yet
vested as of January 1, 2006,  based on the grant-date  fair value  estimated in
accordance with the original  provisions of SFAS 123, and compensation  cost for
all  share-based  payments  granted  subsequent  to January 1, 2006 based on the
grant-date  fair value  estimated  in  accordance  with the  provisions  of SFAS
123(R).  For all quarters  after the first quarter of fiscal 2006,  compensation
costs recognized will include  compensation  costs for all share-based  payments
granted  based on the grant date fair value  estimated  in  accordance  with the
provisions of SFAS 123(R). As of December 31, 2006 no options have been granted.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2006 the Company has a restricted long-term CD investment for
the Waldroff litigation matter discussed in Note 8 to the financial  statements.
Pending  appeal of this case  CytoGenix  has  established  a long-term CD in the
amount of $115,500 to comply. This CD earns interest at a rate of 3.4% annually.
This CD must be  maintained  until a  mandate  is  issued  by the 1st  Court  of
Appeals. Only upon issuance of the mandate can we petition for the refund of the
CD.











                                       36
<PAGE>



ITEM 8.  FINANCIAL STATEMENTS


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of CytoGenix, Inc.


We  have  audited   management's   assessment,   included  in  the  accompanying
Management's  Report  on  Internal  Control  Over  Financial   Reporting,   that
CytoGenix,  Inc.  did not maintain  effective  internal  control over  financial
reporting as of December 31, 2006, because of the effect of significant  control
deficiencies  which,  collectively,  represent  a  material  weakness,  based on
criteria  established in Internal  Control--Integrated  Framework  issued by the
Committee  of  Sponsoring   Organization  of  the  Treadway  Commission  (COSO).
CytoGenix,  Inc.'s management is responsible for maintaining  effective internal
control over financial  reporting and for its assessment of the effectiveness of
internal control over financial  reporting.  Our responsibility is to express an
opinion on management's  assessment and an opinion on the  effectiveness  of the
company's internal control over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with U.S. generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) 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 financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, 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.

A  material  weakness  is  a  control  deficiency,  or  combination  of  control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented


                                       37
<PAGE>

or  detected.   The  following  control   deficiencies  which,  in  combination,
constitute a material weakness have been identified and included in management's
assessment:

          o    The Company has  inadequate  segregation of duties within various
               accounting  processes and lacks  sufficient  monitoring  controls
               over  these  processes  to  mitigate  the  risk.  The  accounting
               processes  lacking  sufficient  monitoring  controls  include the
               signing of checks, bank statement  reconciliation,  and review of
               data used to prepare the financial statements.
          o    The Company lacks  procedures to properly account for non-routine
               or complex accounting issues.
          o    The Company lacks controls to ensure that agreements are provided
               to, and reviewed by, accounting and financial reporting personnel
               on a timely basis.
          o    The  Company  lacks a  well-defined  process  for  the  financial
               reporting  process  including  review and approvals.  There is no
               standard and consistent financial reporting package; there is not
               a  process  in  place  for  evaluating   alternative   accounting
               treatments for significant  transactions  that are documented and
               approved  by   management;   there  are  no  formal  or  informal
               procedures  for journal entry  review,  and no formal or informal
               procedures to ensure the  completeness  and accuracy of financial
               statement disclosures.


This material  weakness was considered in determining  the nature,  timing,  and
extent of audit tests applied in our audit of the 2006 financial statements, and
this report does not affect our report  dated March 12, 2007 on those  financial
statements.

In our opinion,  management's  assessment that CytoGenix,  Inc. did not maintain
effective internal control over financial  reporting as of December 31, 2006, is
fairly  stated,  in all  material  respects,  based on criteria  established  in
Internal  Control--Integrated  Framework  issued by the  Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  Also, in our opinion,  because
of the effect of the material weakness described above on the achievement of the
objectives of the control criteria, CytoGenix, Inc. has not maintained effective
internal  control over  financial  reporting  as of December 31, 2006,  based on
criteria  established in Internal  Control--Integrated  Framework  issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).


/s/ LBB & Associates Ltd., LLP
------------------------------
LBB & Associates Ltd., LLP
Houston, TX
March 12, 2007










                                       38
<PAGE>





        MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

Board of Directors and Shareholders of Cytogenix, Inc.

The  Management  of  CytoGenix,   Inc.  (the   "Company")  is  responsible   for
establishing and maintaining  adequate internal control over financial reporting
for the Company.  The Company's  internal control over financial  reporting is a
process designed to provide  reasonable  assurance  regarding the reliability of
financial  reporting and the  preparation  of financial  statements for external
purposes in accordance with U. S. generally accepted accounting principles.  The
Company's internal control over financial  reporting includes those policies and
procedures  that: (i) pertain to the  maintenance of records that, in reasonable
detail,  accurately and fairly reflect the  transactions and dispositions of the
assets of the Company,  (ii) provide reasonable  assurance that transactions are
recorded as necessary to permit preparation of financial statement in accordance
with U. S.  generally  accepted  accounting  principles,  and that  receipts and
expenditures   of  the   Company  are  being  made  only  in   accordance   with
authorizations  of management  and  directors of the Company;  and (iii) provide
reasonable  assurance  regarding  prevention of timely detection of unauthorized
acquisition,  use or  disposition  of the  Company's  assets  that  could have a
material effect on the financial statements.

All  internal  control  systems,  no matter  how well  designed,  have  inherent
limitations,  Therefore,  even those systems  determined to be effective may not
prevent or detect misstatements.

The Company's  management  assessed the effectiveness of the Company's  internal
control over financial reporting as of December 31, 2006, utilizing the criteria
set  forth  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway
Commission  ("COSO")  in  Internal  Control-Integrated  Framework.  Management's
assessment included evaluating the design of the Company's internal control over
financial  reporting and testing the operational  effectiveness of the Company's
internal control over financial reporting.

A  material  weakness  is  a  control  deficiency,  or  combination  of  control
deficiencies,  that  results in a more than  remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  The Company identified the following control  deficiencies  which,
together,  constitute a material  weakness in the  Company's  assessment  of the
effectiveness  of internal  control over financial  reporting as of December 31,
2006:

          o    The Company has  inadequate  segregation of duties within various
               accounting  processes and lacks  sufficient  monitoring  controls
               over  these  processes  to  mitigate  the  risk.  The  accounting
               processes  lacking  sufficient  monitoring  controls  include the
               signing of checks, bank statement  reconciliation,  and review of
               data used to prepare the financial statements.
          o    The Company lacks  procedures to properly account for non-routine
               or complex accounting issues.



                                       39
<PAGE>

          o    The Company lacks controls to ensure that agreements are provided
               to, and reviewed by, accounting and financial reporting personnel
               on a timely basis.
          o    The Company lacks a well-defined process for financial reporting,
               including  review  and  approvals.   There  is  no  standard  and
               consistent financial reporting package; there is not a process in
               place  for  evaluating   alternative  accounting  treatments  for
               significant  transactions  that are  documented  and  approved by
               management;  there  are no  formal  or  informal  procedures  for
               journal  entry  review,  and no formal or informal  procedures to
               ensure the  completeness  and  accuracy  of  financial  statement
               disclosures.

Because of the aforementioned control deficiencies,  which together constitute a
material  weakness,  the Company's  management  has concluded that the Company's
internal  control over  financial  reporting was  ineffective as of December 31,
2006.

The Company is in the process of remediating its control deficiencies.  However,
the material weakness in internal control over financial reporting that has been
identified  will  not  be  remediated  until  numerous   internal  controls  are
implemented  and  operate for a period of time,  are tested,  and the Company is
able  to  conclude  that  such  internal  controls  are  operating  effectively.
Effective  with the first  quarter  in 2007,  the  Company  has (i)  implemented
increased segregation of duties between the check issuance, the check signature,
and  the  bank  statement   reconciliation   functions,   (ii)  implemented  the
requirement for greater documentation for all expenditures,  including approvals
by division  manager  and CEO under  certain  circumstances,  and (iii) hired an
outside  financial  reporting  consultant  to review the financial  data used to
prepare the financial  statements.  The Company  cannot  provide  assurance that
these  procedures  will be successful in  identifying  material  errors that may
exist in the financial  statements.  The Company cannot make  assurances that it
will not identify  additional  material  weaknesses in its internal control over
financial reporting in the future.

Management's  assessment of the effectiveness of the Company's  internal control
over  financial  reporting  as of December  31,  2006 has been  audited by LBB &
Associates Ltd., LLP, the Company's  independent  registered  public  accounting
firm, as stated in their report included in this Annual Report on Form 10-K.

CytoGenix, Inc.

/s/  MALCOLM SKOLNICK
---------------------
     Malcolm Skolnick
     PRESIDENT & CEO/(PRINCIPAL EXECUTIVE OFFICER)

/s/  PAM SCHERTZ
----------------
     Pam Schertz
     CHIEF FINANCIAL OFFICER







                                       40
<PAGE>





             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of CytoGenix, Inc.


We have  audited  the  accompanying  balance  sheets of  CytoGenix,  Inc.  as of
December  31,  2006  and  2005,  and  the  related   statements  of  operations,
stockholders'  equity  (deficit),  and cash  flows  for each of the years in the
three-year  period ended December 31, 2006.  These financial  statements are the
responsibility of the company's management.  Our responsibility is to express an
opinion  on these  financial  statements  based  on our  audits.  The  financial
statements for the period  February 10, 1995  (inception)  through  December 31,
2002,  were  audited  by other  auditors  whose  reports  expressed  unqualified
opinions on those statements.  The financial  statements for the period February
10, 1995 (inception)  through December 31, 2002,  include total revenues and net
loss of $2,575 and $14,842,328,  respectively.  Our opinion on the statements of
operations,  stockholders'  equity  (deficit),  and cash  flows  for the  period
February 10, 1995 (inception)  through December 31, 2006,  insofar as it relates
to amounts for prior periods  through  December 31, 2002, is based solely on the
report of other auditors.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of CytoGenix,  Inc. as of December
31, 2006 and 2005, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the financial  statements,  the  Company's  absence of
significant  revenues,  recurring  losses  from  operations,  and its  need  for
additional  financing  in  order  to fund  its  projected  loss  in  2007  raise
substantial  doubt about its ability to  continue as a going  concern.  The 2006
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United  States),  the  effectiveness  of CytoGenix,
Inc.'s internal control over financial  reporting as of December 31, 2006, based
on criteria established in Internal Control--Integrated  Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated March 12, 2007  expressed an  unqualified  opinion on  management's
assessment of internal  control over financial  reporting and an adverse opinion
on the effectiveness of internal control over financial reporting.

/s/ LBB & Associates Ltd., LLP
------------------------------
LBB & Associates Ltd., LLP
Houston, TX
March 12, 2007









                                       41
<PAGE>


<TABLE>

<CAPTION>

                                  CYTOGENIX, INC.
                           A DEVELOPMENT STAGE COMPANY

                                 BALANCE SHEETS


                                                                             December 31, 2006        December 31, 2005
                                                                            ---------------------  ---------------------
<S>                                                                         <C>                    <C>

                                     ASSETS

Current Assets:
     Cash                                                                            $ 2,854,197            $ 1,307,965
     Accounts receivable, net                                                              2,577                      -
     Inventory                                                                           421,957                      -
     Prepaid expenses                                                                     14,297                 21,392
                                                                            ---------------------  ---------------------

                                Total Current Assets                                   3,293,028              1,329,357

Property and equipment, net                                                              261,793                 56,287
Deposits                                                                                 481,971                  6,399
Long-term investments - restricted                                                       172,892                117,905
                                                                            ---------------------  ---------------------

                                    Total Assets                                     $ 4,209,684            $ 1,509,948
                                                                            =====================  =====================


                      LIABILITIES AND STOCKHOLERS' EQUITY

Current Liabilities:
     Long-term debt, current portion                                                 $    25,153            $         -
     Accounts payable                                                                    309,874                258,495
     Accrued expenses                                                                    927,889                843,932
                                                                            ---------------------  ---------------------

                             Total Current Liabilities                                 1,262,916              1,102,427

     Long-term debt, less current portion                                                 45,015                      -
                                                                            ---------------------  ---------------------

                                 Total Liabilities                                     1,307,931              1,102,427
                                                                            ---------------------  ---------------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, $.001 par value; 50,000,000 share authorized,
         no shares issued and outstanding                                                      -                      -
     Common stock, $.001 par value; 300,000,000 share authorized,
         140,663,961 and 124,460,970 share issued and outstanding as of
         December 31, 2006 and 2005, respectively                                        140,664                124,461
     Additonal paid-in capital                                                        30,544,649             23,971,086
     Treasury stock                                                                     (629,972)              (629,972)
     Deficit accumulated during the development stage                                (27,153,588)           (23,058,054)
                                                                            ---------------------  ---------------------

                             Total Stockholders' Equity                                2,901,753                407,521
                                                                            ---------------------  ---------------------

                     Total Liabilities and Stockholders' Equity                      $ 4,209,684            $ 1,509,948
                                                                            =====================  =====================


              The accompanying notes are an integral part of these financial statements

</TABLE>



                                       42
<PAGE>

<TABLE>


<CAPTION>

                                                          CYTOGENIX, INC.
                                                    A DEVELOPMENT STAGE COMPANY

                                                     STATEMENTS OF OPERATIONS

                                                                                                                 February 10, 1995
                                                                        Year Ended December 31,                  Inception Through
                                                             2006               2005              2004           December 31, 2006
                                                        ----------------  -----------------  ----------------   --------------------
<S>                                                     <C>               <C>                <C>                <C>


REVENUES                                                $        76,993   $              -   $             -    $           159,568

COSTS OF REVENUES                                                45,547                  -                 -                310,440
                                                        ----------------  -----------------  ----------------   --------------------

       GROSS MARGIN                                              31,446                  -                 -               (150,872)

COSTS AND EXPENSES:
       Research and development                               2,199,148          1,724,317           831,472             10,005,336
       General and administrative                             1,534,830          1,495,454         1,434,893             14,455,743
       Consulting expense                                       345,637            290,000            60,926              1,864,118
       Depreciation and amortization                             48,754             25,391            38,125                318,347
       Impairment expense                                             -                  -                 -                345,588
       Equity in losses in joint venture                              -                  -                 -                 10,000
                                                        ----------------  -----------------  ----------------   --------------------

LOSS FROM OPERATIONS                                         (4,096,923)        (3,535,162)       (2,365,416)           (27,150,004)

OTHER INCOME(EXPENSE):
       Interest income                                            4,987              2,405                40                  7,673
       Interest expense                                          (3,011)                 -                 -                 (3,011)
       Loss on disposal of property of equipment                   (587)              (368)                -                (10,760)
       Other income                                                   -                  -                 -                  2,514
                                                        ----------------  -----------------  ----------------   --------------------

NET LOSS                                                $     (4,095,534) $      (3,533,125) $    (2,365,376)   $       (27,153,588)
                                                        ================  =================  ================   ====================

Net loss per share:
       Basic and diluted net loss per share             $          (0.03) $           (0.03) $         (0.02)
                                                        ================  =================  ================

Weighted average shares outstanding:
       Basic and diluted                                    127,366,388        114,181,072       101,817,083
                                                        ================  =================  ================


            The accompanying notes are an integral part of these financial statements


</TABLE>


                                       43
<PAGE>

<TABLE>

<CAPTION>

                                                          CYTOGENIX, INC.
                                                   A DEVELOPMENT STAGE COMPANY

                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                PERIOD FROM FEBRUARY 10, 1995 (INCEPTION) THROUGH DECEMBER 31, 2006


                                                                     Additional                                          Total
                                           Common Stock               Paid -in        Treasury       Retained       Stockholders'
                                      Shares          Amounts         Capital          Stock          Deficit       Equity (Deficit)
                                 ---------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>           <C>        <C>     <C>

Shares issued for cash                64,638,231        $  64,638    $  5,621,470       $        -   $           -      $ 5,686,108
Shares issued for services            22,701,324           22,701       6,956,535                -               -        6,979,236
Shares issued for exercised warrants   1,599,999            1,600         222,400                -               -          224,000
Stock option expense                           -                -       1,797,300                -               -        1,797,300
Contributions to capital                       -                -         152,500                -               -          152,500
Purchase of treasury stock                     -                -               -          (60,000)              -          (60,000)
Sales of treasury stock                        -                -      (1,639,938)       2,180,506               -          540,568
Shares issued for debt                   334,064              334         231,470                -               -          231,804
Issuance of stock into treasury       20,000,000           20,000      10,455,016      (10,475,016)              -                -
Retirement of treasury stock         (11,048,625)         (11,048)     (6,862,825)       6,873,873               -                -
Penalty on sale of treasury stock              -                -        (125,765)         125,765               -                -
Shares issued for patent                 500,000              500         374,500                -               -          375,000
Shares received for note receivable            -                -               -          (25,100)              -          (25,100)
Share rights issued as revenue
  incentive                                    -                -         264,893                -               -          264,893
Reclassify prior year treasury sales
  to additional paid in capital in
  2000                                         -                -               -          750,000               -          750,000
Net loss                                       -                -               -                -     (17,159,553)     (17,159,553)
                                 ---------------------------------------------------------------------------------------------------

BALANCE, December 31, 2003            98,724,993           98,725      17,447,556         (629,972)    (17,159,553)        (243,244)

Shares issued for cash, net
  fundraising                          8,715,191            8,715       1,542,886                -               -        1,551,601
Shares issued for services               482,032              482         162,760                -               -          163,242
Shares issued for debt                    39,267               39          31,250                -               -           31,289
Shares issued for exercised warrants   1,242,856            1,243         346,185                -               -          347,428
Net loss                                       -                -               -                -      (2,365,376)      (2,365,376)
                                 ---------------------------------------------------------------------------------------------------

BALANCE, December 31, 2004           109,204,339          109,204      19,530,637         (629,972)    (19,524,929)        (515,060)

Shares issued for cash, net
  fundraising                         13,928,967           13,929       3,571,151                -               -        3,585,080
Shares issued for debt                   647,701              648         541,478                -               -          542,126
Shares issued for services               679,963              680         327,820                -               -          328,500
Net loss                                       -                -               -                -      (3,533,125)      (3,533,125)
                                 ---------------------------------------------------------------------------------------------------

BALANCE, December 31, 2005           124,460,970          124,461      23,971,086         (629,972)    (23,058,054)         407,521

Shares issued for cash, net
  fundraising                         15,882,991           15,883       6,298,683                -               -        6,314,566
Shares issued for services               320,000              320         274,880                -               -          275,200
Net loss                                       -                -               -                -      (4,095,534)      (4,095,534)
                                 ---------------------------------------------------------------------------------------------------

BALANCE, December 31, 2006           140,663,961        $ 140,664    $ 30,544,649       $ (629,972)  $ (27,153,588)     $ 2,901,753
                                 ===================================================================================================

</TABLE>


                                                           44
<PAGE>

<TABLE>

<CAPTION>


                                 CYTOGENIX, INC.
                           A DEVELOPMENT STAGE COMPANY

                            STATEMENTS OF CASH FLOWS

                                                                                              February 10, 1995
                                                          Year Ended December 31,             Inception Through
                                                     2006           2005           2004       December 31, 2006
                                                 -------------  -------------  -------------  ------------------
<S>                                                                            <C>            <C>

OPERATING ACTIVITIES:
    Net loss                                     $ (4,095,534)  $ (3,533,125)  $ (2,365,376)  $     (27,153,588)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
      Deprecation and amortization                     48,754         25,391         38,128             314,971
      Impairment expense                                    -              -              -             345,588
      Loss on disposal of property and equipment          587            368              -              10,760
      Gain on long-term investments - restricted       (4,987)        (2,405)             -              (7,392)
      Stock issued for services                       275,200        328,500        163,242           7,746,178
      Stock option expense                                  -              -              -           2,062,193
      Equity in losses of joint venture                     -              -              -              10,000
      Changes in assets and liabilities:
         Accounts receivable                           (2,577)             -              -              (2,577)
         Inventory                                   (421,957)             -              -            (421,957)
         Prepaid expenses                               7,095        (21,392)        20,374             (14,297)
         Deposits                                           -              -              -              (6,399)
         Accounts payable                              51,379         20,662        (50,533)            309,874
         Accrued expenses                              83,956        584,138        524,372           1,733,107
                                                 -------------  -------------  -------------  ------------------

Net cash used in operation activities              (4,058,084)    (2,597,863)    (1,669,793)        (15,073,539)
                                                 -------------  -------------  -------------  ------------------

INVESTING ACTIVITIES:
    Purchase of property and equipment               (254,846)       (16,987)       (12,964)           (558,111)
    Deposit on Building Contract                     (475,572)                                         (475,572)
    Issue note receivable                                   -              -              -             (25,100)
    Purchase of long-term investments - restricted    (50,000)      (115,500)             -            (165,500)
    Investment in joint venture                             -              -              -             (10,000)
                                                 -------------  -------------  -------------  ------------------

Net cash used in investing activities                (780,418)      (132,487)       (12,964)         (1,234,283)
                                                 -------------  -------------  -------------  ------------------

FINANCING ACTIVITIES:
    Proceeds from notes payable                        80,000              -              -             330,000
    Payment on notes payable                           (9,832)             -              -            (259,832)
    Treasury share sold                                     -              -              -           1,290,568
    Purchase of treasury shares                             -              -              -             (60,000)
    Buyback of stock warrants                               -              -           (571)               (571)
    Proceeds from stock subscriptions                       -              -              -                   -
    Sale of common stock                            6,314,566      3,585,080      1,551,601          17,137,355
    Sale of common stock for exercised warrants             -              -        348,000             571,999
    Contributions to capital                                -              -              -             152,500
                                                 -------------  -------------  -------------  ------------------

Net cash provided by financing activities           6,384,734      3,585,080      1,899,030          19,162,019
                                                 -------------  -------------  -------------  ------------------

NET CHANGE IN CASH                                  1,546,232        854,730        216,273           2,854,197
CASH, beginning of period                           1,307,965        453,235        236,962                   -
                                                 -------------  -------------  -------------  ------------------

CASH, end of period                              $  2,854,197   $  1,307,965   $    453,235   $       2,854,197
                                                 =============  =============  =============  ==================

SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid                                $      1,272   $          -   $          -   $           1,272
                                                 =============  =============  =============  ==================

    Income taxes paid                            $          -   $          -   $          -   $               -
                                                 =============  =============  =============  ==================

NONCASH TRANSACTIONS:
    Common stock issued for debt                 $          -   $    542,126   $     31,289   $         805,219
    Received treasury stock for note receivable             -              -              -              25,100
    Common stock issued for patent                          -              -              -             375,000

            The accompanying notes are an integral part of these financial statements

</TABLE>


                                       45
<PAGE>


                                 CYTOGENIX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2006

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

Nature of business

CytoGenix,  Inc.  ("CytoGenix") was incorporated on February 10, 1995 in Nevada.
CytoGenix  is  a   biotechnology   company   focusing  on  controlled   cellular
dedifferentiation and transdifferentiation processes. CytoGenix has acquired the
rights for application to a specialized  expression  vector capable of producing
single stranded DNA (ssDNA) in both eukaryotes and prokaryotes.

Basis of Presentation

These financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America.

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 at the date of the balance  sheet.  Actual results could differ from
those estimates.

Cash and Cash Equivalents

Cash and cash  equivalents  include  highly liquid,  temporary cash  investments
having original maturity dates of three months or less. For reporting  purposes,
such  cash   equivalents  are  stated  at  cost  plus  accrued   interest  which
approximates fair value.

Accounts Receivable

The  Company's  accounts  receivable  primarily  consist  of trade  receivables.
Management  reviews  accounts  receivable on a monthly basis to determine if any
receivables will potentially be uncollectible. The company includes any accounts
receivable balances that are determined to be uncollectible in its allowance for
doubtful  accounts.  As of December 31, 2006 and 2005 the allowance for doubtful
accounts is zero.

Inventory

Inventory  includes raw materials  (liquid buffers and enzyme mix) that are used
to produce  enzymatically  synthesized DNA (synDNA(TM)).  Inventory is stated at
the lower of cost or market, cost being determined using the first-in, first out
("FIFO")  method.  Reserves are established for excess or obsolete  inventories.
Inventory is included in the cost of revenue when sold.


                                       46
<PAGE>


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment is recorded at cost and  depreciation  is computed  using
the straight-line method over the useful lives of the assets. Major renewals and
improvements are capitalized;  minor  replacements,  maintenance and repairs are
charged to current operations.

Impairment of Long-lived Assets

CytoGenix  performs  reviews for the  impairment of long-lived  assets  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.

Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment of or Disposal of Long-Lived  Assets,  sets forth guidance as to when
to  recognize  an  impairment  of  long-lived  assets  and how to  measure  such
impairment.  The standards  require  certain  assets be reviewed for  impairment
whenever  events  or  circumstances  indicate  the  carrying  amount  may not be
recoverable.

Revenue Recognition

CytoGenix's  revenues are primarily derived from selling  synDNA(TM).  CytoGenix
recognizes revenue when persuasive evidence of an arrangement  exists,  delivery
has occurred,  the sales price is fixed or determinable  and  collectibility  is
probable.

Research and Development

Internal research and development  costs are expensed as incurred.  Research and
development  costs include salaries and  personnel-related  costs,  supplies and
materials,  facility  costs,  depreciation  of  facility  property,  and outside
services required to conduct the preclinical development.

Income Taxes

The  asset  and  liability  approach  is used to  account  for  income  taxes by
recognizing  deferred tax assets and  liabilities  for the  expected  future tax
consequences of temporary  differences  between the carrying amounts and the tax
bases of assets and  liabilities.  CytoGenix  records a valuation  allowance  to
reduce the  deferred tax assets to the amount that is more likely than not to be
realized.

Earnings Per Common Share

Basic and  diluted  net loss per share  excludes  dilution  and is  computed  by
dividing net loss by the weighted  average  number of common shares  outstanding
for the period presented.


                                       47
<PAGE>


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Stock-Based Compensation

Effective  January  1,  2006,  the  Company  adopted  SFAS  No.  123  (revised),
"Share-Based Payment" (SFAS 123(R)) utilizing the modified prospective approach.
Prior to the  adoption of SFAS 123(R) we  accounted  for stock  option  grant in
accordance with APB Opinion No. 25,  "Accounting for Stock Issued to Employees,"
and accordingly,  recognized  compensation expense for stock option grants using
the intrinsic value method.

Under the modified prospective  approach,  SFAS 123(R) applies to new awards and
to awards  that  were  outstanding  on  January  1,  2006 that are  subsequently
modified,  repurchased or cancelled.  Under the modified  prospective  approach,
compensation  cost  recognized  in the first  quarter  of fiscal  2006  includes
compensation  cost for all  share-based  payments  granted prior to, but not yet
vested as of January 1, 2006,  based on the grant-date  fair value  estimated in
accordance with the original  provisions of SFAS 123, and compensation  cost for
all  share-based  payments  granted  subsequent  to January 1, 2006 based on the
grant-date  fair value  estimated  in  accordance  with the  provisions  of SFAS
123(R).  For all quarters  after the first quarter of fiscal 2006,  compensation
costs recognized will include  compensation  costs for all share-based  payments
granted  based on the grant date fair value  estimated  in  accordance  with the
provisions of SFAS 123(R).

Segment Reporting

The Company  operates in one  industry  segment --  biotechnology  research  and
development.  The Company  operates  in one  geographic  area,  being the United
States of America.

FASB Statement No. 131,  Disclosures about Segments of an Enterprise and Related
Information,  establishes  standards for reporting  information  about operating
segments.  Operating  segments are defined as components of an enterprise  about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing  performance.  The Company's chief operating
decision maker is its Chief  Executive  Officer.  The Company's  Chief Executive
Officer  reviews  financial  information  presented on a consolidated  basis for
purposes of  allocating  resources and  evaluating  financial  performance.  The
Company has one business activity and there are no segment managers who are held
accountable  for  operations,  operating  results  and  plans  for  products  or
components below the consolidated unit level.  Accordingly,  the Company reports
as a single operating segment.


                                       48
<PAGE>


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in GAAP, and expands  disclosures  about fair
value measurements.  This statement is effective for financial statements issued
for fiscal years  beginning  after  November 15, 2007.  Management  is currently
evaluating  the  impact  SFAS  No.  157  will  have on the  Company's  financial
position, results of operations, and cash flows.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - including  an amendment of FASB
statement No. 115." This Statement  permits all entities to choose, at specified
election  dates,  to measure  eligible  items at fair  value  (the  "fair  value
option").  A business entity shall report  unrealized  gains and losses on items
for which the fair  value  option  has been  elected  in  earnings  (or  another
performance  indicator if the business entity does not report  earnings) at each
subsequent reporting date. Upfront costs and fees related to items for which the
fair value option is elected shall be recognized in earnings as incurred and not
deferred.  If an entity elects the fair value option for a  held-to-maturity  or
available-for-sale  security in conjunction with the adoption of this Statement,
that security shall be reported as a trading  security under  Statement 115, but
the accounting for a transfer to the trading  category under  paragraph 15(b) of
Statement  115 does not apply.  Electing  the fair value  option for an existing
held-to-maturity security will not call into question the intent of an entity to
hold  other debt  securities  to  maturity  in the  future.  This  statement  is
effective as of the first fiscal year that begins after  November 15, 2007.  The
Company is currently  analyzing  the effects of SFAS 159 but does not expect its
implementation  will  have  a  significant  impact  on the  Company's  financial
condition or results of operations.

In July 2006, the FASB issued FASB Interpretation  ("FIN") No. 48 Accounting for
Uncertainly in Income Taxes - An  Interpretation  of FASB Statement No. 109. FIN
48  prescribes  detailed  guidance  for  the  financial  statement  recognition,
measurement,  and  disclosure  of  uncertain  tax  positions  recognized  in  an
enterprise's  financial  statements in accordance with SFAS No. 109,  Accounting
for Income Taxes.  Tax positions  must meet a  more-likely-than-not  recognition
threshold at the effective date to be recognized upon the adoption of FIN 48 and
in subsequent periods. FIN 48 will be effective for fiscal years beginning after
December 15, 2006, and the provisions of FIN 48 will be applied to all positions
upon the adoption of the Interpretation.  The cumulative effect of this applying
the provisions of this  Interpretation  will be reported as an adjustment to the
opening  balance of  retained  earnings  for that  fiscal  year.  Management  is
currently  evaluating the impact of FIN 48 on the financial  statements but does
not  believe  that its  adoption  will have a material  effect on the  Company's
financial position, results of operations, or cash flows.




                                       49
<PAGE>


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering
the  Effects of Prior  Year  Misstatements  when  quantifying  Misstatements  in
Current Year Financial  Statements  ("SAB 108").  SAB 108 requires  companies to
evaluate the  materiality  of  identified  unadjusted  errors on each  financial
statement and related  financial  statement  disclosure  using both the rollover
approach and the iron curtain  approach,  as those terms are defined in SAB 108.
The rollover approach quantifies  misstatements based on the amount of the error
in the current  year  financial  statement,  whereas the iron  curtain  approach
quantifies  misstatements  based on the effects of correcting  the  misstatement
existing in the balance  sheet at the end of the current year,  irrespective  of
the  misstatement's  year(s)  of  origin.  Financial  statements  would  require
adjustment  when either approach  results in quantifying a misstatement  that is
material. Correcting prior year financial statements for immaterial errors would
not require previously filed reports to be amended. If a Company determines that
an  adjustment to prior year  financial  statements is required upon adoption of
SAB 108 and does not elect to restate its previous financial statements, then it
must  recognize  the  cumulative  effect  of  applying  SAB 108 in  fiscal  2006
beginning  balances of the affected assets and liabilities  with a corresponding
adjustment to the fiscal 2006 opening balance in retained  earnings.  SAB 108 is
effective for interim periods of the first fiscal year ending after November 15,
2006,  and will be adopted  by the  Company  in the first  quarter of 2007.  The
Company does not expect the adoption of this interpretation to have an impact on
its financial position or results of operations.

NOTE 2 - GOING CONCERN

CytoGenix has had  negligible  revenues since  inception and only  approximately
$77,000  in the last  two  years.  The  Company  has  incurred  losses  totaling
$27,153,588  from  inception  through  December  31,  2006.   Because  of  these
conditions,  CytoGenix  will  require  additional  working  capital  to  develop
business  operations.  CytoGenix  intends to raise  additional  working  capital
either through private placements, public offerings and/ or bank financing.

There  are no  assurances  that  CytoGenix  will be able to  achieve  a level of
revenues  adequate to generate  sufficient  cash flow from  operations or obtain
additional  financing through private placements,  public offerings and/ or bank
financing necessary to support CytoGenix's working capital requirements.  To the
extent that funds generated from any private  placements,  public offerings and/
or bank  financing are  insufficient,  CytoGenix  will have to raise  additional
working  capital.  No assurance can be given that  additional  financing will be
available,  or if  available,  will be on  terms  acceptable  to  CytoGenix.  If
adequate  working  capital  is not  available  CytoGenix  may not  increase  its
operations.

These conditions raise substantial  doubt about CytoGenix's  ability to continue
as a going  concern.  The financial  statements  do not include any  adjustments
relating to the  recoverability  and classification of asset carrying amounts or
the amount and  classification  of  liabilities  that might be necessary  should
CytoGenix be unable to continue as a going concern.


                                       50
<PAGE>


NOTE 3 - LONG TERM INVESTMENT - RESTRICTED

The Company  established a CD for $50,000 with Frost National bank which matures
July 18, 2007.  This CD earned interest at 4.650% and in 2006 interest earned is
$1,057.  The CD was  required by Frost  National  Bank to  partially  secure the
equipment loan discussed in Note 7.

The Company has a restricted long-term CD investment for the Waldroff litigation
matter discussed in Note 12 to the financial statements.  Pending appeal of this
case  CytoGenix  has  established  a  long-term  CD in the amount of $115,500 to
comply with the court order.  This CD earns interest at a rate of 3.4% annually.
This CD must be  maintained  until a  mandate  is  issued  by the 1st  Court  of
Appeals. Only upon issuance of the mandate can we petition for the refund of the
CD.

NOTE 4 - PROPERTY AND EQUIPMENT, NET

Property consisted of the following as of December 31:

                                                          2006           2005
                                                          ----           ----
         Lab equipment                    5-7 years     $ 299,005     $ 104,635
         Office Furniture & Fixtures      3-7 years        62,592        57,759
         Office Equipment                 3-7 years        63,246        57,518
         Leasehold Improvements           Lease Term       16,804         3,164
         Less: accumulated depreciation                  (179,854)     (166,789)
                                                        ---------     ---------
         Net book value                                 $ 261,793     $  56,287
                                                        =========     =========

Depreciation  expense totaled $48,754,  $25,391, and $38,125 for 2006, 2005, and
2004 respectively.

NOTE 5 - DEPOSITS

The Company deposits at December 31, 2006 include the first  installment for the
construction of the new production and office facility in Houston,  Texas in the
amount of  $475,572.  The  remaining  balance in the  deposit  account is a rent
deposit on the current facilities for $6,399.

NOTE 6 - ACCRUED EXPENSES

Accrued  expenses  consist mainly of unpaid salaries and unpaid payroll taxes on
cash compensation and stock based compensation.  Total accrued payroll taxes for
previously  issued  stock  compensation  as of  December  31,  2006 and 2005 was
$207,154 and $207,154,  respectively.  Accrued bonus compensation per employment
agreements  was as of  December  31,  2006 and 2005 was  $361,946  and  $396,946
respectively.



                                       51
<PAGE>



NOTE 7 - DEBT

CytoGenix entered into an $80,000,  36 month promissory note with a bank on July
18, 2006 to finance the cost of equipment. The note requires monthly payments of
$2,569  including  interest at 9.51%.  Interest paid for the year ended December
31, 2006 was $3,012.

Annual  maturities  of debt during each of the years ended  December  31, are as
follows:

   2007                                                        $       25,153
   2008                                                                30,105
   2009                                                                14,910
   2010                                                                     -
   2011                                                                     -
                                                                -------------
   Total                                                       $       70,168
                                                               ==============


NOTE 8 - COMMON STOCK ISSUANCES

CytoGenix has issued common stock since inception as follows:

         STOCK ISSUED FOR SERVICES:

                           Year                Shares               Amount
                           -----            ----------         ------------
                           1995             4,584,500          $    47,383
                           1996               500,000              375,000
                           1997             3,687,425              691,392
                           1998             3,601,021            2,820,826
                           1999               544,348              468,322
                           2000               546,171              491,473
                           2001             1,780,009              334,742
                           2002             3,162,535            1,016,747
                           2003             4,295,315              733,351
                                            ----------         ------------
                           Sub-total       22,701,324            6,979,236
                           2004               482,032              163,242
                           2005               679,963              328,500
                           2006               320,000              275,200









                                       52
<PAGE>


NOTE 8 - COMMON STOCK ISSUANCES (CONTINUED)

STOCK ISSUED FOR CASH:

                           Year                Shares              Amount
                           -----            -----------        -----------
                           1995                110,000         $   21,000
                           1997                825,974            129,132
                           1998              2,964,000            593,800
                           1999                317,220            130,026
                           2000              1,268,989            610,800
                           2001             14,496,853          1,283,958
                           2002             12,992,411          1,596,043
                           2003             31,662,784          1,321,349
                                            -----------        -----------
                           Sub-total        64,638,231          5,686,108
                           2004              8,715,191          1,551,601
                           2005             13,928,967          3,585,080
                           2006             15,882,991          6,314,566

In 2006,  restricted  common stock sold for cash was  consistently  sold through
private  placement  offering at a discount.  The difference  between the selling
price and the fair market  value on the date sold was  approximately  $3,686,112
for the year.

STOCK ISSUED FOR DEBT:

In 2006,  there were no shares  issued for debt.  In 2005,  647,701  shares were
issued for debt totaling $542,126.

In 1998,  212,780  shares were issued for debt  totaling  $135,990  and in 2000,
500,000 shares were issued for a patent, recorded at the fair value of the stock
issued totaling $375,000.  In 1999, 20,000,000 shares were put into treasury and
8,229,288 were retired from treasury. In 2001, 2,819,337 shares were retired. In
2003,  121,284  shares were issued for debt totaling  $95,814.  In 2004,  39,267
shares were issued for debt totaling $31,289.

NOTE 9 - STOCK OPTIONS AND WARRANTS

In 2004,  CytoGenix  issued  1,242,856  warrants as part of a private  placement
memorandum.  The warrants are exercisable at $0.28 per share,  vest  immediately
and expire one year from the grant  date.  Of these  warrants  642,857  were not
exercised and expired in 2005.  There were no warrants  outstanding  at December
31, 2006 or 2005.

On June 24,  2003,  the Company  adopted  the 2003 Stock  Option Plan (the "2003
Plan") to provide  for the  granting of  incentive  stock  options to  executive
officers  and  employees  of the Company,  as  determined  by a committee of the
Company's  board of directors.  Non-qualified  options may also be granted under
the 2003 Plan to non-employee directors and consultants of the Company.





                                       53
<PAGE>


NOTE 9 - STOCK OPTIONS AND WARRANTS (CONTINUED)

A total of 18,000,000  share of common stock have been reserved for the issuance
under the 2003 Plan. All stock options granted under the 2003 Plan vest, subject
to a Condition Precedent,  33.3% over each of the first and second anniversaries
of the grant  date and  expire no later than ten years from the date of the plan
on June 24, 2013. Awards granted under the Option Plan are to be determined from
time to time by a compensation committee. If an option expires or is terminated,
surrendered or cancelled  without having been fully exercised,  the unused share
covered by any such Option shall again be  available  for grant under the Option
Plan. As of December 31, 2006 6,325,000  common stock shares are available to be
awarded under this plan.  No option  issued under the 2003 Plan is  exercisable,
even if  vested,  unless and until  such time that the  underlying  shares to be
issued are publicly registered with the Securities and Exchange Committee,  such
registration  constituting  the  Condition  Precedent.  The  Company is under no
obligation to register the underlying  shares,  nor is there any recourse by the
option holder in the event their options expire or otherwise  terminate prior to
the Condition Precedent being met.

On June 14,  2005 the  Company  adopted  the 2005 Stock  Option  Plan (the "2005
Plan") to provide  for the  granting of  incentive  stock  options to  executive
officers  and  employees  of the Company,  as  determined  by a committee of the
Company's  board of directors.  Non-qualified  options may also be granted under
the 2005 Plan to non-employee directors and consultants of the Company

A total of 18,000,000  share of common stock have been reserved for the issuance
under the 2005 Plan. All stock options granted under the 2003 Plan vest, subject
to a Condition Precedent,  33.3% over each of the first and second anniversaries
of the grant  date and  expire no later than ten years from the date of the plan
on June 14, 2015. Awards granted under the Option Plan are to be determined from
time to time by a compensation committee. If an option expires or is terminated,
surrendered or cancelled  without having been fully exercised,  the unused share
covered by any such Option shall again be  available  for grant under the Option
Plan. As of December 31, 2006 7,496,000  common stock shares are available to be
awarded under this plan.  No option  issued under the 2005 Plan is  exercisable,
even if  vested,  unless and until  such time that the  underlying  shares to be
issued are publicly registered with the Securities and Exchange Committee,  such
registration  constituting  a  Condition  Precedent.  The  Company  is  under no
obligation to register the underlying  shares,  nor is there any recourse by the
option holder in the event their options expire or otherwise  terminate prior to
the Condition Precedent being met.

The shares of common stock  granted in the options  under the stock option plans
discussed  above have not been  registered  as of December 31, 2006.  Management
presently has no plans to register such shares.









                                       54
<PAGE>


NOTE 10 - INCOME TAXES

For the period from inception through December 31, 2006,  CytoGenix has incurred
net losses and,  therefore,  has no tax  liability.  The net  deferred tax asset
generated  by the loss  carry-forward  has been fully  reserved.  The  valuation
allowance increased approximately  $1,400,000,  $1,205,000,  and $800,000 during
the years ended December 31, 2006, 2005 and 2004,  respectively.  The cumulative
net operating loss  carry-forward is  approximately  $19,926,500 at December 31,
2006, and will expire in the years 2013 through 2022.

Deferred income taxes consist of the following at December 31,

                                                    2006              2005
                                                    ----              ----
                  Long-term:
                  Deferred tax assets         $   6,775,000      $   5,375,000
                  Valuation allowance            (6,775,000)        (5,375,000)
                                              -------------      -------------
                                              $           -      $           -
                                              =============      =============

NOTE 11 - CONCENTRATIONS

The Company had gross sales of $76,993, $0 and $0 for the years ended 2006, 2005
and 2004,  respectively.  The Company has three customers that represent 100% of
the gross  sales for the year ended  December  31,  2006.  The  Company  has one
supplier that provides all the materials necessary to generate the sales for the
year ended December 31, 2006.

The Company has cash balances in a single financial institution which, from time
to time,  exceed the  federally  insured  limit of $100,000.  As of December 31,
2006,  the  Company's  cash balance  exceeded  the  federally  insured  limit by
$2,767,887. No loss has been incurred related to this concentration of cash.

NOTE 12 - COMMITMENTS AND CONTIGENCIES

Lease
-----

CytoGenix  leases  office  facilities  under an operating  lease that expires on
December 31, 2009. Rent expense was $69,749,  $66,455 and $68,407 for 2006, 2005
and 2004, respectively. Annual future rent payments are as follows:

                  Year                                      Amount
              -------------                          -----------------
                  2007                                $      74,806
                  2008                                       76,792
                  2009                                       76,792

Over the term of the lease the rent  works out to an average of $5,701 per month
starting  December 2003 and ending  September  2009. As of December 31, 2006 and
2005  deferred  rent was $25,981 and  $32,656,  respectively  and is included in
accrued expenses.



                                       55
<PAGE>


NOTE 12 - COMMITMENTS AND CONTIGENCIES (CONTINUED)

Land & Building
---------------

The Company  signed an earnest money  contract with GSL  Constructors,  Ltd. for
design/build   project  located  in  the  Westchase   District  of  Houston  for
$3,796,577.  Upon  execution of the earnest money contract a deposit of $474,572
was paid by the  Company.  The second  payment of $474,572  will be due when the
facility  is  completed  to  Dried-In  Conditions.  The  balance  will be due at
closing.  The contract is for 2.274 acres of land together with a facility.  The
Company  has engaged the  services of Luwa SA to design and  construct  the cGMP
portion of the new 20,000 sq ft  facility.  Groundbreaking  for this  project is
anticipated to occur in 2007 subject to financing.

Research
--------

CytoGenix  has entered into  Sponsored  Research  Agreements  (SRA) with several
Universities.  The Universities do research for CytoGenix related to CytoGenix's
proprietary technology.  As work progresses,  the Universities invoice CytoGenix
for  reimbursement  of  expenses  related  to  the  research.   The  SRA's  have
established  budgets.  As of December 31, 2006 unbilled  amounts under the SRA's
totaled approximately $120,987.

As of December 31, 2006 the Company  renewed an SRA with the Montefiore  Medical
Center. A Company director is affiliated with Montefiore Medical Center.

Employment
----------

Per the employment agreement of the CEO, there is a severance pay obligation for
early termination for any reason other than cause,  permanent disability,  or if
the  employee   voluntarily   resigns  following  a  constructive   termination,
(collectively  a  "Termination  Event") then the Company  shall pay the employee
base compensation for a period of twelve (12) months following  termination.  In
addition,  the Company shall also  reimburse the Employee for the payment of the
Employee' COBRA or equivalent  other  replacement  medical and dental  insurance
premiums for the period of twelve (12) months.  The cash  obligation  under this
arrangement  if the CEO were to be terminated on January 1, 2007 could result in
a cash outflow of approximately $515,000.

Board of Directors
------------------

There  are  currently  four  outside  Directors  who  received  $25,000  each in
compensation  for the year ending December 31, 2006. The  compensation  for 2007
will increase to $40,000 each per year.





                                       56
<PAGE>


NOTE 12 - COMMITMENTS AND CONTIGENCIES (CONTINUED)

Inventory
---------

The Company has  entered an  agreement  with GE  Healthcare  Bio-Sciences  Corp.
whereas GEHC will provide the Company  with DNA  production  reagents for use in
the manufacture of vaccines and  therapeutic  compounds.  The Company  committed
under this agreement to spend $350,000 for the year ended December 31, 2006. The
Company met the commitment for 2006 and is in the process of negotiating with GE
for the options for 2007 and beyond.  As of the date of this filing no agreement
has been finalized.

Litigation
----------

Phanuel Pursuits, LLC

Phanuel  Pursuits,  LLC suit was filed in October 2004 claiming  that  CytoGenix
(licensor) had breached a license agreement with Phanuel Pursuits (licensee) for
use  of  the  CytoGenix  ssDNA  expression  technology  in  Indian  and  Chinese
therapeutics.  The licenses were dependent upon foreign regulatory approval. The
case was dismissed  prior to trial for lack of evidence and no appeal was filed.
Action on this matter was therefore finalized in March of 2006.

William B Waldroff and Applied Veterinary Genomics, Inc.
Waldroff and Applied Veterinary  Genomics,  Inc. ("AVGI") - Litigation initiated
in  March  2004  over the  validity  of  license  agreements  between  CytoGenix
(licensor) and William Waldroff (licensee) for use of CytoGenix ssDNA expression
technology in shrimp and horse therapeutic  applications.  AVGI, as sublicensee,
was a third party in this action. A jury trial held in February 2005 resulted in
entry of a judgment against CytoGenix requiring performance on the contracts and
payment of attorney fees. CytoGenix  subsequently  appealed this decision and in
December  2006 the 1st Court of Appeals  reversed  the trial  court's  judgment,
finding no need for CytoGenix to perform on the contracts and no need for either
party to pay the opposing party's attorney fees. Waldroff and Applied Veterinary
Genomics filed a motion for a rehearing;  CytoGenix  filed a timely  response to
that motion and the parties await  decision by the Court.  On March 3, 2007, the
Court of Appeals denied Waldroff/AVGI's Motion for Rehearing. Pending resolution
of the Court's decision and possible further appeals,  CytoGenix has established
a  long-term  CD in the  amount  of  $115,500  to comply  with the  trial  court
judgment.  This CD earns interest at a rate of 3.4% annually.  Accrued  Interest
for  the  year  ended   December  31,  2006  and  2005  was  $3,929  and  $2,405
respectively.

Defamatory Actions
------------------

The Company is actively  pursuing legal action against various parties  involved
in the  posting of  defamatory  comments  about the  Company  and several of its
officers on public  investor  chat-room  websites.  A settlement with one of the
parties resulted in an apology posted on Investor's Hub  (www.investorshub.com),




                                       57
<PAGE>

<TABLE>


NOTE 13 - SUBSEQUENT EVENTS

In  November  of 2006,  the  former  Chief  Financial  Officer  (CFO),  Lawrence
Wunderlich,  and the former Chief Operations  Officer,  Frank Vazquez,  resigned
from the  Company.  The  Company  and former  officers  are  currently  pursuing
arbitration to resolve claims by Messrs Vazquez and Wunderlich and counterclaims
by the Company.  In  conjunction  with the former  officers'  resignations,  the
former CFO filed a SOX  Whistleblower  Complaint with the Department of Labor in
January of 2007.  The  action is against  the  Company  and the Chief  Executive
Officer, Malcolm Skolnick.

The SEC has requested  information  from the Company  addressing the allegations
and the Company has responded to the request.  The Company's  Board of Directors
instituted a special  committee of  independent  directors who have appointed an
independent,  outside  counsel to conduct an  independent  investigation.  As of
March  20,  2007  this  investigation  is in  progress.  Management  intends  to
vigorously defend the actions brought by the former CEO and CFO.


NOTE 14 - UNAUDITED QUARTERLY FINANCIAL DATA

                                      First Quarter    Second Quarter  Third Quarter   Fourth Quarter
                                      ------------     --------------  -------------   --------------
<S>                                                                    <C>             <C>

Year Ended December 31, 2006
         Net Sales                     $         -      $    37,180     $     8,115     $    31,698
         Gross Profit                            -           25,524         (11,327)         17,249
         Net Loss                       (1,035,494)        (916,763)     (1,219,699)       (923,578)
         Basic Loss Per Share                (0.01)           (0.01)          (0.01)          (0.01)
Year Ended December 31, 2005
         Net Sales                     $         -      $         -     $         -     $         -
         Gross Profit                            -                -               -               -
         Net Loss                         (686,845)        (591,514)     (1,065,266)     (1,189,500)
         Basic Loss Per Share                (0.01)           (0.00)          (0.01)          (0.01)
Year Ended December 31, 2004
         Net Sales                     $         -      $         -     $         -     $         -
         Gross Profit                            -                -               -               -
         Net Loss                         (382,440)        (461,935)       (485,044)     (1,035,957)
         Basic Loss Per Share                (0.00)           (0.00)          (0.00)          (0.01)

</TABLE>















                                       58
<PAGE>



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

Not applicable.


ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURES CONTROLS AND PROCEDURES

In order to ensure that the information we must disclose in our filings with the
Securities  and Exchange  Commission  is recorded,  processed,  summarized,  and
reported on a timely  basis,  we have  formalized  our  disclosure  controls and
procedures. Our principal executive officer and principal financial officer have
reviewed  and  evaluated  the  effectiveness  of  our  disclosure  controls  and
procedures,  as defined in Exchange Act Rules  13a-15(e)  and  15d-15(e),  as of
December 31, 2006. Based on such evaluations, such officers have concluded that,
as of December 31, 2006, our disclosure  controls and procedures  were effective
in  timely  alerting  them  to  material  information  relating  to  us(and  our
consolidated  subsidiaries) required to be included in our periodic SEC filings.
These has been no change in our internal control over financial reporting during
the  quarter  ended  December  31,  2006  that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

See Management's  Report on Internal Control over Financial Reporting in Item 8,
which is incorporated herein by reference.

ITEM 9B. OTHER INFORMATION

None

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS OF THE COMPANY AND OTHER KEY EMPLOYEES

Set forth  below are the  names,  ages as of March  16,  2007 and  titles of the
persons  currently  serving as  Director,  Executive  Officers  and  Significant
Employees of the Company:


NAME                           AGE      TITLE
--------------------------------------------------------------------------------

Malcolm H Skolnick             71       Chief Executive Officer, President and
                                        Director
                                        Term of Office 2006-2009



                                       59
<PAGE>


Pam Schertz                    50       Chief Financial Officer

Cindee Ewell                   52       Vice President of Legal Affairs

Yin Chen                       44       Vice President of Research & Development

Kurt Berens                    44       Vice President of Product Development

Xin-Xing Tan                   37       Senior Research Scientist

Frederic Kendirgi              36       Senior Research Scientist

Scott E. Parazynski, M.D.      47       Director
                                        Term of Office: 2006-2009

 Cy A. Stein, M.D., Ph.D.      52       Director
                                        Term of Office: 2003-2006

 John J. Rossi, Ph.D.          60       Director
                                        Term of Office: 2004-2007

 Raymond L. Ocampo, Jr.        53        Director
                                         Term of Office: 2004-2007

DR.  MALCOLM H. SKOLNICK has been the Chief  Executive  Officer and President of
the  Company  since  September  1, 1999.  Prior to that time and for the last 30
years Dr.  Skolnick was a Professor in the  University of Texas Health  Sciences
Center at Houston.  Dr. Skolnick received M.S. and Ph.D. degrees in physics from
Cornell  University and a J.D. from the University of Houston.  Dr. Skolnick has
conducted basic science and clinical research and is a patented inventor.  He is
licensed to practice law in Texas and is a registered  patent  attorney.  He has
practiced  intellectual  property law,  been active in  technology  transfer and
licensing  activities  and serves on the Boards of Southwest  Health  Technology
Foundation,  Citizens  League for  Environmental  Action Now (CLEAN),  and Frank
Evans  Center for  Conflict  Resolution  and  Responsible  Community  Designs (a
private company).

MS. PAM  SCHERTZ  was  appointed  Interim  CFO on December 1, 2006 and holds the
position of Corporate Treasurer. Ms. Schertz previously served as Controller for
the company  beginning  in October  2003.  Prior to working for  CytoGenix,  Ms.
Schertz has over 15 years of experience  in  accounting  in various  industries,
including  a  casket   manufacturer,   an  independent  power  company,  and  an
architecture firm. Management positions have included serving as Controller at a
high-end  clothier and at a civil engineering firm. Ms. Schertz received her BBA
in Accounting  from the  University of Houston as is a licensed CPA in the State
of Texas.

DR. YIN CHEN  earned  this Ph.D.  in  Molecular  Biology &  Biochemistry  at the
University of Maine in 1996. Subsequently, he was a post-doctoral fellow at Beth
Israel Deaconess  Medical Center, a teaching hospital of Harvard Medical School.
In 1999, he joined InGene,  Inc. of Kansis City, MO as senior research scientist


                                       60
<PAGE>

and then CytoGenix,  as chief research  scientist in February 2000. He is one of
co-inventors  of the Company's  proprietary  ssDNA  expression  systems.  He was
appointed  as Chief  Scientific  Officer  and Vice  President  of  Research  and
Development  on November 7, 2001 and is Executive  Secretary  of the  Scientific
Advisory Committee.

DR. CINDEE EWELL brings a combination of  scientific,  legal,  and  intellectual
property  experience  that is  critical to securing  and  maintaining  the legal
protection of the technology as well as our Company agreement with outside third
parties. Dr. Ewell holds a Bachelor of Science degree from Cornell University, a
Doctor of Philosophy  degree from the  University of Texas Health Science Center
at Houston,  a Juris  Doctorate  from South Texas  College of Law,  and has over
seven  years of  post-doctoral  experience  working  in the  Department  of Cell
Biology  at Baylor  College  of  Medicine.  Dr.  Ewell  initially  worked in the
biotechnology  industry  as a  microbiologist  and then moved on into  academics
where she worked more as a cellular  molecular  biologist.  Her legal  expertise
includes  approximately  three years law firm  experience  where she worked with
large pharmaceutical and chemical clients in the areas of patent prosecution and
freedom to operate.

MR. KURT BERENS has ten years  research and  development  experience  in ethical
drugs and medical  devices.  Mr. Berens has been a  collaborator  on projects in
academia  and was most  recently  the  Manager of the  Cellular  and  Biomedical
Section at NASA-Johnson  Space Center. He was a Senior Project Manager for Texas
Biotechnology  for six years, Mr. Berens was part of a development team that was
successful   in  obtaining  FDA  approval  for   Argatroban(R).   Trained  as  a
pharmaceutical  scientist,  Mr.  Berens  has  worked  successfully  in both  the
academic  and  commercial  drug  development  fields.  Mr.  Berens  received his
Bachelor's degree at the University of Minnesota followed by doctoral studies in
pharmaceutics at the University of Houston.

DR.  XIN XING TAN joined  the  Company  on October 1, 2002 as a Senior  Research
Scientist.  His  responsibilities  and  expertise  lie in the  areas of  DNA/RNA
manipulation, cDNA library screening, gene expression regulation and Photosystem
II protein  complexes.  Dr Tan graduated  from Wuhan  University in Wuhan,  P.R.
China.  He attained his  doctorate  in  biochemistry  at the Chinese  Academy of
Sciences.  Following  graduation  he  maintained a position of NIH  Postdoctoral
Fellow at Rice University before joining CytoGenix, Inc.

DR. FREDERIC KENDIRGI is a Senior Research  Scientist  bringing broad experience
in  eukaryotic  gene  expression  as  well  as  developing  assays  for  protein
detection/function  and expression vectors in eukaryotic  systems. He earned his
M.Sc.  in  Virology  and  Immunology  in 1995  from  the  University  of  Quebec
(INRS-Institut  Armand-Frappier) Laval, Canada and his Ph.D. in biochemistry and
Molecular  Biology from the University of Calgary,  Calgary  Alberta,  Canada in
2000. Subsequently,  he joined the laboratory of Dr. S.R. Wente as post-doctoral
scientist  at  Washington  University  in St. Louis and  Vanderbilt  University,
Nashville.  Dr.  Kendirgi has authored,  co-authored  or presented 10 scientific
abstracts at national and  international  meeting and 5  scientific  papers.  He
joined CytoGenix research and development team in October 2004.



                                       61
<PAGE>


SCOTT E. PARAZYNSKI,  M.D. Dr.  Parazynski is a graduate of Stanford  University
and Stanford  Medical  School and pursued  clinical  training at the Brigham and
Women's  Hospital  (Boston,  MA) and emergency  medicine  residency  training in
Denver,  CO. He has published  articles in the field of space physiology and has
expertise in human  adaptation to stressful  environments.  Dr.  Parazynski is a
member  of  the  Aerospace  Medical   Association,   the  American  Society  for
Gravitational  and Space  Biology  and has  received  numerous  special  honors,
including the National Institutes of Health Predoctoral Training Award in Cancer
Biology, NASA Graduate Student Researcher's Award and Research Honors Award from
Stanford Medical School. Dr. Parazynski has been an astronaut since 1992 and has
logged  over  262  hours in  space.  He  first  flew in 1994 on the  Atmospheric
Laboratory for Applications and Science (ATLAS-3) mission,  which was part of an
on-going program to determine the Earth's energy balance and atmospheric  change
over an 11-year  solar cycle.  During this mission,  he and his  crewmates  also
evaluated the Interlimb Resistance Device, a free-floating exercise he developed
to prevent musculoskeletal atrophy in microgravity.

CY A. STEIN,  M.D.,  PH.D. Dr. Stein is currently  Professor of Medicine Urology
and  Pharmacology  in the  Oncology  Department  of Albert  Einstein  College of
Medicine,  New York. In addition to his clinical and faculty  activities,  he is
co-editor-in-chief of Antisense and Nucleic Acid Drug Development, sits on seven
editorial  advisory boards,  including  Nucleic Acids Research,  serves on eight
scientific advisory boards, including Genta (Berkeley Heights, NJ), Targent (New
York, NY), A3D (Heidelberg, Germany), and is an ad hoc reviewer for over 20 peer
reviewed  journals.  He has authored 97 peer reviewed journal  articles.  He has
written 56 book  chapters,  reviews  and  editorials,  and he holds six  patents
issued and four patents pending.  He attended Brown  University  (BA),  Stanford
University (PhD in Organic Chemistry), Albert Einstein College of Medicine (MD),
and New York  Hospital-Cornell  Medical  Center  (Internship  and  Residency  in
Internal Medicine). Dr Stein was a Clinical Associate and Senior Staff Fellow at
The National Cancer Institute, Bethesda, Maryland.

JOHN J. ROSSI, PH.D.,  Associate Director for Laboratory Research,  City of Hope
Comprehensive  Cancer Center.  Dr. Rossi began his employment  with City of Hope
(COH) in 1980 as an assistant  research scientist in the Department of Molecular
Genetics.  He was  promoted to chairman of the  Division of Biology in 1992.  In
1993,  COH bestowed  its highest  honor upon him by naming him to its Gallery of
Medical and  Scientific  Achievement  for his  pioneering  work at the molecular
level in the battle  against AIDS and other major  diseases.  In 1998, Dr. Rossi
was  appointed  as the Dean of the City of Hope  Graduate  School of  Biological
Sciences.  Dr. Rossi is an expert in ribozymes (molecular scissors).  One of his
most notable  projects is in the area of ribozyme  research in AIDS.  He led the
research team that first suggested applying ribozymes to treat HIV. His research
in molecular  genetics and  microbiology  has  resulted in eight  patents  being
granted  and has served as the basis for more than 120  scientific  papers.  Dr.
Rossi  received his  bachelor's  degree from the University of New Hampshire and
earned his doctorate at the University of  Connecticut.  Prior to his working at
COH, Dr. Rossi completed four years of post Ph.D.  training at Brown  University
in Providence, Rhode Island.

RAYMOND L. OCAMPO JR. is a lawyer and  businessman.  He currently  serves on the
boards of PMI Group, Inc. (PMI) and Pinpoint  Solutions  Corporation.  Mr. Campo


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<PAGE>

retired in November 1996 as Senior Vice  President,  General Counsel & Secretary
at Oracle  Corporation,  the world's  second  largest  software  company,  after
serving as its chief legal counsel for more than a decade. Before joining Oracle
Corporation  in 1986,  Mr. Ocampo was engaged in the private  practice of law in
San Francisco  (1976-86) and was an adjunct professor at Hastings College of the
Law (1977-83). He received his undergraduate degree form U.C.L.A. in 973 and his
law degree from Boalt Hall  School of Law at U.C.  Berkely in 1976.  Mr.  Ocampo
authored Surfing the Law and Technology Tsunami (American Bar Association 2001),
a collection of keynote  addresses about the intersection of law and technology,
and co-authored Negotiating and Drafting Software Consulting Agreements (Glasser
LegalWorks  1996).  Mr.  Ocampo  was  the  2001-02  Chair  of the  American  Bar
Association's  Section of Science & Technology law. He previously  served as the
chair of the Section's  E-Commerce  Division (1998-99) and Internet & Cyberspace
Committee  (1996-99)  and served as co-chair  of the  Multimedia  &  Interactive
Technologies  Committee  (1995-96).  He also  served  as chair  of the  Computer
Litigation Committee (1992-94) of the ABA's Section of Litigation.

The  Company  has not  adopted a Code of Ethics  that  applies to the  Company's
principal  executive officers,  the principal  financial officer,  the principal
accounting officer or the controller. No Code of Ethics has been adopted because
the Company and the board of  directors  chose to devote its working  capital to
the Company's  research and development  projects instead of reducing to writing
standards  designed to deter  wrongdoing and promote honest and ethical conduct.
The Board of  Directors  and  current  management  has  decided  that in lieu of
current events and the  anticipated  growth of the company a Code of Ethics will
be adopted in 2007.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated by reference to
the Company's Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

The  information  required  by Item 12 of Form  10-k is  incorporated  herein by
reference to the Company's Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The  Company  entered  into a  consultant  agreement  with one of the  Company's
Directors,  Cy A. Stein,  Ph.D.  This  agreement is for services by Dr. Stein to
evaluate and consult in the  development of existing and new research  platforms
and business directives for the Company.  The agreement began on October 3, 2006
and extends for no longer than six (6) months for a fee of $3,000 per month plus
travel expenses. The Company has paid to Dr. Stein the amount of $11,540 for the
year ended December 31, 2006.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



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<PAGE>

<TABLE>

The information required by Item 15 of Form 10-K is incorporated by reference to
the Company's Proxy Statement.


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS

(A) (1) AND (2)  Financial  Statements  and  Financial  Statement  Schedules See
    "Index to Consolidated Financial Statements" on page F-1

(A)    (3) EXHIBITS

         EXHIBIT
          NUMBER                     DESCRIPTION
<S>     <C>                                                                  <C>

            3.1             --Articles of Incorporation of Cryogenic Solutions, Inc.
                              (incorporated by reference to exhibit 3.1 to the registrant's
                              registration statement on Form 10-SB, as amended
                              (File No. 000-26807), filed with the Securities & Exchange
                              Commission ("SEC") initially on July 23, 1999 the ("Form   10-SB")).

            3.2             --Certificate of Amendment dated November 1, 1995 of Articles of
                              Incorporation of Cryogenic Solutions, Inc. (incorporated by re-
                              ference to exhibit 3.2 of the Form 10-SB).

            3.3             --Certificate of Amendment dated January 13, 2000 of Articles of
                              Incorporation of CytoGenix, Inc. (incorporated by reference to
                              exhibit 3.3 of the Form 10-SB).

            3.4             --Certificate of Amendment dated March 7, 2001 of Articles of
                              Incorporation of CytoGenix, Inc. (incorporated by reference to
                              Annex II of the definitive proxy statement on Schedule 14A
                              filed with the SEC on December 23, 2003).

            3.5             --Certificate of Amendment dated April 6, 2004 of Articles of
                              Incorporation of CytoGenix, Inc. (incorporated by reference to
                              Exhibit 3.5 to the registrant's Form 10-KSB for the year ended
                              December 31, 2003 filed with the SEC on April 14, 2004).

            3.6             --Bylaws of Cryogenic Solutions, Inc (incorporated by reference to
                              exhibit 3.4 of the Form 10-SB).

            3.7             --Amendments to Bylaws of CytoGenix, Inc. (incorporated by
                              reference to Annex I of the definitive proxy statement on
                              Schedule  14A filed  with the SEC on December 23, 2003).

            10.1+           --Employment Agreement dated January 1, 2005 between
                              CytoGenix, Inc. and Malcolm H. Skolnick (incorporated
                              by reference to exhibit 10.1 of the Form 10-K/A for


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<PAGE>

                              Year ended December 31, 2005 filed with the SEC Inc. on
                              April 21, 2006).

            10.2            --License Agreement dated February 3, 2000, between CytoGenix,
                              Inc. and PharmaGenix, LLC. (incorporated by reference to
                              exhibit 10.3 of the Form 10-SB).

            10.3            --Technology Transfer Agreement dated June 26, 1998 between
                              Cryogenic Solutions, Inc. and InGene, Inc. (incorporated by
                              reference to exhibit 10.4 of the Form 10-SB)

            10.4            --Sponsored Research Agreement between CytoGenix, Inc. and
                              Baylor College of Medicine as of March 1, 2000 (incorporated
                              by reference to exhibit 10.7 of the Form 10-SB).

            10.5+           --Stock Option Plan (incorporated by reference to Annex III of
                              the definitive proxy statement on schedule 14A filed with the
                              SEC on December 23, 2003).

            10.6+           --Stock Option Plan (incorporated by reference to Annex I of the
                              definitive proxy statement on schedule 14A filed with the
                              SEC on June 17, 2005).

            10.7            --Supply Agreement dated March 22, 2006, between CytoGenix,
                              Inc. and GE Healthcare Bio-Science Corporation (incorporated
                              by reference to Exhibit 10 to the registrant's current report on
                              Form 8-K filed with the SEC on March 28, 2006).

            10.8            --Ernest Money Contract of Design/Build Project dated October
                              30, 2006 between CytoGenix, Inc. and GSL Contractors, Ltd.
                              (incorporated by reference to Exhibit 10.1 to the registrant's
                              current  report on Form 8-K filed with the SEC on November 3,
                              2006).

            31.1            --Certifications of Principal Executive Officer pursuant to Rule
                              13a-14(a) of the Securities Exchange Act of 1934, the "Act".

            31.2            --Certifications of Principal Financial Officer pursuant to Rule
                              13a-14(a) of the Act".

            32.1            --Certifications of Principal Executive Officer pursuant to 18
                              U.S.C. Section 1350.

            32.2            --Certifications of Principal Financial Officer pursuant to 18
                              U.S.C. Section 1350.
</TABLE>

-------------------------
                  + Management contract or compensatory plan or arrangement.


                                       65
<PAGE>



                                    SIGNATURES
In accordance with Section 13 or 15(d) Exchange Act, the registrant  caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                    CYTOGENIX, INC.

                           By:       /s/ Malcolm Skolnick
                                    --------------------------------------------
                                    Malcolm Skolnick, PH.D.
                                    PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date: March 30, 2007

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

Date: March 30, 2007       By:      /s/ Malcolm Skolnick
                                    --------------------------------------------
                                    MALCOLM SKOLNICK, PH.D.
                                    PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                    (PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR)

Date: March 30, 2007       By:      /s/ Raymond L Ocampo, Jr.
                                    --------------------------------------------
                                    RAYMOND L. OCAMPO, JR.
                                    DIRECTOR

Date: March 30, 2007       By:      /s/ Scott E. Parazynski
                                    --------------------------------------------
                                    Scott E. Parazynski
                                    DIRECTOR

Date: March 30, 2007       By:      /s/ Cy A. Stein
                                    --------------------------------------------
                                    CY A. STEIN
                                    DIRECTOR

Date: March 30, 2007       By:      /s/ John J. Rossi
                                    --------------------------------------------
                                    JOHN J. ROSSI
                                    DIRECTOR


Date: March 30, 2007       By:      /s/ Pam Schertz
                                    --------------------------------------------
                                    PAM SCHERTZ
                                    CHIEF FINANCIAL OFFICER



                                       66