**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




**QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**
              **SECURITIES
                EXCHANGE ACT OF 1934**For
                the quarterly period ended June 30,
                2007




Commission
      file number: 0-32019




**TASKER
      PRODUCTS CORP.**


(Exact
      name of registrant as specified in its charter)




**Delaware**
            
            **88-0426048**(State
                of incorporation)
            
            (IRS
                Employer Identification No.)






**39
      Old Ridgebury Road-Suite 14,**


**Danbury,
      CT 06810-5116**


(Address
      of principal executive offices)





**(203)
      730-4350**


(Registrant’s
      telephone number)




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




Indicate
      by check mark whether the registrant 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 o
            Accelerated
                filer o
            Non-accelerated
                filer x




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




The
      number of shares outstanding of the registrant’s common stock as of August 10,
      2007 was 109,461,005.









**TASKER
      PRODUCTS CORP.**




**INDEX**




**PART
                I. FINANCIAL INFORMATION****Item
                1.**
            **Financial
                Statements**Unaudited
                Condensed Consolidated Balance Sheets as of June 30, 2007 and December
                31,
                2006
            2Unaudited
                Condensed Consolidated Statements of Operations for the three months
                ended
                June 30, 2007 and 2006
            3Unaudited
                Condensed Consolidated Statements of Operations for the six months
                ended
                June 30, 2007 and 2006
            4Unaudited
                Condensed Consolidated Statements of Cash Flows for the six months
                ended
                June 30, 2007 and 2006
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6**Item
                2.**
            **Management’s
                Discussion And Analysis Of Financial Condition And Results Of
                Operations**
            22**Item
                3.**
            **Quantitative
                And Qualitative Disclosures About Market Risk**
            31**Item
                4.**
            **Controls
                And Procedures**
            31**PART
                II. OTHER INFORMATION****Item
                1A.**
            **Risk
                Factors**
            32**Item
                2.**
            **Unregistered
                Sales Of Equity Securities And Use Of Proceeds**
            33**Item
                4.**
            **Submission
                of Matters to a Vote of Security Holders**
            34**Item
                6.**
            **Exhibits**
            35**SIGNATURES**
            36




**Forward-Looking
      Statements**




In
      this
      Quarterly Report, we state our beliefs of future events and of our future
      financial performance. In some cases, you can identify those so-called
“forward-looking statements” by words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” or “continue” or the negative of those words and other comparable
      words. These forward-looking statements are subject to risks and uncertainties
      that could cause actual results to differ materially from historical results
      or
      those we anticipate. Factors that could cause actual results to differ from
      those contained in the forward-looking statements include, but are not limited
      to: our ability to obtain new financing and/or generate revenue growth in the
      near future; our history of losses; our limited experience in the marketing
      of
      our products; our ability to compete with other products in our market space;
      the risk of unfavorable federal regulation; and the other risks and
      uncertainties discussed in this Quarterly Report and in Amendment No. 1 to
      our
      Annual Report on Form 10-K for the year ended December 31, 2006 and such other
      reports and documents that we file from time to time with the Securities and
      Exchange Commission. Statements included in this Quarterly Report are based
      upon
      information known to us as of the date that this Quarterly Report is filed
      with
      the Securities and Exchange Commission, and we assume no obligation to update
      or
      alter our forward-looking statements made in this Quarterly Report, whether
      as a
      result of new information, future events or otherwise, except as otherwise
      required by applicable federal securities laws.




1






**PART
      I — FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




**TASKER
      PRODUCTS CORP. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS**


**(In
      thousands except per share data)**




**June
                30,**
            
            **December 31,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            740
            
            $
            932Accounts
                receivable, net of allowance for doubtful accounts of $39 and $24,
                respectively
            
            
            462
            
            
            176Notes
                receivable
            
            
            60
            
            
            50Inventories
            
            
            398
            
            
            300Prepaid
                expenses and other current assets
            
            
            142
            
            
            268Deferred
                financing costs
            
            
            897
            
            
            501Total
                current assets
            
            
            2,699
            
            
            2,227Notes
                receivable, net of current portion
            
            
            675
            
            
            669Property
                and equipment, net
            
            
            1,229
            
            
            1,311Intangible
                assets, net
            
            
            7,499
            
            
            7,887Goodwill
            
            
            9,835
            
            
            9,835Deposits,
                net
            
            
            41
            
            
            38Total
                assets
            
            $
            21,978
            
            $
            21,967**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            518
            
            $
            1,227Other
                accrued liabilities
            
            
            2,323
            
            
            2,509Notes
                payable - acquisition of IRL
            
            
            74
            
            
            679Convertible
                bridge notes, net of discount of $1,818 and $1,600,
                respectively
            
            
            6,476
            
            
            320Derivative
                liabilities
            
            
            945
            
            
            —Warrants
                payable - placement agent
            
            
            1,501
            
            
            409Notes
                payable - shareholders
            
            
            582
            
            
            564Total
                current liabilities
            
            
            12,419
            
            
            5,708Long-term
                liabilities:Other
                long-term liabilities
            
            
            25
            
            
            30Total
                long-term liabilities
            
            
            25
            
            
            30Commitments
                (See Note 11)Stockholders’
                equity:Common
                stock, $0.001 par value; 300,000 shares authorized; 109,461 and 106,340
                shares issued and outstanding, respectively
            
            
            109
            
            
            106Additional
                paid-in capital
            
            
            112,361
            
            
            105,131Accumulated
                deficit
            
            
            (102,936
            )
            
            (89,008
            )Total
                stockholders’ equity
            
            
            9,534
            
            
            16,229Total
                liabilities and stockholders’ equity
            
            $
            21,978
            
            $
            21,967


See
      accompanying notes




2





**TASKER
      PRODUCTS CORP. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**


**(In
      thousands except per share data)**




**Three Months Ended**
              **June
                30,****2007**
            
            **2006**Revenues
            
            $
            632
            
            $
            537Cost
                of goods sold
            
            
            73
            
            
            145Gross
                margin
            
            
            559
            
            
            392Operating
                expensesSelling,
                general & administrative (1)
            
            
            3,420
            
            
            2,910Product
                development (1)
            
            
            349
            
            
            514Depreciation
                and amortization
            
            
            280
            
            
            579Impairment
                of goodwill and intangible asset
            
            
            —
            
            
            30,152Total
                operating expenses
            
            
            4,049
            
            
            34,155Loss
                from operations
            
            
            (3,490
            )
            
            (33,763
            )Other
                income (expense):Interest
                expense
            
            
            (175
            )
            
            (22
            )Interest
                income
            
            
            16
            
            
            100Amortization
                of debt discount
            
            
            (3,187
            )
            
            —Amortization
                of deferred financing costs
            
            
            (1,200
            )
            
            —Liquidated
                damages
            
            
            —
            
            
            (49
            )Gain
                on extinguishment of obligations
            
            
            4
            
            
            50Other
            
            
            (15
            )
            
            (4
            )Total
                other income (expense), net
            
            
            (4,557
            )
            
            75Net
                loss
            
            $
            (8,047
            )
            $
            (33,688
            )Net
                loss per common share, basic and diluted
            
            $
            (0.07
            )
            $
            (0.32
            )Weighted
                average common shares outstanding, basic and diluted
            
            
            108,958
            
            
            104,947(1)
                Stock-based compensation is allocated as follows:




**Three Months Ended**
              **June
                30,****2007**
            
            **2006**Selling,
                general & administrative
            
            $
            1,219
            
            $
            1,006Product
                development
            
            
            13
            
            
            101Total
            
            $
            1,232
            
            $
            1,107






See
      accompanying notes




3




**TASKER
      PRODUCTS CORP. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**


**(In
      thousands except per share data)**




**Six Months Ended**
              **June
                30,****2007**
            
            **2006**Revenues
            
            $
            1,057
            
            $
            758Cost
                of goods sold
            
            
            168
            
            
            213Gross
                margin
            
            
            889
            
            
            545Operating
                expensesSelling,
                general & administrative (1)
            
            
            6,606
            
            
            6,991Product
                development (1)
            
            
            833
            
            
            889Write-off
                of raw material
            
            
            20
            
            
            —Impairment
                of goodwill and intangible assets
            
            
            —
            
            
            30,152Depreciation
                and amortization
            
            
            557
            
            
            1,154Total
                operating expenses
            
            
            8,016
            
            
            39,186Loss
                from operations
            
            
            (7,127
            )
            
            (38,641
            )Other
                income (expense):Interest
                expense
            
            
            (280)
            
            
            (49
            )Interest
                income
            
            
            33
            
            
            138Amortization
                of debt discount
            
            
            (4,872
            )
            
            —Amortization
                of deferred financing costs
            
            
            (1,722
            )
            
            —Liquidated
                damages
            
            
            —
            
            
            (136
            )Gain
                on extinguishment of obligations
            
            
            55
            
            
            50Loss
                on disposal of vehicle
            
            
            —
            
            
            (50
            )Other
            
            
            (15
            )
            
            75Total
                other income (expense), net
            
            
            (6,801
            )
            
            28Net
                loss
            
            $
            (13,928
            )
            $
            (38,613
            )Net
                loss per common share, basic and diluted
            
            $
            (0.13
            )
            $
            (0.38
            )Weighted
                average common shares outstanding, basic and diluted
            
            
            107,933
            
            
            102,749




(1)
                Stock-based compensation is allocated as
                follows:




**Six Months Ended**
              **June
                30,****2007**
            
            **2006**Selling,
                general & administrative
            
            $
            2,563
            
            $
            2,673Product
                development
            
            
            149
            
            
            158Total
            
            $
            2,712
            
            $
            2,831




See
      accompanying notes




4




**TASKER
      PRODUCTS CORP. AND SUBSIDIARIES**


**UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(In
      thousands)**




**Six Months Ended****June
                30,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                loss
            
            $
            (13,928
            )
            $
            (38,613
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Non-cash
                itemsDepreciation
                and amortization
            
            
            557
            
            
            1,154Noncash
                interest and liquidated damages
            
            
            1
            
            
            122Noncash
                loss on disposal of assets
            
            
            —
            
            
            50Write
                off of raw materials
            
            
            20
            
            
            —Stock-based
                compensation
            
            
            2,712
            
            
            2,831Impairment
                of goodwill and intangible assets
            
            
            —
            
            
            30,152Allowance
                for uncollectible accounts receivable
            
            
            15
            
            
            10Loss
                on equity investment
            
            
            —
            
            
            9Amortization
                of discount on first and second convertible bridge notes
            
            
            4,873
            
            
            —Amortization
                of deferred financing costs
            
            
            1,722
            
            
            —Gain
                on change in fair value of derivative liabilities
            
            
            15
            
            
            —Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (301
            )
            
            (120
            )Inventories
            
            
            (118
            )
            
            9Prepaid
                expenses and other current assets
            
            
            122
            
            
            (20
            )Accounts
                payable
            
            
            (708
            )
            
            (489
            )Other
                accrued liabilities
            
            
            (163
            )
            
            (286
            )Net
                cash used in operating activities
            
            
            (5,181
            )
            
            (5,191
            )**Cash
                flows from investing activities:**Purchases
                of available-for-sale securities
            
            
            —
            
            
            (6,350
            )Purchases
                of property and equipment
            
            
            (86
            )
            
            (93
            )Proceeds
                from available-for-sale-securities
            
            
            
            
            
            2,650Payments
                for deposits and other
            
            
            
            
            
            (2
            )Net
                cash used in investing activities
            
            
            (86
            )
            
            (3,795
            )**Cash
                flows from financing activities:**Proceeds
                from private placements, net of issue costs
            
            
            6,375
            
            
            9,335Deferred
                financing costs
            
            
            (812
            )
            
            (593
            )Exercise
                of warrants / options
            
            
            122
            
            
            57Repayment
                of auto loan
            
            
            (5
            )
            
            —Repayments
                on note payable - IRL
            
            
            (605
            )
            
            (483
            )Net
                cash provided by financing activities
            
            
            5,075
            
            
            8,316**Net
                decrease in cash and cash equivalents**
            
            
            (192
            )
            
            (670
            )**Cash
                and cash equivalents, beginning of period**
            
            
            932
            
            
            1,037**Cash
                and cash equivalents, end of period**
            
            $
            740
            
            $
            367**Supplemental
                disclosures of cash flow information:**Interest
                paid
            
            $
            6
            
            $
            13**Supplemental
                disclosures of non-cash investing and financing
                activities:**Fair
                value of warrants issued as private placement fees
            
            $
            214
            
            $
            593Recognition
                of debt discount and beneficial conversion on debt
            
            $
            4,161
            
            $
            —Conversion
                of debt and accrued interest into common stock
            
            $
            116
            
            $
            194




See
      accompanying notes




5





**TASKER
      PRODUCTS CORP. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**1.**  **Basis
      of Presentation**




Tasker
      Products Corp. (formerly known as Tasker Capital Corp.) was formed
      on May 13, 1996 and was in the development stage through December 31,
      2005. The quarterly period ended March 31, 2006 is the
      first period during which Tasker Products Corp. is considered an operating
      company.




Tasker
      Products Corp. and its subsidiaries (collectively, the "Company") manufacture,
      distribute and market products using pHarlo technology, a process that enables
      copper sulfate, a compound with bacteriostatic properties, to remain active
      throughout a wide range of pH values. The Company currently markets the
      following: Unifresh Ò Footbath, a grooming aid for dairy cows; Tasker Blue, an antimicrobial aid
      in
      the scalder (a stage in poultry processing designed to loosen feathers so that
      they can be picked and removed mechanically) and the post-feather picker process
      (the method used in chicken processing that receives chickens immediately after
      the scalder and mechanically removes feathers) sections of poultry processing;
      and Tasker Pacific Blue Ô Seafood
      Wash, a product used in commercial and retail seafood processing to extend
      shelf
      life and reduce or eliminate odors.




The
      accompanying unaudited condensed consolidated financial statements of the
      Company as of June 30, 2007 and December 31, 2006 and for the three and six
      month periods ended June 30, 2007 and 2006 reflect all adjustments of a normal
      and recurring nature to present fairly the consolidated financial position,
      results of operations and cash flows for the interim periods.  These
      unaudited condensed, consolidated financial statements have been prepared by
      the
      Company pursuant to the instructions to Form 10-Q and Article 10 of Regulation
      S-X.  Pursuant to such instructions, certain financial information and
      footnote disclosures normally included in such financial statements have been
      condensed or omitted.




These
      unaudited condensed consolidated financial statements should be read in
      conjunction with the audited consolidated financial statements of the Company
      and notes thereto, together with management’s discussion and analysis or plan of
      operations, contained in Amendment No. 1 to the Company’s annual report on Form
      10-K for the year ended December 31, 2006. The results of operations for the
      three and six month periods ended June 30, 2007 are not necessarily indicative
      of the results that may occur for the year ending December 31,
      2007.




Certain
      prior period amounts have been reclassified to conform to the current year
      presentation. ****




**2.
      Recent Accounting Pronouncements**




In
      July
      2006, the Financial Accounting Standards Board issued Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48
      creates a single accounting and disclosure model for uncertain tax positions,
      provides guidance on the minimum threshold that a tax uncertainty is required
      to
      meet before it can be recognized in the financial statements and applies to
      all
      tax positions taken by a company, both those deemed to be routine as well as
      those for which there may be a high degree of uncertainty.




FIN
      48
      establishes a two-step approach for evaluating tax positions. The first step,
      recognition, occurs when a company concludes (based solely on the technical
      aspects of the tax matter) that a tax position is more likely than not to be
      sustained on examination by a taxing authority. The second step, measurement,
      is
      only considered after step one has been satisfied and measures any tax benefit
      at the largest amount that is deemed more likely than not to be realized upon
      ultimate settlement of the uncertainty. Tax positions that fail to qualify
      for
      initial recognition are recognized in the first subsequent interim period that
      they meet the more likely than not standard, when they are resolved through
      negotiation or litigation with the taxing authority or upon the expiration
      of
      the statute of limitations. Derecognition of a tax position previously
      recognized would occur when a company subsequently concludes that a tax position
      no longer meets the more likely than not threshold of being sustained. FIN
      48
      also significantly expands the financial statement disclosure requirements
      relating to uncertain tax positions. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. The
      adoption of the provisions of FIN 48 did not have a material impact on the
      Company’s financial position, results of operations and cash flows.




6


In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS 157”), which defines fair value, establishes a framework for
      measuring fair value in U.S. generally accepted accounting principles, and
      expands disclosures about fair value measurements.  SFAS 157 applies
      under other existing accounting pronouncements that require or permit fair
      value
      measurements, as the FASB previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute. 
Accordingly, SFAS 157 does not require any new fair value
      measurements.  However, the application of this statement may change the
      Company’s current practice for fair value measurements.  SFAS 157 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years.  The
      Company is currently evaluating the impact this statement will have on its
      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* (“SFAS 159”). SFAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value that are not
      currently required to be measured at fair value. SFAS 159 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 at each subsequent reporting date.  Upfront costs and
      fees related to items for which the fair value option is elected are recognized
      in earnings as incurred and not deferred.  SFAS 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between entities that choose different measurement attributes for similar types
      of assets and liabilities.  SFAS 159 is effective as of the beginning
      of an entity’s first fiscal year that begins after November 15, 2007. 
The Company is currently evaluating the impact this statement will have on
      its
      financial position, results of operations and cash
      flows .




**3.
      Liquidity**




*Going
      Concern*




The
      Company has incurred losses in its operations in each quarter since it changed
      its business direction in late 2002. For the three and six months ended June
      30,
      2007, the Company has incurred a net loss of approximately $8.0 million and
      $13.9 million, respectively. The Company has not generated positive cash flow
      from operating activities for the six months ended June 30, 2007 and 2006.
      The
      Company expects to continue to incur losses until it can generate sufficient
      revenue growth from existing and new business arrangements.




At
      June
      30, 2007, the Company had a total of approximately $740,000 of cash and cash
      equivalents.




Between
      December 1, 2006 and May 1, 2007, the Company received cash in the amount of
      approximately $6,295,000 (including cash received during December 2006, in
      the
      amount of approximately $1,920,000) from several investors. In exchange for
      the
      cash received, the Company issued to the investors 10% Secured Convertible
      Promissory Notes (the “First Convertible Bridge Notes”), which are convertible
      into 86,828,841 shares of common stock at a conversion price of $0.0725 per
      share. As an inducement for the investors to purchase the First Convertible
      Bridge Notes, the Company issued to these investors four-year warrants, which
      entitle them to purchase an aggregate of 34,972,733 shares of common stock,
      which number of shares is based on 50% of the principal amount of the notes
      purchased by the investors and divided by the per share exercise price of $0.09.
      As compensation for its services as placement agent, Indigo Securities, LLC
      received cash in the amount of approximately $629,500 and seven-year warrants
      to
      purchase an aggregate of 8,682,894 shares of the Company’s common stock at an
      exercise price of $0.0725 per share. The placement agent warrants contain a
      “cashless exercise” option.




7




In
      June
      2007, the Company received cash in the amount of $2,000,000 from one investor.
      In exchange for the cash received, the Company issued to the investor 10%
      Secured Convertible Promissory Notes (the “Second Convertible Bridge Notes”),
      which are convertible into shares of common stock at a conversion price of
      the
      lower of $0.16 per share or 90% of the per share amount of a Qualified Financing
      (as defined below) or if such Qualified Financing has not been completed by
      July
      4, 2007, the lower of $0.16 per share or 80% of the per share amount of a
      Qualified Financing. Based on a conversion price of $0.16 per share, the Second
      Convertible Bridge Notes are convertible into 12,500,000 shares of common stock.
      In conjunction with these Second Convertible Bridge Notes, the Company issued
      to
      the investor four-year warrants to purchase 1,000,000 shares of common stock
      at
      an exercise price of $0.20 per share. Since the Company did not complete the
      Qualified Financing by July 4, 2007, such investor will receive additional
      four-year warrants to purchase 1,000,000 shares of common stock at an exercise
      price of 0.20 per share. As compensation of its services as placement agent,
      Indigo Securities, LLC received cash in the amount of $200,000 and will receive
      seven-year warrants at an exercise price of the lower of $0.20 per share or
      the
      per share exercise price of warrants issued in a Qualified Financing. The number
      of shares of common stock issuable upon exercise price of such warrants will
      have an aggregate purchase price of $200,000. Based on an exercise price of
      $0.20 per share, the warrants that will be issued to Indigo will be exercisable
      into 1,000,000 shares of common stock. The placement agent warrants also contain
      a “cashless exercise” option. Because the number of shares issuable on
      conversion are indeterminate and not limited by the terms of the agreement,
      the
      conversion option and warrants are required to be recorded as derivative
      liabilities. (See Note 14)




A
      “Qualified Financing” is an offering of debt securities with aggregate gross
      proceeds of at least $10,000,000 (including the gross proceeds from the First
      and Second Convertible Bridge Notes).




Based
      upon the Company’s projections of future revenues from its products and cash on
      hand, including cash of $6.4 million received from the sale of the Company’s First and
      Second Convertible Bridge Notes between January 1, 2007 and June 30, 2007,
      the
      Company will not have adequate working capital to fund its operations during
      the
      next twelve months. The
      Company is rapidly depleting its cash resources and its ability to continue
      to
      operate and grow its business is dependent upon obtaining new financing or
      generating sufficient cash flows from operations.  The cost of any new
      financing may be prohibitive. While the Company has been in the process of
      aggressively developing, marketing and selling its products, there can be no
      assurances that those efforts will be met with success in the marketplace or
      that the timing of the Company’s efforts will be consistent with its cash
      availability and burn rate. If the Company is unable to arrange new financing
      and/or generate sufficient revenue growth
      from existing and new business arrangements ,
      the
      Company will not have sufficient cash to support its operations and meet its
      obligations. The Company anticipates that it will need approximately an
      additional $4 - $6 million to support its operations and meet its obligations
      over the next twelve months. The Company is currently reviewing alternative
      methods of financing, including private issuances of debt and/or
      equity.




In
      view
      of the matters described above, recoverability of a major portion of the
      recorded asset amounts shown in the accompanying balance sheet is dependent
      upon
      continued operations of the Company, which in turn is dependent upon the
      Company’s ability to raise additional capital, obtain financing and to succeed
      in its future operations. The financial statements do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts or amounts and classification of liabilities that might be necessary
      should the Company be unable to continue as a going concern.




*Registration
      Rights Agreements*




Since
      the
      Company’s inception, the Company has funded operations and investing activities
      through the sale of common stock, warrants and convertible debt under several
      private placements. Requirements for liquidated damages under some of these
      private placements may have an impact on the Company’s future liquidity. To
      date, the Company has satisfied and/or received waivers for the provisions
      of a
      majority of the agreements that would have otherwise required the Company to
      pay
      liquidated damages.




8




At
      June
      30, 2007, there was no derivative liability balance related to the April 2004
      and July 2004 registration rights agreements, since
      the
      shares purchased under the April 2004 and July 2004 private placements could
      be
      sold under Rule 144(k) of the Securities Act of 1933. Conversely, as of June
      30,
      2007, we had recorded approximately $441,000, the full and maximum potential
      amount of the actual incurred liquidated damages associated with the April
      2004
      and the July 2004 registration rights agreements.




On
      April
      26, 2006, the Company filed a registration statement registering resale of
      securities purchased in the September 2005 and January 2006 private placements.
      This registration statement was declared effective by the SEC on October 31,
      2006. As it relates to the September 2005 private placement, the Company
      believes that it has used its best efforts to cause the registration statement
      to be declared effective and, therefore, pursuant to the terms of the
      September 2005 registration rights agreement, the Company believes that it
      is not currently liable for liquidated damages as a result of the registration
      statement not being declared effective by May 23, 2006. Should the rights
      holders dispute that the Company used its best efforts, and the Company either
      accedes to their assertion or is found to not have used its best efforts, the
      estimated maximum amount of liquidated damages for which the Company would
      be
      liable, assuming ineffectiveness from May 23, 2006 to October 31, 2006 and
      for illustration purposes only, from July 1, 2007 to the end of the period
      covered by the registration agreement is approximately $68,000.




As
      it
      relates to the January 2006 private placement, the Company, despite using
      its best efforts, failed to have the registration statement declared effective
      by the SEC on or before October 26, 2006. Consequently, as of December 31,
      2006,
      the Company is required to issue to each holder of the January 2006 private
      placement, shares and warrants equal to one percent of the respective number
      of
      shares and warrants purchased by each holder or an aggregate of 133,359 shares
      of common stock and warrants to purchase 133,359 shares of common stock. As
      of
      June 30, 2007, the Company had not issued these shares and
      warrants.




**4.
      Notes Receivable**




On
      March 28, 2005, in connection with the 2005 acquisition of the pHarlo
      Assets, the Company issued to David Creasey, a principal of pHarlo Citrus
      Technologies and Indian River Labs, a loan of $625,000. This loan is secured
      by
      options and stock that Mr. Creasey holds in the Company. As of June 30,
      2007, the balance of this loan is approximately $735,000 including accrued
      interest of approximately $110,000.





**5.
      Goodwill and Other Intangible Assets**




The
      net
      carrying values of goodwill and other intangible assets at June 30, 2007 were
      as
      follows (in thousands):




**Net Carrying 
                Amount/ Adjusted Basis**
            
            **Additions**
            
            **Accumulated
                Amortization**
            
            **Net Carrying 
                Amount**Amortizable
                utility patents
            
            $
            7,887
            
            $
            25
            
            $
            413
            
            $
            7,499Goodwill
            
            $
            9,835
            
            $
            —
            
            $
            —
            
            $
            9,835




The
      net
      carrying values of goodwill and other intangible assets at December 31, 2006
      were as follows (in thousands):




**Gross Carrying
                 Amount**
            
            **Impairment
                Charges**
            
            **Accumulated
                Amortization**
            
            **Net Carrying 
                Amount/ Adjusted Basis**Amortizable
                utility patents
            
            $
            22,500
            
            $
            12,239
            
            $
            2,374
            
            $
            7,887Goodwill
            
            $
            41,677
            
            $
            31,842
            
            $
            —
            
            $
            9,835




9




The
      Company recorded amortization expense of approximately $207,000 and $413,000
      related to the other intangible assets for the three and six months ended June
      30, 2007, respectively. The Company recorded amortization expense of $511,000
      and $1,023,000 related to the other intangible assets for the three and six
      months ended June 30, 2006, respectively.




Future
      expected amortization expense of intangible assets for the remaining two
      quarters of the current fiscal year and the subsequent fiscal years is as
      follows (in thousands):




2007
            
            $
            4152008
            
            
            8292009
            
            
            8292010
            
            
            8292011
            
            
            8292012
                and thereafter
            
            
            3,768




**6.**  **Warrants
      and Stock Options**




**Warrants:**




Outstanding
      warrants (excluding warrants issued for compensation subsequent to adoption
      of
      FAS 123R included below under share-based payments) at June 30, 2007, were
      as
      follows:




·
            Warrants
                to purchase 524,850 shares of common stock issued with notes payable
                in
                November 2002. The warrants have a five-year term and were issued
                with an
                exercise price of $2.00 per share.




·
            Warrants
                to purchase 375,000 shares of common stock issued to pHarlo in connection
                with a license agreement in November 2002. The warrants have a five-year
                term and were issued with an exercise price of $0.25 per
                share.




·
            Warrants
                to purchase 3,025,000 shares of common stock issued to consultants
                in
                November 2002. The warrants have a five-year term and were issued
                with an
                exercise price of $0.25 per share.




·
            Warrants
                to purchase 400,000 shares of common stock issued to a consultant
                in May
                2004. The warrants have a five-year term and were issued with an
                exercise
                price of $0.25 per share.




·
            Warrants
                to purchase 562,500 shares of common stock issued to a placement
                agent in
                connection with the December 2004 private placement. The warrants
                have a
                five-year term and were issued with an exercise price of $2.00 per
                share.




10




·
            Warrants
                to purchase 1,473,770 shares of common stock issued to investors
                in
                connection with the September 2005 private placement. The warrants
                have a
                five-year term and were issued with an exercise price of $1.00 per
                share.




·
            Warrants
                to purchase 13,335,925 shares of common stock issued to investors
                in
                connection with the January 2006 private placement. The warrants
                have a
                five-year term and were issued with an exercise price of $1.00 per
                share.




·
            Warrants
                to purchase 800,155 shares of common stock issued to a placement
                agent in
                connection with the January 2006 private placement. The warrants
                have a
                five-year term and were issued with an exercise price of $1.00 per
                share.




·
            Warrants
                to purchase 34,972,733 shares of common stock issued to lenders in
                connection with the sale of the First Convertible Bridge Notes between
                December 1, 2006 and May 1, 2007. The warrants have a four-year term
                and
                were issued with an exercise price of $0.09 per
                share.




·
            Warrants
                to purchase 8,682,894 shares of common stock issued to a placement
                agent
                in connection with the sale of the First Convertible Bridge Notes
                between
                December 1, 2006 and May 1, 2007. The warrants have a seven-year
                term and
                were issued with an exercise price of $0.0725 per share. On March
                6, 2007,
                we issued 2,000,000 shares of our common stock to our placement agent
                pursuant to the cashless exercise of 2,983,051 of these
                warrants.




·
            Warrants
                to purchase 1,000,000 shares of common stock issued to a lender in
                connection with the sale of the Second Convertible Bridge Notes on
                June 4,
                2007. The warrants have a four-year term and were issued with an
                exercise
                price of $0.20 per share.




·
            Warrants
                to purchase shares of common stock issuable to a placement agent
                in
                connection with the sale of the Second Convertible Bridge Notes on
                June 4,
                2007. The number of shares of common stock issuable upon exercise
                price of
                such warrants will have an aggregate purchase price of $200,000 at
                an
                exercise price of the lower of $0.20 per share or the per share price
                of
                warrants issued in a Qualified Financing. The number of shares into
                which
                these warrants are convertible, based on a $0.20 per share exercise
                price,
                is 1,000,000 shares. The warrants have a seven-year term and contain
                a
                "cashless exercise" option.




The
      following table summarizes the Company’s warrant activity (excluding warrants
      issued for compensation subsequent to adoption of FAS 123R included below under
      share-based payments) for the quarter ended June 30, 2007:




**Number of 
                warrants**
            
            **Exercise Price
                 per warrant**
            
            **Weighted average
                exercise price per warrant**
              **share**Outstanding,
                January 1, 2007
            
            
            33,812,133
            
            $
            0.0725
                - $2.00
            
            $
            0.59Granted
            
            
            21,351,919
            
            $
            0.0725
                - $0.09
            
            $
            0.09Exercised
            
            
            (2,983,051
            )
            $
            0.0725
            
            $
            0.07Outstanding,
                March 31, 2007
            
            
            52,181,001
            
            $
            0.0725
                - $2.00
            
            $
            0.42Granted
            
            
            11,806,957
            
            $
            0.0725 -
                $0.20
            
            $
            0.10Exercised
            
            
            —
            
            
            —
            
            
            —Outstanding,
                June 30, 2007
            
            
            63,987,958
            
            $
            0.0725
                - $2.00
            
            $
            0.34




11




The
      Warrants granted pursuant to the April 2004 Private Placement originally had
      exercise prices of $0.10 and $0.20. However, in accordance with the terms of
      the
      agreement and upon specified events the exercise prices of all warrants issued
      in this placement were modified to $0.05 per share in September 2004 and further
      modified to $0.01 per share in May 2005. All of the warrants issued in
      connection to the April 2004 Private Placement were exercised during
      2006.




The
      Warrants granted pursuant to the July 2004 Private Placement originally had
      an
      exercise price of $0.25. However, in accordance with the terms of the agreement
      and upon specified events the exercise price of all warrants issued in this
      placement were modified to $0.05 per share in September 2004 and further
      modified to $0.01 per share in May 2005. All of the warrants issued in
      connection to the July 2004 Private Placement were exercised during
      2006.




The
      Warrants granted pursuant to the September 2005 Private Placement originally
      had
      an exercise price of $3.00. In January 2006, in connection with an amendment
      to
      the agreement the exercise price of the warrants was reduced from $3.00 to
      $1.00
      per share.




As
      of
      June 30, 2007, the weighted average contractual life of warrants outstanding
      (excluding warrants issued for compensation subsequent to adoption of FAS 123R
      included below under share-based payments) is approximately 4.2
      years.




**Share-based
      payments:**




On
      January 1, 2006, the Company adopted the provisions of SFAS No. 123R
“Share-Based Payment” using the modified prospective transition method. The
      total expense associated with non-plan warrant and stock option based employee
      compensation was approximately $1,232,000 and $1,107,000 for the three months
      ended June 30, 2007 and 2006, respectively. The total expense associated with
      non-plan warrant and stock option based employee compensation was approximately
      $2,712,000 and $2,831,000 for the six months ended June 30, 2007 and 2006,
      respectively.




The
      aggregate intrinsic value in the tables below represent the total intrinsic
      value (the difference between the closing stock price on the last trading day
      of
      the quarter ended June 30, 2007 and the exercise price, multiplied by the number
      of in-the-money options and warrants) that holders would have received had
      all
      such holders exercised their options and warrants on June 30, 2007. This amount
      changes each reporting period based on changes in the fair market value of
      the
      Company’s common stock. Total intrinsic value of options exercised for the three
      and six months ended June 30, 2007 was $1,000. Total intrinsic value of options
      exercised for the six months ended 2006 was $122,000.




At
      June
      30, 2007, future compensation cost related to non-vested stock options and
      warrants, less estimated forfeitures, is approximately $3,454,000 and will
      be
      recognized over an estimated weighted average period of 8.5 years.




A
      summary
      of stock option and warrants activity is as follows:




**Number
                of options**
            
            **Weighted
                Average Exercise Price per option**
            
            **Weighted
                Average Remaining Contractual Term (years)**
            
            **Aggregate
                Intrinsic Value**Outstanding,
                January 1, 2007
            
            
            41,640,701
            
            $
            0.40Granted
            
            
            21,138,333
            
            $
            0.17Cancelled/forfeited
            
            
            (673,490
            )
            $
            1.46Outstanding,
                March 31, 2007
            
            
            62,105,544
            
            $
            0.25
            
            
            8.47
            
            $
            2,531,000Granted
            
            
            6,620,000
            
            $
            0.18Exercised
            
            
            (10,000
            )
            $
            0.25Cancelled/forfeited
            
            
            (1,000,000
            )
            $
            0.40Outstanding,
                June 30, 2007
            
            
            67,715,544
            
            $
            0.25
            
            
            8.5
            
            $
            3,454,000Options
                and warrants exercisable at June 30, 2007
            
            
            40,218,915
            
            $
            0.29
            
            
            8.3
            
            $
            959,457




12


The
      following table summarizes additional information about stock options granted
      during the six months ended June 30:




**2007**
            
            **2006**Weighted-average
                fair value of grants
            
            $
            0.14
            
            $
            0.69Risk-free
                interest rate
            
            
            4.44%-4.92
            %
            
            4.88%-5.04
            %Expected
                option term
            
            
            4.0-6.1
                years
            
            
            6.1
                yearsStock
                price volatility
            
            
            138%-141
            %
            
            132%-135
            %Dividend
                yield
            
            
            —
            
            
            —




Outstanding
      stock options and warrants issued for compensation at June 30, 2007, were as
      follows:




·
            Warrants
                to purchase 18,000,000 shares of common stock issued to our President
                and
                Chief Executive Officer on December 1, 2006, as part of his compensation.
                The warrants have a ten-year term and were issued with exercise prices
                ranging from $0.11 to $0.18 per
                share.




·
            Warrants
                to purchase 3,030,000 shares of common stock issued to employees,
                directors and consultants on December 26, 2006, as part of their
                compensation. The warrants have a ten-year term and were issued with
                an
                exercise price of $0.14 per share.




·
            Warrants
                to purchase 750,000 shares of common stock issued to a director on
                January
                11, 2007, as part of his compensation. The warrants have a ten-year
                term
                and were issued with an exercise price of $0.15 per
                share.




·
            Warrants
                to purchase 9,010,000 shares of common stock issued to employees,
                directors and consultants on February 5, 2007, as part of their
                compensation. The warrants have a ten-year term and were issued with
                an
                exercise price of $0.14 per share.




·
            Warrants
                to purchase 870,000 shares of common stock issued to employees, directors
                and consultants on March 14, 2007, as part of their compensation.
                The
                warrants have a ten -year term and were issued with an exercise price
                of
                $0.19 per share.




13




·
            Warrants
                to purchase 50,000 shares of common stock issued to a former consultant
                to
                settle a pending litigation matter on March 14, 2007. The warrants
                have a
                five -year term and were issued with an exercise price of $0.15 per
                share.




·
            Warrants
                to purchase 10,125,000 shares of common stock issued to our Executive
                Chairman on March 14, 2007, as part of his compensation. The warrants
                have
                a ten-year term and were issued with exercise prices of $0.19 per
                share.




·
            Warrants
                to purchase 200,000 shares of common stock issued to two consultants
                on
                April 13, 2007, as part of their compensation. The warrants have
                a
                ten-year term and were issued with exercise prices of $0.33 per
                share.




·
            Warrants
                to purchase 1,420,000 shares of common stock issued to employees,
                directors and consultants on June 29, 2007, as part of their compensation.
                The warrants have a ten -year term and were issued with an exercise
                price
                of $0.20 per share.




·
            Warrants
                to purchase 5,000,000 shares of common stock issued to the placement
                agent on June 29, 2007, as a fee for various consulting services
                provided. The warrants have a ten-year term and were issued with
                an
                exercise price of $0.19 per share.




**7.
      Net Loss Per Common Share**




The
      following tables set forth the computation of basic and diluted net loss per
      common share for the three and six months ended June 30, 2007 and 2006,
      respectively:




**Three Months Ended****June
                30,****2007**
            
            **2006****(in thousands except per share data)****Numerator
                for basic and diluted net loss per share:**Net
                loss
            
            $
            (8,047
            )
            $
            (33,688
            )Net
                loss available to common stockholders
            
            $
            (8,047
            )
            $
            (33,688
            )**Denominator:**Denominator
                for basic and diluted net loss per share - weighted-average
                shares
            
            
            108,958
            
            
            104,947**Basic
                and diluted net loss per common share:**
            
            $
            (0.07
            )
            $
            (0.32
            )






**Six Months Ended****June
                30,****2007**
            
            **2006****(in thousands except per share data)****Numerator
                for basic and diluted net loss per share:**Net
                loss
            
            $
            (13,928
            )
            $
            (38,613
            )Net
                loss available to common stockholders
            
            $
            (13,928
            )
            $
            (38,613
            )**Denominator:**Denominator
                for basic and diluted net loss per share - weighted-average
                shares
            
            
            107,933
            
            
            102,749**Basic
                and diluted net loss per common share:**
            
            $
            (0.13
            )
            $
            (0.38
            )





As
      of
      June 30, 2007, 19,300,232 options, 112,422,958 warrants and 109,556,114 shares
      of
      common stock issuable upon the conversion of the First and Second Convertible
      Bridge Notes were
      excluded from the computation of net loss per share because their effect would
      be anti-dilutive. As of June 30, 2006, 22,440,777
      options and 21,497,200  warrants
      were excluded from the computation of net loss per share because the effect
      would be anti-dilutive.




14




**8.
      Inventories**




Inventories
      consisted of the following:




**June
                30,**
            
            **December 31,****2007**
            
            **2006****(in thousands)**Raw
                Materials
            
            $
            121
            
            $
            89Finished
                Goods
            
            
            277
            
            
            211$
            398
            
            $
            300




Inventories
      are stated at the lower of cost or market. Cost is determined using the
      first-in, first-out (FIFO) method.




**9.**  **Other
      Accrued Liabilities**




Other
      accrued liabilities consisted of the following (in thousands):




**June
                30, 2007**
            
            **December
                31, 2006**Accrued
                wages
            
            $
            134
            
            $
            90Accrued
                interest
            
            
            402
            
            
            148Liquidated
                damages
            
            
            464
            
            
            464Accrued
                legal and accounting fees
            
            
            130
            
            
            240Accrued
                consulting
            
            
            151
            
            
            198Litigation
                settlement
            
            
            —
            
            
            423Accrued
                purchases
            
            
            20
            
            
            99Other
            
            
            1,022
            
            
            847$
            2,323
            
            $
            2,509




**10.
      Notes Payable**




*Notes
      Payable to Shareholders*




During
      the year ended December 31, 2002, the Company completed a private placement
      offering for cash proceeds of $524,850. The Company issued 524,850 shares of
      common stock, issued warrants to purchase 524,850 shares of common stock at
      a
      price of $2.00 per share and issued 5% promissory notes with a face value of
      $524,325, to the investors. The principal amount and accrued interest are due
      on
      November 26, 2007.




**June
                30, 2007**
            
            **December
                31, 2006****(in
                thousands)**Notes
                payable, with interest at 5%, fair value
            
            $
            524
            
            $
            524Less:
                Discount to record note at fair value
            
            
            (224
            )
            
            (224
            )300
            
            
            300Less:
                Note converted into equity
            
            
            (50
            )
            
            (50
            )Amortization
                of discount to June 30, 2007 and December 31, 2006,
                respectively
            
            
            223
            
            
            217$
            473
            
            $
            467







15




The
      fair
      value attributed to the notes is based upon the fair value of the underlying
      financial instruments. The discount resulting from recording the notes at fair
      value is being amortized using the effective interest method over the five-year
      term of the notes.  As of
      June 30, 2007 and December 31, 2006 we have accrued interest related to these
      notes of approximately $109,000 and $97,000, respectively.




*Note
      Payable IRL*




As
      partial consideration for the purchase of the pHarlo assets in 2005, Tasker
      issued a promissory note in the amount of $1,931,973 to Indian River Labs,
      LLC
      (“IRL”). The promissory note bears interest of 3.4% per annum and is payable in
      equal bi-weekly principal installments of $37,153, plus interest, through July
      2007. On May 22, 2007 we issued 761,963 shares of our common stock, in lieu
      of
      cash for two installments of this note payable.




The
      following schedule outlines the activity for this note through June 30, 2007
      and
      December 31, 2006:




**June
                30, 2007**
            
            **December
                31, 2006****(in
                thousands)**Note
                payable, with interest at 3.4%, fair value
            
            $
            1,932
            
            $
            1,932Principal
                repayments
            
            
            (1,858
            )
            
            (1,253
            )$
            74
            
            $
            679




*Convertible
      Bridge Notes*




In
      December 2006,  the Company began an offering of 10% Convertible Promissory
      Notes in which the Company agreed to issue and sell First Convertible Bridge
      Notes and warrants to purchase shares of common stock at $0.09 per share. The
      warrants expire in four years from the date of issuance. The First Convertible
      Bridge Notes mature six months from issuance and have various maturity dates
      starting June 1, 2007, bear interest at 10% per annum and are convertible into
      shares of common stock at a price of $0.0725 per share, including interest,
      or
      other securities pursuant to the terms of the First Convertible Bridge
      Notes.  Certain
      of the notes have matured according to their terms, but no demand for payment
      has been made by the holders. The related discounts and deferred financing
      fees
      were fully amortized through the maturity dates and interest continues to be
      accrued. The Company will either pay such notes and related interest when demand
      is made or, if elected by the holders, convert the notes and accrued
      interest into new notes and/or equity instruments in any Qualified Financing
      commenced by the Company.




16




Between
      December 1, 2006 and May 1, 2007, the Company had received cash in the amount
      of
      approximately $6,295,000 (including cash received during December 2006, in
      the
      amount of approximately $1,920,000) from several investors. In exchange for
      the
      cash received, the Company issued to the investors 10% Secured Convertible
      Promissory Notes (the “First Convertible Bridge Notes”), which are convertible
      into 86,828,841 shares of common stock at a conversion price of $0.0725 per
      share. As an inducement for the investors to purchase the First Convertible
      Bridge Notes, the Company issued to these investors four-year warrants, which
      entitle them to purchase an aggregate of 34,972,733 shares of common stock,
      which number of shares is based on 50% of the principal amount of the notes
      purchased by the investor and divided by the per share exercise price of $0.09.




All
      of
      the proceeds were allocated to the warrants and embedded beneficial conversion
      feature. The combined discount is being amortized as additional (noncash)
      interest expense with a corresponding increase to the First Convertible Bridge
      Notes over the six-month term of the notes using the effective interest method.
      For the six months ended June 30, 2007, the Company had amortized $4,835,000
      of
      the combined discount to interest expense.




In
      recording the First Convertible Bridge Notes, the Company first allocated the
      proceeds from the sale of the First Convertible Bridge Notes between the First
      Convertible Bridge Notes and the warrants based upon their relative fair values,
      resulting in the recognition of a discount of approximately $1,666,000. The
      value of the warrants was computed using the Black-Scholes option pricing model.
      Second, in accordance with EITF No. 00-27, “Application of Issue 98 **-** 5 to
      Certain Convertible Instruments” after allocating a portion of the First
      Convertible Bridge Note proceeds to the warrants, the Company calculated the
      value of the embedded beneficial conversion feature in the note by comparing
      the
      carrying value of the proceeds, net of the warrant discount, to the fair value
      of the shares issuable upon conversion of the debentures. If there is a
      beneficial conversion, it is recognized, as an additional discount to the extent
      of the remaining proceeds. The Company recognized an additional discount of
      $4,629,000 for the embedded beneficial conversion feature.




As
      compensation for its services as placement agent, Indigo Securities, LLC
      received cash in the amount of approximately $629,500 and seven-year warrants
      to
      purchase an aggregate of approximately 8,682,894 shares of the Company’s common
      stock at an exercise price of $0.0725 per share. These warrants contain a
      "cashless exercise" option. The total fee of $1,721,000, including the fair
      value of the warrants issued, has been recorded as deferred financing costs
      and
      is being amortized as additional (noncash) interest expense over the life of
      the
      notes using the effective interest method. On March 6, 2007, the Company issued
      2,000,000 shares of its common stock to this placement agent pursuant to the
      cashless exercise of 2,983,051 of these warrants.




In
      June
      2007, the Company received cash in the amount of $2,000,000 from one investor.
      In exchange for the cash received, the Company issued to the investor 10%
      Convertible Promissory Notes (the “Second Convertible Bridge Notes”), which are
      convertible into shares of common stock at a conversion price of the lower
      of
      $0.16 per share or 90% of the per share amount of a Qualified Financing (as
      defined above) or if such Qualified Financing has not been completed by July
      4,
      2007, the lower of $0.16 per share or 80% of the per share amount of a Qualified
      Financing. In conjunction with these Second Convertible Bridge Notes, the
      Company issued to the investor four-year warrants to purchase 1,000,000 shares
      of common stock at an exercise price of $0.20 per share. Since the Company
      did
      not complete the Qualified Financing by July 4, 2007, such investor will receive
      additional four-year warrants to purchase 1,000,000 shares of common stock
      at an
      exercise price of 0.20 per share. As compensation for its services as placement
      agent, Indigo Securities, LLC received cash in the amount of $200,000 and will
      receive seven-year warrants at an exercise price of the lower of $0.20 per
      share
      or the per share price of warrants issued in a Qualified Financing. The number
      of shares of common stock issuable upon exercise price of such warrants will
      have an aggregate purchase price of $200,000. Based on an exercise price of
      $0.20 per share, the warrants that will be issued to Indigo will be exercisable
      into 1,000,000 shares of common stock. The placement agent warrants also contain
      a “cashless exercise” option. Because the number of shares issuable on
      conversion are indeterminate and not limited by the terms of the agreement,
      the
      conversion option and warrants are required to be recorded as derivative
      liabilities (See Note 14).




17




**June
                30, 2007**
            
            **December
                31, 2006****(in
                thousands)**Convertible
                bridge notes, with interest at 10%
            
            $
            8,295
            
            $
            1,920Less:
                Discount to warrants and beneficial conversion features
            
            
            (7,011
            )
            
            (1920
            )1,284
            
            
            —Amortization
                of discount to June 30, 2007
            
            
            5,192
            
            
            320$
            6,476
            
            $
            320





**11.
      Contractual Obligations and Commitments**




The
      Company has the following off-balance sheet commitments as of June 30, 2007,
      which are comprised primarily of a research and development fee contract,
      consulting and employment contracts, vendor agreements, notes payable, as well
      as numerous operating leases.




**(in thousands)****Payments**
              **Due by****Period**
            
            **Less Than**
            
            **1-3**
            
            **3-5**
            
            **More Than****Contractual Obligations**
            
            **Total**
            
            **1 Year**
            
            **Years**
            
            **Years**
            
            **5 Years**Research
                & development (“R&D”) fees (1)
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Consulting
                agreements
            
            
            121
            
            
            30
            
            
            91
            
            
            —
            
            
            —Employment
                agreements (2)
            
            
            1,281
            
            
            301
            
            
            980
            
            
            —
            
            
            —Vendor
                agreements
            
            
            16
            
            
            11
            
            
            5
            
            
            —
            
            
            —Operating
                leases
            
            
            850
            
            
            185
            
            
            665
            
            
            —
            
            
            —**Total**
            
            **$**
            **2,268**
            
            **$**
            **527**
            
            **$**
            **1,741**
            
            **$**
            —
            
            **$**
            **—**





(1)          
      On January 26, 2006, R&D fees payable under a Patent and Sub-License
      Agreement with pHarlo IP were amended so as to have no minimum amounts payable
      after 2006; however, they are capped at $2,000,000 for 2007, $4,000,000 for
      2008, $8,000,000 for 2009 and $10,000,000 for 2010 and beyond. During the six
      months ended June 30, 2007, we paid approximately $21,000 and accrued $30,000
      R&D fees.




(2)          
      As of June 30, 2007 the estimated future minimum annual compensation under
      these
      employment agreements, for 2007, 2008 and 2009, is approximately $301,000,
      $600,000 and $230,000, respectively.




**12.
      Related Party Transactions**




*Greg
      Osborn*




In
      April
      2007, the Company entered into an employment agreement with Greg Osborn in
      connection with his appointment as Executive Chairman, effective March 14,
      2007.
      The agreement provides for, among other things, a term of up to 21 months,
      an
      annual salary of $60,000, an annual bonus at the discretion of the board, the
      grant of initial warrants for the purchase of 2,625,000 shares of the Company’s
      common stock exercisable on a quarterly basis over the term of the agreement
      at
      an exercise price of $0.19 per share, the grant of additional warrants
      exercisable for 7,500,000 shares of the Company’s common stock at an exercise
      price of $0.19 per share with vesting contingent upon achievement of
      contractually specified performance goals, severance payments and a cash payment
      of $20,000 per month for a period of nine months commencing when the Company
      reaches profitability. Mr. Osborn is the Managing Partner of Indigo
      Securities, LLC, the firm that served from December 2006 to June 2007 as
      placement agent for the offering of the First and Second Convertible Bridge
      Notes.




18




Mr.
      Osborn purchased First Convertible Bridge Notes in the aggregate principal
      amount of $25,000 and received four-year warrants to purchase an aggregate
      of
      138,888 shares of the Company's common stock at an exercise price of $0.09
      per
      share.





As
      of May
      1, 2007, Indigo Securities, LLC, the placement agent of the First Convertible
      Bridge Notes received in the aggregate a fee of approximately $629,500 and
      seven-year warrants to purchase an aggregate of approximately 8,682,894 shares
      of the Company's common stock at an exercise price of $0.0725 per share. Also,
      in connection with the Second Convertible Bridge Notes Indigo Securities, LLC
      received cash of $200,000 and will receive seven-year warrants. The number
      of
      shares of common stock issuable upon exercise price of such warrants will have
      an aggregate purchase price of $200,000 at an exercise price of the lower of
      $0.20 per share or the per share price of warrants issued in a Qualified
      Financing. The number of shares that the Indigo warrants are convertible into
      based on a $0.20 per share exercise price is 1,000,000 shares. The warrants
      contain a "cashless exercise" option. Warrants to purchase 5,000,000 shares
      of common stock were issued to the placement agent on June 29, 2007, as a fee
      for various consulting services provided. The warrants have a ten-year term
      and
      were issued with an exercise price of $0.19 per share.





*Wynn
      Starr*




In
      2004,
      the Company entered into an Exclusive Field of Use License Agreement and Product
      Sale Agreement with Wynn Starr Special Products, LLC. Under the terms of this
      agreement, as amended through January 23, 2007, the Company has granted Wynn
      Starr a worldwide right to market and distribute products used as
      post-harvesting processing aids for the poultry industry based on the pHarlo
      technology. In return for this license, Wynn Starr will purchase licensed
      products from the Company and will withhold up to 25% of the net sale price
      per
      gallon sold, based on different increments of achieved net sale prices. The
      amended agreement also includes other target performance criteria such that,
      if
      met by Wynn Starr, the Company will issue to Wynn Starr a warrant to purchase
      up
      to 1,300,000 shares of the Company’s common stock with an exercise price based
      upon the closing price of the Company’s common stock on January 23, 2007, the
      date of the amendment. As of June 30, 2007, the Company had paid $14,000 to
      Wynn
      Starr and had accrued $22,000 under this royalty arrangement. Steven B. Zavagli,
      a former member of the Company’s board of directors, is the founder, Chairman
      and the Chief Executive Officer of Wynn Starr and Wynn Starr’s ultimate parent
      company, Wynn Starr Flavors, Inc.




*Gordon
      Davis*




During
      the six months ended June 30, 2007, the Company paid Gordon O. Davis, the former
      Chairman of the Board of Directors, who resigned in May 2006, approximately
      $65,000 under a consulting services agreement, as amended on March 7,
      2007. **** Mr.
      Davis
      is the father in law of the Company’s Chief Financial Officer.




**13.
       Segments — Enterprise Wide Disclosures**




The
      Company owns several utility patents and patent applications that cover certain
      products applications that are marketed and sold by the Company. The Chief
      Operating Decision Maker (CODM) of the Company is the President and CEO. The
      operating results of each product application, other than for revenue, are
      not
      separately tracked or reported. Operating results by product application are
      not
      reviewed by the CODM because discrete financial information is not available.
      Consequently, as permitted by the provisions of SFAS No. 131, “Disclosure About
      Segments of an Enterprise and Related Information,” the Company has one
      reportable segment for financial statement purposes.




*Revenue
      by Product*




The
      Company’s revenue by product is as follows:




**Three Months Ended June
                30,****2007**
            
            **2006****(in
                thousands)**Unifresh®
                Footbath
            
            $
            342
            
            $
            477Tasker
                Blue Poultry Processing
            
            
            283
            
            
            —Close
                CallTM
            
            
            —
            
            
            60Other
            
            
            7
            
            
            —$
            632
            
            $
            537






19






**Six Months Ended June
                30,****2007**
            
            
            **2006****(in
                thousands)**Unifresh®
                Footbath
            
            $
            591
            
            $
            606Tasker
                Blue Poultry Processing
            
            
            458
            
            
            —Close
                CallTM
            
            
            —
            
            
            152Other
            
            
            8
            
            
            —$
            1,057
            
            $
            758




*Dependence
      on Certain Customers*




The
      Company’s dependence on certain customers as a percentage of total revenue is as
      follows:




**Three Months Ended**
              **June
                30,****2007**
            
            **2006**Customer
                A
            
            
            13
            %
            
            40
            %Customer
                B
            
            
            6
            %
            
            25
            %Customer
                C
            
            
            38
            %
            
            —
            %Customer
                D
            
            
            23
            %
            
            —
            %






**Six Months Ended**
              **June
                30,****2007**
            
            **2006**Customer
                A
            
            
            15
            %
            
            31
            %Customer
                B
            
            
            7
            %
            
            20
            %Customer
                C
            
            
            38
            %
            
            —
            %Customer
                D
            
            
            19
            %
            
            —
            %







*Accounts
      Receivable Concentration*




**Six Months Ended**
              **June
                30,****2007**
            
            **2006**Customer
                A
            
            
            17
            %
            
            53
            %Customer
                B
            
            
            2
            %
            
            38
            %Customer
                C
            
            
            40
            %
            
            —
            %Customer
                D
            
            
            20
            %
            
            —
            %




**14.
       Derivative Instruments**




The
      Company has issued and outstanding financial instruments with embedded
      derivative features consisting of convertible debt and warrants. **** The
      Company analyzes these financial instruments in accordance with Statement of
      Financial Accounting Standards (“SFAS”) No. 133 and Emerging Issues task Force
      (“EITF”) Issue No. 00-19 to determine if these hybrid contracts have embedded
      derivatives that must be bifurcated. In addition, free standing warrants are
      accounted for as either equity or liabilities in accordance with the provisions
      of EITF Issue No. 00-19.




20




Under
      EITF 00-19, instruments that are issued when there are insufficient shares
      to
      satisfy their conversion are required to be recorded as derivative liabilities
      and are then required to be adjusted to fair value at each reporting period
      with
      changes in fair value being recorded in the statement of operations. Because
      the
      conversion price of the Second Convertible Bridge Notes is based upon a formula,
      the number of shares which will ultimately be issued is currently indeterminable
      and we cannot therefore be assured of having sufficient shares available to
      satisfy conversions. Also as a result, other issuances subsequent to this
      transaction, such as the warrants issued with the Second Convertible Bridge
      Notes are also required to be carried as derivative liabilities even though
      the
      number of such instruments is fixed.




At
      the
      inception and at each reporting date the Company has recorded a derivative
      liability. At each reporting period, the Company calculates the estimated fair
      value of the derivative liability. Changes in the estimated fair value of the
      derivative liabilities are recorded in the consolidated statement of operations.
      The change in the fair value of the derivative liabilities from issuance to
      June
      30, 2007 was $15,000. At June 30, 2007, the derivative liability was
      approximately $945,000.




**15.
       Subsequent Events**




On
      July
      16, 2007 the Company reincorporated from the State of Nevada to the State of
      Delaware. As a result of this reincorporation, the number of authorized shares
      of the Company’s common stock increased from 300,000,000 to 450,000,000 and the
      Company has 15,000,000 shares of preferred stock authorized.




Since
      the
      Company did not complete the Qualified Financing by July 4, 2007, the investor
      of the Second Convertible Bridge Notes will receive additional four-year
      warrants to purchase 1,000,000 shares of common stock at an exercise price
      of
      0.20 per share.




21




**Item
      2. Management’s Discussion And Analysis of Financial Condition And Results Of
      Operations**




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the condensed consolidated
      financial statements and notes thereto appearing elsewhere in this Quarterly
      Report on Form 10-Q. This discussion contains forward-looking statements that
      involve risks and uncertainties. See “Forward-Looking Statements” for a
      description of the important factors that could cause actual results to differ
      materially from those contained in these forward-looking
      statements.




**Business
      Overview**





We
      manufacture, distribute and market a variety of products using a process we
      refer to as “pHarlo technology.” These products are covered by one or more
      patents, or base patents, and manufactured using the pHarlo technology, which
      is
      covered by those patents. The pHarlo technology utilizes a safe solution, which
      we call the pHarlo concentrate, a solution whose components have been accepted
      as Generally Recognized as Safe by the U.S. Food and Drug Administration, or
      FDA. This safe solution enables copper sulfate, a compound with bacteriostatic
      properties, i.e., the ability to inhibit bacteria growth, to remain active
      throughout a wide range of pH values, or measurements of acidity or alkalinity
      in a solution.




We
      currently market:




·
            Unifresh
                Footbath, a grooming aid for dairy cows;




·
            Tasker
                Pacific Blue Seafood Wash, a product used in commercial and retail
                seafood
                processing to extend shelf life and reduce or eliminate odors; and




·
            Tasker
                Blue, an antimicrobial aid to be used in the scalder process of poultry
                processing, a stage in poultry processing designed to loosen feathers
                so
                that they can be picked and removed mechanically, and the post-feather
                picker process, which is the method used in chicken processing that
                receives chickens immediately after the scalder and mechanically
                removes
                feathers.




We
      are
      currently seeking to license and/or sell the Close CallTM brand an oral hygiene
      drink and derivative applications.




*Unifresh®
      Footbath*




We
      currently market Unifresh®Footbath concentrate, a grooming aid that helps clean
      and disinfect the hooves of dairy cows. Because of the bacteriostatic properties
      of the pHarlo technology, this product helps control bacteria that infect the
      hooves of cows and cause interdigital dermatitis, a bacterial infection of
      the
      skin on a cow’s hoof, and interdigital papillomatosis, a disease that infects a
      cow’s hoof that may cause severe lameness, decreased milk yield, body weight
      loss, decreased reproductive performance and increased veterinary expenses.
      Unifresh ®Footbath concentrate was launched during the third quarter of 2005. In
      the fourth quarter of 2005, we discovered that our Unifresh ®Footbath product’s
      effectiveness was diminished in water that had abnormally high alkaline content.
      We reformulated our Unifresh ®Footbath concentrate with the addition of a
      compound that neutralizes alkali, or a type of base that has a pH greater than
      7, which can increase the pH of water or soil. In the first quarter of 2006,
      we
      introduced our enhanced formulation to the market. It is currently being sold
      to
      dairy farms throughout the U.S. through our sales force, independent brokers
      and
      farm product distributors. We currently market the product as a grooming aid.
      No
      federal agency approvals are required for marketing this product.




22




*Poultry
      Processing*




In
      August
      2005, we began the in-plant commercial verification process for USDA approval
      to
      use the pHarlo technology in the scalder process of poultry processing. The
      first in-plant commercial verification test was completed in October 2005 and
      submitted to the USDA shortly thereafter.




On
      February 6, 2006, we received a letter from the Food Safety and Inspection
      Service ("FSIS") of the USDA consenting to the continuation of in-plant trials
      of our Scalder application at a facility in Athens, Georgia, as well as two
      additional poultry processing plants. The trial involved the application of
      the
      pHarlo technology as an antimicrobial in the scalder and post-feather picker
      stages. In August 2006 we received a Letter of No Objections from the FSIS
      indicating that it had no objections to the use of our product as an
      antimicrobial processing aid in poultry Scalder and, in December 2006, we
      received a similar letter from the USDA to use our product in the Picker and
      New
      York Dressed Cabinet.




During
      the fiscal quarter ended June 30, 2007, we submitted protocols to be used in
      the
      testing of an application for use in the On-Line Reprocessor ("OLR") and Chiller
      sections. We received the FSIS's consent to proceed with in-plant testing of
      these applications. Tests of our OLR application were suspended when we were
      informed of the USDA’s intention to reconsider this requirement of this section
      as an intervention point in controlling bacteria.




We
      recently began tests of our Chiller application. If these tests are successful
      and we receive a Letter of No Objections from the FSIS, we will have commercial
      applications in five of the six intervention stages of poultry
      processing.




*Seafood
      Processing Products*




We
      recently began marketing the pHarlo technology for use in pathogen reduction,
      a
      process by which certain bacteria that causes disease or illness are reduced
      in
      number or eliminated, and the shelf life of seafood is extended. Our product,
      Tasker Pacific Blue Seafood Wash, has been tested at the North Carolina State
      Center for Marine Science & Technology, Virginia Tech University and
      Mississippi State University on shrimp, mahi mahi, salmon, flounder, scallops
      and catfish. The results of these studies indicated that the pHarlo technology
      could possibly double the shelf life on catfish filets and significantly
      increase the shelf life of seafood. No federal agency approvals are required
      for
      the marketing of this product.




In
      the
      processing of fish and seafood species, water is used at many points after
      harvesting. Therefore, the use of dip tanks and sprays of chilled water are
      normal and common. The addition of the Tasker Pacific Blue Seafood Wash to
      these
      wash waters is an easy adaptation of existing process equipment. Our seafood
      application is currently in trial testing by a seafood company located in the
      southeast and in several supermarkets in the northeast.




*Close
      CallTM*




Until
      March 2007, we marketed Close CallTM as an oral hygiene breath drink that
      eliminates odors from tobacco, garlic, onion and alcohol. The FDA requires
      companies making structure or function claims relating to a dietary supplement
      product, such as Close CallTM, to “certify that the firm has substantiation that
      the claim is truthful and not misleading.” While the FDA does not require any
      presentation of this support, it does require a notice of dietary supplement
      ingredients and claims. We believe that our Close CallTM product could be
      marketed more efficiently by a company either already established in the
      industry or with more commercial resources. Therefore, we are actively seeking
      to license and/or sell the Close Call TM brand or derivative
      applications.




23




**Financial
      Overview**




Until
      December 31, 2005, we were a development stage company. The quarterly period
      ended March 31, 2006 was the first period we were considered an operating
      company.




Based
      upon our projections of future revenues from our products and cash on hand,
      including cash of $6.4 million received from the sale of our First and Second
      Convertible Bridge Notes between January 1, 2007 and June 30, 2007, we will
      not
      have adequate working capital to fund our operations during the next twelve
      months. We are rapidly
      depleting our cash resources and our ability to continue to operate and grow
      our
      business is dependent upon obtaining new financing or generating sufficient
      cash
      flows from operations.  The cost of any new financing may be prohibitive. While
      we
      have been in the process of aggressively developing, marketing and selling
      our
      products, there can be no assurance that those efforts will be met with success
      in the marketplace or that the timing of our efforts will be consistent with
      our
      cash availability and burn rate. If we are unable to arrange new financing
      and/or generate sufficient revenue growth from existing and new business
      arrangements, we will not have sufficient cash to support our operations and
      meet our obligations. We anticipate that we will need approximately an
      additional $4 - $6 million to support our operations and meet our obligations
      over the next twelve months. We are currently reviewing alternative methods
      of
      financing, including private issuances of debt and/or equity.




**Related
      Party Transactions**





*Greg
      Osborn*




In
      April
      2007, we entered into an employment agreement with Greg Osborn in connection
      with his appointment as Executive Chairman, effective March 14, 2007. The
      agreement provides for, among other things, a term of up to 21 months, an annual
      salary of $60,000, an annual bonus at the discretion of the board, the grant
      of
      initial warrants for the purchase of 2,625,000 shares of common stock
      exercisable on a quarterly basis over the term of the agreement at an exercise
      price of $0.19 per share, the grant of additional warrants exercisable for
      7,500,000 shares of common stock at an exercise price of $0.19 per share with
      vesting contingent upon achievement of contractually specified performance
      goals, severance payments and a cash payment of $20,000 per month for a period
      of nine months commencing when we reach profitability. Mr. Osborn is the
      Managing Partner of Indigo Securities, LLC, the firm that served from December
      2006 to June 2007 as placement agent for the offering of our First and Second
      Convertible Bridge Notes.




Mr.
      Osborn purchased First Convertible Bridge Notes in the aggregate principal
      amount of $25,000 and received four-year warrants to purchase an aggregate
      of
      138,888 shares of our common stock at an exercise price of $0.09 per
      share.





As
      of May
      1, 2007, Indigo Securities, LLC, the placement agent of the First Convertible
      Bridge Notes received in the aggregate a fee of approximately $629,500 and
      seven-year warrants to purchase an aggregate of approximately 8,682,894 shares
      of our common stock at an exercise price of $0.0725 per share. Also, in
      connection with the Second Convertible Bridge Notes Indigo Securities, LLC
      received cash of $200,000 and will receive seven-year warrants at an exercise
      price of the lower of $0.20 per share or the per share price of warrants issued
      in a Qualified Financing. The number of shares of common stock issuable upon
      exercise price of such warrants will have an aggregate purchase price of
      $200,000. The number of shares that the Indigo warrants are convertible into
      based on a $0.20 per share exercise price is 1,000,000 shares. The warrants
      contain a "cashless exercise" option.





*Wynn
      Starr*





In
      2004,
      we entered into an Exclusive Field of Use License Agreement and Product Sale
      Agreement with Wynn Starr Special Products, LLC. Under the terms of this
      agreement, as amended through January 23, 2007, we have granted Wynn Starr
      a
      worldwide right to market and distribute products used as post-harvesting
      processing aids for the poultry industry based on the pHarlo technology. In
      return for this license, Wynn Starr will purchase licensed products from us
      and
      will remit to us up to 25% of the net sale price per gallon sold, based on
      different increments of achieved net sale prices. This amended agreement also
      includes other target performance criteria such that, if met by Wynn Starr,
      we
      will issue to Wynn Starr a warrant to purchase up to 1,300,000 shares of our
      common stock with an exercise price based upon the closing price of our common
      stock on January 23, 2007, the date of the amendment. Net sales price and
      licensed products are defined in the Exclusive Field of Use License Agreement
      and Products Sale Agreement. As of June 30, 2007, we had paid $14,000 to Wynn
      Starr and had accrued $22,000 under this royalty arrangement. Steven B. Zavagli,
      a former member of our board of directors, is the founder, Chairman and the
      Chief Executive Officer of Wynn Starr and Wynn Starr’s ultimate parent company,
      Wynn Starr Flavors, Inc.




24




*Gordon
      Davis*





During
      the three months ended June 30, 2007 and 2006, we paid Gordon O. Davis, the
      former Chairman of the Board of Directors, who resigned in May 2006,
      approximately $6,000 and $30,000, respectively, under a consulting services
      agreement, as amended on March 7, 2007. Mr. Davis is the father in law of our
      Chief Financial Officer.




**Critical
      Accounting Policies and Estimates**




We
      believe that several accounting policies are important to understanding our
      historical and future performance. We refer to these policies as “critical”
because these specific areas generally require us to make judgments and
      estimates about matters that are uncertain at the time we make the estimate,
      and
      different estimates—which also would have been reasonable—could have been used,
      which would have resulted in different financial results.




The
      critical accounting policies we identified in Amendment No. 1 to our Annual
      Report on Form 10-K for the fiscal year ended December 31, 2006 related to
      stock-based compensation, derivative instruments, goodwill and intangible assets
      and the valuation of acquired intangible assets. It is important that the
      discussion of our operating results that follows be read in conjunction with
      the
      critical accounting policies disclosed in Amendment No. 1 to our Annual Report
      on Form 10-K, as filed with the SEC on April 27, 2007.





**Three
      Months Ended June 30, 2007 Compared to Three Months Ended June 30,
      2006**




*Revenues*




Revenues
      for the three months ended June 30, 2007 were approximately $632,000 compared
      with approximately $537,000 for the corresponding period in 2006. This increase
      is primarily due to increased sales in Unifresh ® Footbath and Tasker Blue, our
      poultry processing product. We expect that revenue will continue to increase
      throughout fiscal year 2007 primarily due to our intensified marketing efforts
      of our poultry processing product and due the expansion of our distributor
      network for our Unifresh® Footbath product.




*Selling,
      General and Administrative*




Selling,
      General and Administrative (“SGA”) expenses are primarily comprised of sales and
      marketing expenses, compensation expenses, professional fees, and general and
      administrative expenses. SGA expenses for the three months ended June 30, 2007
      increased by approximately $510,000 from approximately $2.9 million for the
      three months ended June 30, 2006, to approximately $3.4 million for the three
      months ended June 30, 2007.




Sales
      and
      marketing expenses consist primarily of salaries and other related expenses
      for
      sales and marketing personnel, sales commissions, promotional expenses,
      advertising, public relations and trade show expenses. Sales and marketing
      expenses for the three months ended June 30, 2007 decreased by approximately
      $155,000 primarily due to the timing of consulting, trade show and advertising
      expenses.




Compensation
      expense consists primarily of salaries and other related expenses for senior
      management, finance and administrative employees of our company. Compensation
      expenses decreased by approximately $118,000 primarily due to a reduction in
      administrative and warehouse personnel.




25




Professional
      fees for the three months ended June 30, 2007 increased by approximately $97,000
      due to increase in audit and accounting fees of $52,000, legal fees of $20,000
      and investor service fees of $25,000.




General
      and administrative expenses consist primarily of rent, insurance and travel
      and
      entertainment expenses. The increase in general administrative expenses for
      the
      three months ended June 30, 2007 by approximately $473,000 was primarily due
      to
      an increase in consulting expenses of $329,000 and annual meeting expenses
      of
      $62,000. During the three months ended June 30, 2006, we settled a minimum
      purchase agreement at $119,000 less than we had originally anticipated.




Stock
      based compensation expense for selling, general and administrative employees
      increased by approximately $213,000, to approximately $1.2 million for the
      three
      months ended June 30, 2007 as compared to $1.0 million for the same time period
      in 2006. The expense associated with these awards is recorded as expense within
      the same functional expense category as cash compensation for the respective
      employee is recorded. For the three months ended June 30, 2007, stock
      compensation expense was allocated as follows:




**(in thousands)**Sales
                and marketing
            
            $
            109Product
                development
            
            
            13General
                and administrative
            
            
            1,110$
            1,232




*Product
      Development*




Product
      development consists primarily of personnel expenses to support product
      development. Product development and research expenses for the three months
      ended June 30, 2007 decreased by approximately $165,000 to approximately
      $349,000 from approximately $514,000 for the three months ended June 30, 2006.
      This decrease is primarily due to our decision to focus our development efforts
      in a select smaller number of products. The decrease in the number of products
      we are developing and testing in the three months ended June 30, 2007 resulted
      in the decrease in consulting expenses of approximately $50,000, decrease in
      third party laboratory testing expenses and product development expenses of
      $67,000 and decrease in warehouse expenses of $30,000.




*Depreciation
      and Amortization Expense*




Depreciation
      and amortization expense, which includes the amortization of identifiable
      intangible assets, decreased by approximately $299,000 from approximately
      $579,000 in the three months ended June 30, 2006, to approximately $280,000
      for
      the three months ended June 30, 2007, primarily due to the reduction in the
      carrying value of the intangible assets as a result of the impairment charge
      of
      $12.2 million recorded in the second quarter of 2006.




*Interest
      Expense*




Interest
      expense increased by approximately $153,000 from $22,000 for the three months
      ended June 30, 2006, to approximately $ 175,000 for the three months ended
      June
      30, 2007. The increase was primarily due to an increase of $162,000 in accrued
      interest expense related to the First and Second Convertible Bridge
      Notes.




*Interest
      Income*




Interest
      income decreased by approximately $84,000 from $100,000 for the three months
      ended June 30, 2006, to approximately $16,000 for the three months ended June
      30, 2007 primarily due to a decreased cash balance in the three months ended
      June 30, 2007, as compared to the same period ending June 30, 2006.




*Amortization
      of debt discount*




$2,106,000
      is due to the amortization of the debt discount related to the fair value of
      the
      beneficial conversion feature of the First and Second Convertible Bridge Notes,
      $723,000 is to due to the amortization of the discount related to the fair
      value
      of the four-year warrants issued in connection with the First and Second
      Convertible Bridge Notes and $ 358,000 is due to amortization of discount
      related to the fair value of the derivative liability in connection with the
      Second Convertible Bridge Notes.




26




*Amortization
      of deferred financing costs*




$638,000
      is due to the amortization of the fair value of the placement agent seven-year
      warrants issued in connection with the First Convertible Bridge Notes and
      issuable in connection with the Second Convertible Bridge Notes and $562,000
      is
      due to the amortization of the placement agent fee in connection with the First
      and Second Convertible Bridge Notes.




*Other
      expenses*




For
      the
      three months ended June 30, 2007, we had a gain from the extinguishment of
      debt
      for $ 4,000 as a result of settlement of vendor obligations at lower amounts
      than what we had originally recorded. For
      the
      three months ended June 30, 2007, w e
      also
      recorded loss on change in value of derivative warrant liability and derivative
      conversion feature liability-note of $ 15,000. The other expenses for the three
      months ended June 30, 2006 were $49,000 pertaining to accrual of liquidated
      damages for failure to have a current prospectus available for resale of common
      stock sold in April 2004 and July 2004 private placement.




**Six
      Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006**




*Revenues*




Revenues
      for the six months ended June 30, 2007 were approximately $1,057,000 compared
      with approximately $758,000 for the corresponding period in 2006. This increase
      is primarily due to increased sales in Unifresh ® Footbath and Tasker Blue, our
      poultry processing product. We expect that revenue will continue to increase
      throughout fiscal year 2007 primarily due to our intensified marketing efforts
      of our poultry processing product and due the expansion of our distributor
      network for our Unifresh® Footbath product.




*Selling,
      General and Administrative*




SGA
      expenses for the six months ended June 30, 2007 decreased by approximately
      $385,000 from approximately $7.0 million for the six months ended June 30,
      2006,
      to approximately $6.6 million for the six months ended June 30, 2007.




Sales
      and
      marketing expenses for the six months ended June 30, 2007 increased by
      approximately $39,000 primarily due to the increase in commission, trade show
      and promotional expenses incurred as a result of our intensified marketing
      efforts.




Compensation
      expense consists primarily of salaries and other related expenses for senior
      management, finance and administrative employees of our company. Compensation
      expense decreased by approximately $490,000 primarily due to a reduction in
      administrative and warehouse personnel.




Professional
      fees for the six months ended June 30, 2007 increased by approximately $95,000.
      The increase is due to increase in audit and accounting fees of $168,000 and
      partially offset by a decrease in legal fees of $73,000.




General
      and administrative expenses for the six months ended June 30, 2007 increased
      by
      approximately $81,000 mainly due to an increase
      of $88,000 in freight expenses and $62,000 for annual meeting expenses,
      partially offset by a
      decrease in insurance expense of $45,000, a decrease in equipment rental fees
      of
      $14,000 and a decrease in rent expense of $10,000.




27




Stock
      based compensation expense for selling, general and administrative employees
      decreased by approximately $110,000, to approximately $2.6 million for the
      six
      months ended June 30, 2007 as compared to $2.7 million for the same time period
      in 2006. The expense associated with these awards is recorded as expense within
      the same functional expense category as cash compensation for the respective
      employee is recorded. For the six months ended June 30, 2007, stock compensation
      expense was allocated as follows:




**(in thousands)**Sales
                and marketing
            
            $
            278Product
                development
            
            
            149General
                and administrative
            
            
            2,285$
            2,712




*Product
      Development*




Product
      development consists primarily of personnel expenses to support product
      development. Product development and research expenses for the six months ended
      June 30, 2007 decreased by approximately $56,000 to approximately $833,000
      from
      approximately $889,000 for the six months ended June 30, 2006. This decrease
      is
      primarily due to our decision to focus our development efforts in a select
      smaller number of products. The decrease in the number of products we are
      developing and testing in the six months ended June 30, 2007 resulted in the
      decrease in consulting expenses of approximately $84,000, decrease in third
      party laboratory testing cost and product development cost of $30,000, partially
      offset by increase of $ 80,000 in bonus expense related to achievement of
      regulatory approvals.




*Depreciation
      and Amortization Expense*




Depreciation
      and amortization expense, which includes the amortization of identifiable
      intangible assets, decreased by approximately $597,000 from approximately
      $1,154,000 in the six months ended June 30, 2006, to approximately $557,000
      for
      the six months ended June 30, 2007, primarily due to the reduction in the
      carrying value of the intangible assets as a result of the impairment charge
      of
      $12.2 million recorded in the second quarter of 2006.




*Interest
      Expense*




Interest
      expense increased by approximately $231,000 from $49,000 for the six months
      ended June 30, 2006, to approximately $ 280,000 for the six months ended June
      30, 2007. The increase was primarily due to an increase of $254,000 in accrued
      interest expense related to the First and Second Convertible Bridge
      Notes. **




*Interest
      Income*




Interest
      income decreased by approximately $105,000 from $138,000 for the six months
      ended June 30, 2006, to approximately $33,000 for the six months ended June
      30,
      2007 primarily due to a decreased cash balance in the six months ended June
      30,
      2007, as compared to the same period ending June 30, 2006.




*Amortization
      of debt discount*




$3,331,000
      is due to the amortization of the debt discount related to the fair value of
      the
      beneficial conversion feature of the First and Second Convertible Bridge Notes,
      $1,183,000 is to due to the amortization of the discount related to the fair
      value of the four-year warrants issued in connection with the First and Second
      Convertible Bridge Notes and $ 358,000 is due to amortization of discount
      related to the fair value of the derivative liability in connection with the
      Second Convertible Bridge Notes.




*Amortization
      of deferred financing costs*




$984,000
      is due to the amortization of the fair value of the placement agent seven-year
      warrants issued in connection with the First Convertible Bridge Notes and
      issuable in connection with the Second Convertible Bridge Note and $738,000
      is
      due to the amortization of the placement agent fee issued in connection with
      the
      First and Second Convertible Bridge Notes.




28




*Other
      expenses*




For
      the
      six months ended June 30, 2007, we had a gain from the extinguishment of debt
      for $ 55,000 as a result of settlement of vendor obligations at lower amounts
      than what we had originally recorded as compared to $50,000 for the six months
      ended June 30, 2006. We also recorded loss on change in value of derivative
      warrant liability and derivative conversion feature liability-note of $15,000. For
      the
      six months ended June 30, 2006, w e
      had
      accrued approximately $136,000 for (i) liquidated damages for failure to
      have a current prospectus available for the resale of common stock sold in
      the
      April 2004 and July 2004 private placements and (ii) a loss on a disposal of
      a
      vehicle in the amount of $50,000 as a result of the Settlement and Release
      Agreement we entered into with a former executive. This increase in expense
      was
      partially offset by the reduction of the fair market value of the registration
      rights liability by approximately $85,000.




**Liquidity
      and Capital Resources**




*Overview*




Since
      our
      inception, we have funded operations and investing activities through the sale
      of common stock, warrants and convertible debt under several private placements.
      Requirements for liquidated damages under some of these private placements
      may
      have an impact on our future liquidity. To date we have satisfied and/or
      received waivers for the provisions of a majority of the agreements, that would
      have otherwise required us to pay liquidated damages. However, we have not
      received waivers and from time to time we have not satisfied some of the
      provisions of the registration rights agreements for the April 2004 and July
      2004 convertible debt. Nevertheless, our obligation to accrue liquidated damages
      under these registration rights agreements ceased in April 30 and July 22,
      2006,
      respectively. Through December 31, 2006, we have accrued $442,000 in liquidated
      damages related to these agreements. Also, as of December 31, 2006, we have
      accrued the full amount of liquidated damages of $23,000 required under the
      January 26, 2006 registration rights agreement.




*Liquidity
      - Going Concern*




Based
      upon our projections of future revenues from our products and cash on
      hand, including cash of $6.4 million received from the sale of our First and Second
      Convertible Bridge Notes between January 1, 2007 and June 30, 2007, we will
      not
      have adequate working capital to fund its operations during the next twelve
      months. We
      are rapidly depleting our cash resources and our ability to continue to operate
      and grow our business is dependent upon obtaining new financing or generating
      sufficient cash flows from operations.  The cost of any new financing may
      be prohibitive. While we have been in the process of aggressively developing,
      marketing and selling our products, there can be no assurances that those
      efforts will be met with success in the marketplace or that the timing of our
      efforts will be consistent with our cash availability and burn rate. If we
      are
      unable to arrange new financing and/or generate sufficient revenue growth
      from existing and new business arrangements ,
      we will
      not have sufficient cash to support our operations and meet our obligations.
      We
      anticipate we will need approximately an additional $4 - $6 million to support
      our operations and meet our obligations over the next twelve months. We are
      currently reviewing alternative methods of financing, including private
      issuances of debt and/or equity.




*Operating
      Activities*




At
      June
      30, 2007 our cash and cash equivalents balances were approximately $740,000
      compared with $932,000 at December 31, 2006.




Net
      cash
      used in operating activities for the six months ended June 30, 2007 was
      approximately $5.2 million, primarily due to a net loss of $13.9 million,
      partially offset by amortization of discount on the First and Second Convertible
      Bridge Notes of $4.9 million and the amortization of deferred financing costs
      of
      $1.7 million related to the same convertible bridge notes. Net cash used in
      operating activities for the six months ended June 30, 2006 was approximately
      $5.2 million.




29




*Investing
      Activities*




Net
      cash
      used in investing activities for the six months ended June 30, 2007 was
      approximately $86,000 as compared to approximately $3.8 million for the six
      months ended June 30, 2006. The decrease in net cash used in investing
      activities was primarily due to lack of excess funds to invest in marketable
      securities during 2007.




*Financing
      Activities*




Net
      cash
      provided by financing activities during the six months ended June 30, 2007
      was
      approximately $5.1 million, as compared to approximately $8.3 million for the
      six months ended June 30, 2006. The decrease in net cash provided by financing
      activities was primarily due to lower proceeds from the sale of debt and equity
      instruments in the six months ended June 30, 2007 as compared to the same period
      in 2006.




The
      net
      cash provided by financing activities for the six months ended June 30, 2007
      principally represents proceeds from the sale of the First and Second
      Convertible Bridge Notes, net of placement agent fees and legal expenses.




As
      partial consideration for the purchase of the pHarlo assets in the July 2005
      acquisition, we issued a promissory note in the amount of $1,931,973 to Indian
      River Labs, L.L.C. (“IRL”). The promissory note bears interest of 3.4% per annum
      and is payable in equal bi-weekly principal installments of $37,153, plus
      interest, through July 2007. During the six months ended June 30, 2007 we paid
      approximately $605,000 under the IRL promissory note.




**Registration
      Rights Agreements**




On
      April
      26, 2006, we filed a registration statement registering the resale of securities
      purchased in the September 2005 and January 2006 private placements. This
      registration statement was declared effective by the SEC on October 31, 2006. As
      it
      relates to the September 2005 private placement, we have used our best efforts
      to cause the registration statement to be declared effective and, therefore,
      pursuant to the terms of the September 2005 registration rights agreement,
      we
      believe that we are not currently liable for liquidated damages as a result
      of
      the registration statement not being declared effective by May 23, 2006. Should
      the rights holders dispute that our best efforts were used, and we either accede
      to their assertion or are found to not have used our best efforts, the estimated
      maximum amount of liquidated damages for which we would be liable, assuming ineffectiveness
      from May 23, 2006 to October 31, 2006 and for illustration purposes only,
      from April 1, 2007 to the end of the period covered by the registration
      agreement is approximately $96,000.





As
      it
      relates to the January 2006 private placement, despite using our best
      efforts, we failed to have the registration statement declared effective by
      the
      SEC on or before October 26, 2006. Consequently, as of December 31, 2006 we
      were
      required to issue to each holder of the January 2006 private placement,
      shares and warrants equal to one percent of the respective number of shares
      and
      warrants purchased by each holder or an aggregate of 133,359 shares of common
      stock and warrants to purchase 133,359 shares of common stock. As
      of
      June 30, 2007, we had not issued these shares and warrants.




30




**Off-Balance
      Sheet Arrangements**




During
      the six and twelve months ended June 30, 2007 and December 31, 2006,
      respectively, we did not engage in material off-balance sheet activities,
      including the use of structured finance, special purpose entities; material
      trading activities in non-exchange traded commodity contracts; or transactions
      with persons or entities that benefit from their non-independent relationship
      with us.





**Item
      3. Quantitative and Qualitative Disclosures about Market Risk**




Our
      exposure to market risk, including changes in interest rates, relates primarily
      to cash and cash equivalents. These investments bear interest at a variable
      interest rate, which is subject to market changes. We have not entered into
      any
      interest rate swap agreements, or other instruments to minimize our exposure
      to
      interest rate fluctuations. We have not had any derivativeinstruments in the past and do not presently plan to in the future. Our
      investment portfolio consists of demand deposits and money market mutual funds.
      Due to the highly liquid nature of our investment, a sudden sharp change in
      interest rates would not have a material adverse effect on the value of the
      portfolio.




**Item
      4. Controls and Procedures**




As
      required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
      Act”), we carried out an evaluation of the effectiveness of the design and
      operation of our disclosure controls and procedures (as defined by Rule
      13a-15(e) under the Exchange Act) as of the end of the period covered by this
      report. This evaluation was carried out under the supervision and with the
      participation of our Chief Executive Officer, Lanny Dacus and our Chief
      Financial Officer, Stathis Kouninis.




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the Exchange Act is
      accumulated and communicated to management, including our Chief Executive
      Officer and Chief Financial Officer, to allow timely decisions regarding
      required disclosure.




Based
      upon that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that our disclosure controls and procedures as of the end of the
      period covered by this report were not effective. Commencing in February 2006,
      we instituted and are continuing to implement corrective actions with respect
      to
      the deficiencies in our disclosure controls and procedures caused by the lack
      of
      an automated financial reporting system and a small accounting staff that does
      not allow for a thorough review process. We will complete the design of
      financial reports so that we do not rely on spreadsheets and we will add
      additional accounting staff when our financial condition allows us to do
      so.




There
      were no changes to our internal control over financial reporting (as defined
      on
      Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal
      quarter that have materially affected, or are reasonably likely to materially
      affect, our internal controls over financial reporting.




While
      every effort will be made to ensure the financial reporting system will adhere
      to our internal controls, we cannot be certain that material weaknesses will
      not
      be identified prior to the filing of management’s annual report on internal
      control over financial reporting.




31




**PART
      II — OTHER INFORMATION**




**Item
      1A. Risk Factors**




Except
      for the following revised risk factor, there have been no material changes
      in
      the risk factors from those disclosed in Amendment No. 1 to our Annual Report
      on
      Form 10-K for the year ended December 31, 2006.




**RISKS
      RELATED TO OUR BUSINESS**




***Unless
      we obtain new financing and/or generate revenue growth in the near future,
      our
      liquidity position will become significantly impaired***





Based
      upon our projections of future revenues from its products and cash on
      hand, including cash of $6.4 million received from the sale of the our First and
      Second Convertible Bridge Notes between January 1, 2007 and June 30, 2007,
      we
      will not have adequate working capital to fund its operations during the next
      twelve months. We
      are rapidly depleting our cash resources and its ability to continue to operate
      and grow our business is dependent upon obtaining new financing and/or
      generating sufficient revenue growth from
      existing and new business arrangements . 
      The cost of any new financing may be prohibitive. While we have been in the
      process of aggressively developing, marketing and selling our products, there
      can be no assurances that those efforts will be met with success in the
      marketplace or that the timing of our efforts will be consistent with our cash
      availability and burn rate. If we are unable to arrange new financing and/or
      generate sufficient revenue growth
      from existing and new business arrangements ,
      we will
      not have sufficient cash to support our operations and meet our obligations.
      We
      anticipate we will need approximately an additional $4 - $6 million to support
      our operations and meet our obligations over the next twelve months. We are
      currently reviewing alternative methods of financing, including private
      issuances of debt and/or equity.




***We
      have lost money in each fiscal quarter since we changed our business model
      to
      the development of products in the oral care, food processing, skin care, water
      purification and pet industries*** **.** ***We
      expect future losses and we may never become
      profitable.***




We
      have
      incurred losses from operations in each quarter since we changed our business
      direction in late 2002. Our net losses for the six months ended June 30, 2007
      and the years ended December 31, 2006, 2005 and 2004 were approximately
      $13,928,000, $62,943,000, $18,269,000, and $6,072,000, respectively. We expect
      to continue to incur losses for at least the next twelve months. We anticipate
      operating expenses will increase as we attempt to build our brands, expand
      our
      customer base and develop new products. To become profitable, we must increase
      revenue substantially and achieve and maintain positive gross margins. We may
      not be able to increase revenue and gross margins sufficiently to achieve
      profitability. If we are not able to achieve profitability, our results of
      operations and financial condition will be materially and adversely
      affected.





Our
      consolidated financial statements have been prepared assuming that we will
      continue as a going concern. As discussed in the consolidated financial
      statements, we have incurred negative cash flow from operations and net losses
      since inception and have a working capital deficiency. These conditions, among
      others, raise substantial doubt about our ability to continue as a going
      concern.




**RISKS
      RELATED TO OUR COMMON STOCK**




***The
      large number of shares available for future sale could adversely affect the
      price of our common stock.***




As
      of
      June 30, 2007, approximately 19.3 million shares of common stock were issuable
      upon exercise of outstanding stock options with a weighted average exercise
      price of $0.45 per share, approximately 112.4 million shares of common stock
      were issuable upon exercise of outstanding warrants with an exercise price
      of
      between $0.725 to $2.00 per share and approximately 109.6 million shares of
      common stock were issuable upon the conversion of the First and Second
      Convertible Bridge Notes with an exercise price of between $0.725 to $0.20
      per
      share . In addition, the registration rights agreement for the January 2006
      private placement requires us to pay liquidated damages in the form of
      additional common stock and warrants. As of June 30, 2007, 133,359 shares and
      133,359 warrants are issuable as liquidated damages under the terms of the
      January 2006 registration rights agreement. Substantially all of the shares
      underlying these options and warrants have been or would be registered for
      resale, and none of them are subject to any contractual restrictions on resale.
      Future sales of any of these shares, or the anticipation of such sales, could
      adversely affect the market price of our common stock and could materially
      impair our future ability to raise capital through an offering of equity
      securities. Further, any issuance of a substantial number of these shares would
      dilute the ownership interest of existing stockholders and could result in
      increased volatility in the price of our common stock.




32


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





During
      the three-month period ended June 30, 2007, we issued the following stock
      options, warrants and common stock:




·
            Warrants
                to purchase 7,200,951 shares of common stock issued to lenders in
                connection with the sale of the First Convertible Bridge Notes
                between April 1, 2007 and May 10, 2007. The warrants have a four-year
                term
                and were issued with an exercise price of $0.09 per
                share.




·
            Warrants
                to purchase 1,787,824 shares of common stock issued to the placement
                agent in connection with the sale of First Convertible Bridge Notes
                between April 1, 2007 and May 1, 2007. The warrants have a seven-
                year
                term and were issued with an exercise price of $0.0725 per share. 
                Our Executive Chairman is the Managing Partner of the placement
                agent.




·
            Warrants
                to purchase 1,000,000 shares of common stock issued to lenders in
                connection with the sale of the Second Convertible Bridge Notes on
                June 4,
                2007. The warrants have a four-year term and were issued with an
                exercise
                price of $0.20 per share.




·
            Warrants
                to purchase shares of common stock issued to the placement agent
                in
                connection with the sale of the Second Convertible Bridge Notes on
                June 4,
                2007. The warrants have a seven- year term and were issued with an
                exercise price the lesser of $0.20 per share or the per share price
                of
                warrants issued in a Qualified Financing.




·
            Warrants
                to purchase 200,000 shares of common stock issued to consultants on
                April
                13, 2007, as part of their compensation. The warrants have a ten-year
                term
                and were issued with an exercise price of $0.33 per
                share.




·
            334,067
                shares of our common stock were issued on April 16, 2007, to a vendor
                in
                lieu of cash payment for services previously provided to
                us.




·
            761,963
                shares of our common stock were issued on May 22, 2007, in lieu of
                cash
                payment on two installments of a note
                payable.




·
            Warrants
                to purchase 1,420,000 shares of common stock issued to employees,
                directors and consultants on June 29, 2007, as part of their compensation.
                The warrants have a ten -year term and were issued with an exercise
                price
                of $0.20 per share.




·
            Warrants
                to purchase 5,000,000 shares of common stock issued
                to the placement agent on June 29, 2007, as a fee for various
                consulting services. The warrants have a ten-year term and were issued
                with an exercise price of $0.19 per share.




33




The
      issuances of common stock, warrants and stock options were not registered under
      the Securities Act because such issuances were exempt from registration pursuant
      to Section 4(2) of the Securities Act of 1933, as they were transactions by
      an issuer that did not involve a public offering of securities.




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




We
      held
      our 2007 Annual Meeting of Shareholders on June 29, 2007. We adjourned our
      annual meeting for the purpose of soliciting additional votes to approve an
      Agreement and Plan of Merger pursuant to which we would reincorporate from
      the
      State of Nevada to the State of Delaware. Voting for all other matters that
      were
      presented at the annual meeting closed at the end of the meeting on June 29,
      2007. The adjourned meeting resumed at 10:00 a.m., on Monday, July 16,
      2007.





The
      following matters were voted at the 2007 Annual Meeting of
      Shareholders:




1.
            A
                proposal to elect six directors to serve for a term of one
                year




**Nominee’s
                Name**
            **For**
            **Withheld**Greg
                Osborn
            89,005,753
            4,366,731Joseph
                P. Carfora
            78,492,223
            14,880,261Lanny
                Dacus
            89,103,753
            4,268,731Frederick
                G. Ledlow
            78,508,223
            14,864,261William
                P. Miller
            78,338,223
            14,984,261Peter
                O’Gorman
            78,417,448
            14,955,036




Each
      of
      these nominees was elected to serve as director for a term of one
      year.




On
      June
      27, 2007, Mr. Leon Frenkel resigned from our Board of Directors.




On
      June
      27, 2007, Timothy Lane was appointed to our Board of Directors, and as of June
      29, 2007, Timothy Lane was appointed to the Audit Committee and the Governance
      Committee.




2.
            A
                proposal to amend our Nevada Articles of Incorporation to increase
                the
                maximum number of directors of our company from seven to
                nine




For
            
            
            87,947,855Against
            
            
            5,346,883Abstain
            
            
            77,746




Since
      our
      shareholders approved the Agreement and Plan of Merger for our reincorporation
      into Delaware, this proposal, although approved by our shareholders, will not
      be
      implemented.




3.
            A
                proposal to amend our Nevada Articles of Incorporation to increase
                the
                number of authorized shares of common stock from 300,000,000 to
                450,000,000




For
            
            
            82,493,321Against
            
            
            10,212,861Abstain
            
            
            666,302




Since
      our
      shareholders approved the Agreement and Plan of Merger for our reincorporation
      into Delaware, this proposal, although approved by our shareholders, will not
      be
      implemented.




34




4.
            A
                proposal to amend our Nevada Articles of Incorporation to Authorize
                15,000,000 shares of preferred
                stock




For
            
            
            32,312,506Against
            
            
            13,732,303Abstain
            
            
            315,660




This
      proposal was not approved at the 2007 Annual Meeting of
      Shareholders.




5.
            A
                proposal to grant discretionary authority to our board of directors
                to
                amend our Nevada Articles of Incorporation or Delaware Certificate
                of
                Incorporation, as the case may be, to effect a reverse split of our
                common
                stock within a band ranging from one-for-five to
                one-for-twenty




For
            
            
            82,391,942Against
            
            
            10,910,620Abstain
            
            
            69,921




This
      proposal was approved at the 2007 Annual Meeting of Shareholders.




6.
            A
                proposal to approve an Agreement and Plan of Merger pursuant to which
                we
                will reincorporate from the State of Nevada to the State of
                Delaware




For
            
            
            56,449,797Against
            
            
            3,678,283Abstain
            
            
            142,627




This
      proposal was approved at the 2007 Annual Meeting of Shareholders.




7.
            A
                proposal to ratify the selection of Rothstein, Kass & Company, P.C. as
                our independent registered public accounting firm for the fiscal
                year
                ending December 31, 2007




For
            
            
            91,609,643Against
            
            
            1,649,690Abstain
            
            
            113,151




This
      proposal was approved at the 2007 Annual Meeting of Shareholders.




**Item
      6. Exhibits**




10.1
            
            Amendment
                No. 3 dated January 19, 2007, to Exclusive Field of Use License Agreement
                and Product Sale Agreement dated September 16, 2004 between the Company,
                Pharlo Citrus Technologies and Indian River Labs, LLC.*31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification by Principal Executive
                Officer31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification by Principal Financial
                Officer32.1
            
            Section
                1350 Certifications by Principal Executive Officer32.2
            
            Section
                1350 Certifications by Principal Financial
                Officer




* 
      Confidential portions of this Exhibit have been deleted and filed separately
      with the Securities and Exchange Commission pursuant to a request for
      confidential treatment.




35




**SIGNATURES**




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




TASKER
                PRODUCTS CORP.Date: August
                14, 2007
            
            By:
            
            /s/ Stathis
                KouninisStathis
                KouninisChief
                Financial Officer
              (Principal
                Financial and Accounting Officer)




**Exhibit
      Index**




10.1
            
            Amendment
                No. 3 dated January 19, 2007, to Exclusive Field of Use License Agreement
                and Product Sale Agreement dated September 16, 2004 between the Company,
                Pharlo Citrus Technologies and Indian River Labs, LLC.*31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification by Principal Executive
                Officer31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification by Principal Financial
                Officer32.1
            
            Section
                1350 Certifications by Principal Executive Officer32.2
            
            Section
                1350 Certifications by Principal Financial
                Officer




* 
      Confidential portions of this Exhibit have been deleted and filed separately
      with the Securities and Exchange Commission pursuant to a request for
      confidential treatment.




36