**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB/A**


**(Amendment
      No. 1)**




[X]Annual
                  report under Section 13 or 15(d) of the Securities Exchange Act
                  of 1934
                For
                  the fiscal year ended December 31, 2005[
                  ]Transition
                  report under Section 13 or 15(d) of the Securities Exchange Act
                  of
                  1934
                For
                  the transition period from _____________________ to
                  ______________________


Commission
      file number 000-50614





**ORAGENICS,
      INC.**








**Florida**
            
            **59-3410522**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (IRS
                Employer Identification No.)**13700
                Progess Blvd., Alachua, Florida**
            
            **32615**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)








**(386)
                418-4018**(Issuer’s
                Telephone Number, Including Area
                Code)





Securities
      registered pursuant to Section 12(b) of the Act: Common stock, par value $.001
      per share





Securities
      registered pursuant to Section 12(g) of the Act: Common stock, par value $.001
      per share





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB [   ]





The
      registrant had no revenues for the fiscal year ended December 31,
      2005.





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant, as of March 6, 2006 was approximately $5,465,756 based upon a last
      sales price of $0.48 as reported by the American Stock Exchange.





As
      of
      March 6, 2006 there were 19,646,117 shares of the registrant's Common Stock
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE:**


Portions
      of the Registrant’s Definitive Proxy Statement for its 2006 Annual Meeting of
      Shareholders are incorporated by reference into Part III of this Form 10-KSB
      Report except with respect to information specifically incorporated by reference
      in this Form 10-KSB Report, the Definitive Proxy Statement is not deemed to
      be
      filed as a part hereof .





Transitional
      Small Business Disclosure Format (check one): Yes ___ No _ X _







**EXPLANATORY
      NOTE**




This
      Amendment No. 1 to the Registrant’s Form 10-KSB Annual Report filed with the
      Securities and Exchange Commission (“SEC”) on March 8, 2006 (the “Original
      Filing”) is being filed solely for the purpose of correcting two errors in
      the audit report of Kirkland Russ Murphy & Tapp, PA, our independent
      registered public accounting firm in part II, Item 7, Financial
      Statements.  Specifically, the date of the report of Kirkland Russ Murphy
& Tapp, PA has been changed to read “February 15, 2006, except for Note 11
      as to which the date is March 6, 2006” and the firm’s location is changed to
      read “Clearwater, FL.”  In addition, pursuant to rule 12b-25 of the
      Securities and Exchange Act of 1934, the Exhibits referenced in Item 13 are
      also
      amended to reflect the inclusion of updated certificates of certain officers
      and
      updated consents form Kirkland Russ Murphy & Tapp, PA and Ernst & Young
      LLP.  Except as described, no other changes have been made to the Original
      Filing.  This Amendment continues to speak as of the date of the Original
      Filing, and we have not updated the disclosures contained herein to reflect
      any
      events that occurred at a date subsequent to the filing of the Original
      Filing.





2





**TABLE
      OF CONTENTS**





**PART
      I**


**Page**Explanatory
                  Note
              
              2Item
                  1.
              Description
                  of Business
              4Item
                  2.
              Description
                  of Property
              19Item
                  3.
              Legal
                  Proceedings
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19


**PART
      II**


Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters
              20Item
                  6.
              Management’s
                  Discussion and Analysis or Plan of Operation
              23Item
                  7.
              Financial
                  Statements
              43Item
                  8.
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              43Item
                  8A
              Controls
                  and Procedures
              43Item
                  8B
              Other
                  Information
              44


**PART
      III**


Item
                  9.
              Directors
                  and Executive Officers of the Registrant
              45Item
                  10.
              Executive
                  Compensation
              45Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management
              45Item
                  12.
              Certain
                  Relationships and Related Transactions
              45Item
                  13.
              Exhibits
                  and Reports on Form 8-K
              45Item
                  14.
              Principal
                  Accountant Fees and Services
              45Signatures
              
              64





3




**PART
        I**
 
 **Item
        1.** **Description
        of Business.**
 
 This
        description contains certain forward-looking statements that involve risks
        and
        uncertainties. Our actual results could differ materially from the results
        discussed in the forward-looking statements as a result of certain of the
        risks
        set forth herein and elsewhere in this Form 10-KSB. We assume no obligation
        to
        update any forward-looking statements contained herein.
 
 **Overview**
 
 We
        are an
        early-stage biotechnology company aimed at adding value to novel technologies
        and products sourced from innovative research at the University of Florida
        and
        other academic centers, as well as discovered internally. Our strategy is
        to
        in-license or internally discover and to develop products through human
        proof-of-concept studies (Phase II clinical trials of the U.S. Food and Drug
        Administration’s (“FDA”) regulatory process) prior to partnering with major
        pharmaceutical, biotechnology or healthcare product firms for advanced clinical
        development and commercialization. Since inception, we have funded a significant
        portion of our operations from the public and private sales of our securities.
        We have generated no significant revenues from operations during the last
        two
        years. All of our revenues have been from a sponsored research agreement
        and
        SBIR grants which have expired, however, we have not generated revenues from
        sales of products.
 
 We
        hope
        to be in a position to continue to develop several products, each of which
        addresses potentially large market opportunities.
 
 **Replacement
        therapy** is a
        single, painless one time topical treatment that has the potential to offer
        lifelong protection against dental caries (tooth decay). The therapy is based
        on
        genetically altering the bacterium, *Streptococcus
        mutans (s. mutans)* ,
        which
        is the primary etiologic agent in tooth decay. Present in the normal flora
        of
        the mouth, *Streptococcus
        mutans* converts
        dietary sugar to lactic acid; the lactic acid, in turn, causes the erosion
        of
        tooth enamel that results in the destruction of the tooth surface and eventually
        the entire tooth. Replacement therapy permanently replaces resident acid
        producing *Streptococcus
        mutans* with a
        patented genetically engineered strain of *Streptococcus
        mutans* that
        does not produce lactic acid. Applied topically to tooth surfaces with a
        swab,
        the therapy requires only one application. We have begun Phase I clinical
        trials
        and expect to partner with a major healthcare products or pharmaceutical
        company
        prior to initiating Phase III clinical trials. To facilitate further patient
        recruitment in our Phase I clinical trial, we opened an additional clinical
        site
        in June 2005, however, we have had very limited patient enrollment through
        December 31, 2005 due to the rigorous requirements for enrollment imposed
        upon
        us by the FDA. In January 2006, we concluded this study and discussed with
        the
        FDA our problems with patient enrollment and how we could modify our protocol
        to
        allow us to move forward in our clinical trials. A formal re-submission of
        an
        amended protocol is expected to be filed with the FDA in March 2006 and we
        anticipate instituting a second Phase I clinical study by the end of the
        second
        quarter of 2006. We remain committed to complete the human safety study of
        replacement therapy to the satisfaction of the FDA and we expect the cost
        in
        2006 will be approximately $350,000.
  **Mutacin
        1140** is a
        highly potent bactericidal peptide that is produced by our strain of *Streptococcus
        mutans* .
        Our
        proprietary mutacin was discovered by our researchers during the course of
        developing replacement therapy and is a novel antibiotic that has broad-spectrum
        antimicrobial activity against essentially all Gram-positive bacteria including
        vancomycin-resistant *Staphylococcus
        aureus* .
        The
        antibiotic currently is in preclinical stages of development. During the
        second
        quarter of 2005, we completed development of a proprietary manufacturing
        process
        for mutacin 1140, which overcame a previous hurdle to that molecule’s
        development. We are now able to manufacture in sufficient quantities to allow
        us
        to conduct preclinical studies needed to enable the filing of an Investigational
        New Drug (IND) application. If we are able to secure adequate funding, we
        plan
        to continue to perform in vitro antimicrobial susceptibility and toxicity
        testing during the first half of 2006 before performing more detailed animal
        safety and efficacy studies using mutacin 1140. For example, in March and
        April
        2006 we plan to conduct two preclinical studies with MU 1140TM (which is mutacin
        1140), utilizing independent testing labs, that will provide information
        on Tier
        2 spectrum of activity against clinically important Gram-positive bacteria
        and
        the effectiveness in a drug resistant *Staphylococcus
        aureus* infected
        animal model system. Upon adequate funding and successful completion of this
        testing and the animal studies we expect to be positioned to file an IND
        in the
        fourth quarter of 2006.
  4
 **Probiotics** are live
        microorganisms that confer health benefits to the host when administered
        in
        adequate amounts; the use of yogurt containing live *Lactobacillus* cultures
        is an example of a probiotic application. We have identified three natural
        strains of bacteria that provide significant protection against the causative
        organisms of periodontal disease and dental caries. Because probiotic treatments
        may be marketed as a cosmetic or as "health supplements" in certain geographic
        areas without the need for extensive regulatory oversight, we believe that
        with
        adequate funding, we may achieve commercialization of our probiotic product
        in
        these markets by late 2006. We are continuing our efforts to seek partners
        in
        Europe and Asia for market opportunities for our oral probiotic technology.
        European and Asian companies have signaled their intent to establish a licensing
        agreement with us, while another potential partner is completing a laboratory
        evaluation of the product before moving forward with possible licensing
        discussions. We expect to initiate a human trial within the next two months
        to
        support product claims for Probiora 3TM.  While there can be no assurances,
        this study should be completed by early in the third quarter of 2006. If
        successfully developed, our oral rinse product will be one of the first
        probiotics to be marketed for the maintenance of oral health.
  **IVIAT
        and CMAT** are
        technologies we licensed from iviGene Corporation. Two of our directors own
        an
        aggregate 19.1% interest in iviGene Corporation. These technologies enable
        the
        simple, fast identification of novel and potentially important gene targets
        associated with the natural onset and progression of infections, cancers
        and
        other diseases in humans and other living organisms, including plants. These
        licensed technologies offer the potential to generate and develop a number
        of
        product candidates for future out-licensing to corporate partners, particularly
        in the area of cancer and tuberculosis, as well as agricultural and other
        non-human uses.
  
 We
        were
        founded in 1996, became operational in 1999 and currently employ 10 full-time
        employees. Our registered office is located at 532 SW 117 th Street,
        Gainesville, FL 32607, and our headquarters are located at 13700 Progress
        Boulevard, Alachua, Florida 32615.
 
 **Business
        Objectives and Milestones**
  The
        specific goal of our business is to successfully develop, clinically test
        and
        obtain FDA approval for sales of products based on our licensed, patented
        technologies. Our strategy is to develop novel technologies through human
        proof-of-concept studies (Phase II clinical trials) prior to partnering with
        major pharmaceutical, biotechnology or health care product firms for advanced
        clinical development and commercialization. Upon successful completion of
        proof-of-concept studies, we intend to consider sublicensing our licensed,
        patented technologies to one or more strategic partners that would be
        responsible for advanced clinical development, completing the U.S. Food and
        Drug
        Administration’s approval process, and manufacturing and marketing our products.
        In order to accomplish these objectives, we must obtain additional capital
        and
        take the following actions:
  **Replacement
        Therapy**
  1.
              Initiate
                  second Phase I safety trial.
  **Mutacin 1140**
  1.
              Complete
                  preclinical studies, including animal toxicity and efficacy, required
                  for
                  an investigational new drug application submission.2.
              Submit
                  an investigational new drug application to the
                  FDA.
  **Probiotic
        Technology**
  1.
              Develop
                  appropriate manufacturing and packaging systems.2.
              Complete
                  one human study.
  5
 The
        above
        actions, individually and in the aggregate, are expected to be costly to
        undertake and complete and will require additional capital over and above
        what
        we currently have available to us. Our current available capital limits our
        ability to fully develop our technologies. We expect to allocate our limited
        capital resources to the development of our technologies while we continue
        to
        explore additional capital raising opportunities. There can be no assurances
        that such additional capital will be available to us. The time period for
        the
        development of our technologies could change depending on the progress of
        our
        ability to negotiate a partnering arrangement, as well as our efforts to
        raise
        additional capital.
  **Our
        Technologies**
  **Replacement
        Therapy**
  Dental
        caries (tooth decay) is a worldwide epidemic that affects the majority of
        populations in industrialized and developing countries. According to the
        World
        Health Organization, tooth decay is the most prevalent infectious disease,
        affecting approximately 5 billion people. Much of the tooth decay in low-income
        countries remains untreated until the teeth are extracted.
  Tooth
        decay is characterized by the dissolution of enamel and dentin which eventually
        results in the destruction of the entire tooth. The immediate cause of tooth
        decay is organic acid produced by microorganisms on the tooth surface. Studies
        suggest that of the 400 to 500 microbial species in the mouth, *Streptococcus
        mutans,* a
        common
        bacterium found in virtually all humans, is the principal causative agent
        in the
        development of tooth decay. Residing within dental plaque, *Streptococcus
        mutans* derives
        its energy from carbohydrate metabolism as it converts dietary sugar to lactic
        acid which, in turn, erodes the tooth enamel.
  Our
        replacement therapy technology employs a genetically modified strain of *Streptococcus
        mutans* that
        does
        not produce lactic acid. When applied to the teeth, this non acid-producing
        organism displaces and permanently replaces the indigenous acid-producing
        strains of *Streptococcus
        mutans,* thereby
        potentially providing lifelong protection against most forms of tooth decay.
  Replacement
        therapy is suitable for use by the general population. The ideal application
        would be to treat infants at the onset of tooth eruption when initial bacterial
        colonization of the tooth surfaces is occurring. Replacement therapy requires
        only a single 5-minute application. Applied topically to the teeth with a
        swab,
        the therapy can be administered by dentists to patients during routine office
        visits.
  We
        submitted an IND for replacement therapy to the FDA in 1998 seeking permission
        to begin Phase I clinical trials. In March 2003, we submitted a new IND.
        In
        November 2004, the FDA approved our clinical design and protocol for the
        Phase I
        clinical trial. In March 2005, we initiated enrollment in the clinical trial.
        We
        are in the process of seeking permission to modify the design and protocol
        of
        our Phase I clinical trial with the FDA due to patient enrollment difficulties
        discussed below under regulatory status.
  ***Technical
        Background***
 Replacement
        therapy represents a novel approach to preventing bacterial infections by
        capitalizing on interactions between different species of bacteria inhabiting
        the same ecosystem. This approach involves permanently implanting a harmless
        strain of bacteria in the host’s microflora. Once established, the harmless
        strain prevents the colonization and outgrowth of a potential pathogen. In
        the
        case of dental caries, beneficial bacteria are implanted in the mouth of
        the
        host to prevent colonization of the harmful bacteria ** that ** cause
        tooth decay.
 
 Our
        replacement therapy involves replacing the naturally occurring, acid-producing
        strains of *Streptococcus
        mutans* with
        a
        genetically engineered strain of *Streptococcus
        mutans* that
        does
        not produce lactic acid. Our researchers discovered a strain of *Streptococcus
        mutans* that
        did
        not produce the decay-causing lactic acid. This strain, however, could not
        permanently replace the acid-producing strains of *Streptococcus
        mutans* naturally
        occurring in the normal flora of the mouth. Thus, it was first necessary
        to find
        a strain of *Streptococcus
        mutans* that
        could permanently replace the naturally occurring decay-causing strains of *Streptococcus
        mutans* .
 
 6
 Through
        extensive scientific research, we eventually found a rare strain of *Streptococcus
        mutans,* present
        in only 1% of the population, which secretes a natural antibiotic capable
        of
        killing virtually all other strains of *Streptococcus
        mutans.* We
        believe this natural antibiotic, referred to as mutacin 1140, enables the
        bacteria to persistently and preemptively colonize the oral cavity, displace
        pre-existing strains and gain dominance in its ecosystem, dental
        plaque.
 
 Using
        clinical isolates of this rare strain ** as
        the
        starting strain, we then employed recombinant DNA technology to delete the
        gene
        encoding for lactate dehydrogenase. Our research revealed the gene deletion
        eliminated the strain’s ability to produce lactic acid; however, it also caused
        a metabolic imbalance that prevented the strain from growing. So as to correct
        the imbalance, an auxiliary gene for alcohol dehydrogenase was inserted which
        restored the strain’s growth. Instead of lactic acid, the strain produced
        ethanol and acetoin which are the normal end products of metabolism in many
        other microorganisms colonizing the oral cavity. We named this strain BCS3-L1,
        and filed for composition of matter intellectual property protection for
        the
        strain.
 
 ***Regulatory
        Status***
 We
        submitted an Investigational New Drug application for our replacement therapy
        to
        the U.S. Food and Drug Administration in 1998 seeking permission to begin
        clinical trials. Subsequent to review by the Office of Vaccines Research
        and
        Review Division of Vaccines and Related Products Application at the Center
        for
        Biologics Evaluation and Research (CBER), the FDA placed the application
        on
        clinical hold pending the development of a recall mechanism to completely
        eradicate the organism from human subjects, should it be necessary, until
        complete safety could be experimentally established in the Phase I clinical
        trials.
  In
        response to this requirement, we genetically engineered a second strain of *Streptococcus
        mutans* (A2JM)
        identical in every aspect to the original strain (BCS3-L1) except that it
        requires exogenous d -alanine
        for survival. d -alanine
        was selected because the nutrient is not normally found in human diets; humans
        do not produce it; and it can be easily administered via a mouth rinse. With d -alanine
        nutrient supplementation, the organism lives; without nutrient supplementation,
        the organism cannot survive. Therefore, the organism can be completely
        eradicated from human subjects by withdrawing d -alanine
        nutrient supplementation.
  In
        the
        initial studies to assess product safety (Phase I clinical trials) that began
        in
        March 2005, the genetically altered strain of *Streptococcus
        mutans* requiring d- alanine
        supplementation was administered to study subjects in conjunction with a
        twice
        daily dose of a d -alanine
        mouth rinse. Once safety is experimentally established, the replacement therapy
        to be commercialized will consist of the original effector strain which does
        not
        require d -alanine
        to maintain colonization.
 
 We
        began
        our initial study in May 2005, however, during the remainder of 2005 we were
        unable to enroll a sufficient number of qualified subjects into our study.
        This
        initial study was expected to be conducted in eleven couples and an additional
        four unattached males at Hill Top Research in West Palm Beach, Florida and
        would
        look at the safety of Replacement Therapy and the potential for horizontal
        transmission of the Replacement Therapy organism to the non-treated member
        of
        each couple.  All
        of
        the participants in the trial, according to the FDA approved protocol, were
        required to be without teeth, with full sets of dentures, and under the age
        of
        55. The study required four days of pretreatment with an antibiotic
        (chlorhexidine) to kill resident *S.
        mutans* in
        each
        participant’s ** mouth.
        Male study subjects were to receive Replacement Therapy. The non-treated
        member
        of each couple was to be tested repeatedly to see if there was any horizontal
        transmission of the Replacement Therapy organism from one person to another.
        The
        investigators were to determine the genetic stability of the Replacement
        Therapy
        organism over time. Seven days after treatment, the subjects were to undergo
        an
        eradication phase of the study for one month, using the same antibiotic and
        the
        withholding of a D-alanine amino acid supplement that the Replacement Therapy
        organism requires for its survival. Finally, the protocol required investigators
        to subsequently follow each study participant for three months to ensure
        that
        the eradication was effective.
 
 On
        December 2, 2005, due to the enrollment of only one subject in our initial
        clinical study, we re-submitted a new protocol to the FDA that was less
        restrictive. In January 2006, we held discussions with the FDA about our
        problems with patient enrollment and how we could modify our protocol. The
        critical changes to the study are that it will be conducted in 10 patients
        who
        have teeth and the patients will be quarantined to a hospital-type setting
        for
        up to 12 days with a 2 month follow-up phase. We have concluded the initial
        study and expect to submit additional proposed changes in the trial to the
        FDA
        in March 2006. We anticipate instituting a second Phase I clinical study
        by the
        third quarter of 2006. We believe these changes, if approved in a timely
        manner
        by the FDA, will allow the Company to complete the enrollment of patients
        and
        thereby complete the study by the end of 2006.
 
 7
 ***Preclinical
        Studies***
 From
        1976
        to 2002, our researchers and others have conducted several animal studies
        on
        replacement therapy for dental caries. We believe these studies support our
        belief in the ability of our novel technology ** to
        prevent tooth decay. Additionally, we believe these studies demonstrate the
        ability of our genetically engineered strain of *Streptococcus
        mutans* to
        persistently and preemptively colonize the oral cavity and aggressively displace
        the indigenous wild-type strain, filling its bacterial niche in all respects
        except for the production of lactic acid.
  In
        the
        most recent animal study, our patented effector strain (BCS3-L1) and the
        wild-type strain were both grown in culture in the presence of sugar. The
        wild-type strain produced mostly lactic acid from the metabolism of sugar;
        it
        also produced small amounts of other acids as well as the non-acidic compounds,
        ethanol and acetoin. By contrast, our genetically modified strain produced
        mostly the non-acidic compounds, ethanol and acetoin, from the metabolism
        of
        sugar. No lactic acid was detectable. Two identical groups of conventional
        rats
        were then infected with either the wild-type strain or the genetically modified
        strain. A third identical group was not infected and served as the control
        group.
  In
        both
        preemptive colonization and aggressive displacement rat model studies, the
        genetically engineered effector strain performed well and was able to occupy
        the
        niche normally occupied by wild-type *Streptococcus
        mutans* .
        The
        mutacin 1140 produced by the effector strain appeared to provide a selective
        advantage in colonization suitable for use in replacement therapy for dental
        caries.
 
 A
        six-month study was also conducted to evaluate possible toxic effects of
        exposure to the genetically modified effector strain. No adverse gross or
        histological side effects were observed in conventional rats. Sufficient
        amounts
        of mutacin 1140 have not yet been purified to be able to directly test its
        toxicity but it belongs to the same class of antibiotics as nisin, which
        has
        very low toxicity and is used as a food preservative worldwide.
 
 In
        summary, we believe the preclinical studies demonstrate that our genetically
        modified strain of *Streptococcus
        mutans* :
 
 ·
              Does
                  not cause significant tooth decay in the animal test
                  subjects;
 ·
              Persistently
                  and preemptively colonizes the tooth surfaces of the animal test
                  subjects;
 ·
              Displaces
                  other strains of*Streptococcus
                  mutans;*
 ·
              Is
                  genetically stable in the laboratory and in the animal test
                  subjects;
 ·
              Shows
                  no toxicity in acute and chronic tests;
                  and
 ·
              Does
                  not disrupt the normal flora of the
                  mouth.
 
 ***Intellectual
        Property***
 We
        have
        exclusively licensed the intellectual property for our replacement therapy
        from
        the University of Florida Research Foundation, Inc. The license is dated
        August
        4, 1998 and was amended on September 15, 2000, July 10, 2002, September 25,
        2002
        and March 17, 2003. The agreement provides us with an exclusive worldwide
        license to make, use and sell products and processes covered by Patent No.
        5,607,672, which is dated March 4, 1997 and will expire on March 3, 2014.
        Our
        license is for the period of the patent, subject to the performance of terms
        and
        conditions contained therein. The patent covers the genetically altered strain
        of *Streptococcus
        mutans* which
        does not produce lactic acid, a pharmaceutical composition for administering
        the
        genetically altered strain and the method of preventing tooth decay by
        administering the strain. The University of Florida Research Foundation,
        Inc.
        has reserved for itself and the University of Florida the right to use and
        sell
        such products and services for research purposes only. Our license also provides
        the University of Florida Research Foundation, Inc. with a license, for research
        purposes only, to any improvements that we make to the products and processes
        covered by the patent.
  Under
        the
        terms of the license, we have entered into an Equity Agreement with the
        University of Florida Research Foundation, Inc. under which we issued 599,940
        shares of our common stock as partial consideration for the license. We are
        obligated to pay 5% of the selling price of any products developed from the
        licensed technology to the University of Florida Research Foundation, Inc.
        and,
        if we sublicense the license, we are obligated to pay 20% of all amounts
        received from the sublicensee. On December 31, 2005 and each year thereafter
        we
        are obligated to make a minimum royalty payment of $50,000 for replacement
        therapy and $50,000 for mutacin 1140, for an aggregate of $100,000 which
        is
        required to be paid in equal quarterly installments of $25,000. We spent
        in
        excess of $1,000,000 in each of 2005 and 2004 which were the minimum amounts
        required under our license in order to maintain it. In each future calendar
        year
        and in addition to the royalty payment obligations, we are obligated to spend,
        or cause to be spent, an aggregate of $1,000,000 on the research, development
        and regulatory prosecution of our replacement therapy and mutacin 1140
        technologies combined, until a product which is covered wholly or partially
        by
        the claims of the patent, or is manufactured using a process which is covered
        wholly or partially by the claims of the patent, is sold commercially. If
        we
        fail to make these minimum expenditures, the University of Florida Research
        Foundation, Inc. may terminate our license.
  8
 We
        must
        also pay all patent costs and expenses incurred by the University of Florida
        Research Foundation, Inc. for the preparation, filing, prosecution, issuance
        and
        maintenance of the patent. In 2003, upon our having received external funding
        exceeding $1 million, we reimbursed the university $100,000 of the initial
        $105,000 they paid for patent prosecution. During 2004 and 2005, we paid
        the
        university an additional $83,000 as reimbursement for patent prosecutions.
        We
        have agreed to indemnify and hold the University of Florida Research Foundation,
        Inc. harmless from any damages caused as a result of the production,
        manufacture, sale, use, lease, consumption or advertisement of the product.
        Further, we are required to maintain liability insurance coverage appropriate
        to
        the risk involved in marketing the products, for which we obtained liability
        insurance in the amount of $2,000,000 that expires in August, 2006. There
        is no
        assurance that we can obtain continued coverage on reasonable
        terms.
  We
        received notification from B.C. International Corporation on July 29, 2002
        that
        a gene utilized in its licensed, patented strain of *Streptococcus
        mutans* infringes
        a patent which it holds under a license. B.C. International Corporation’s
        notification did not state that they intended to pursue legal remedies. We
        do
        not believe that the gene in question infringes that patent and we sent them
        correspondence setting out our position. We have received no further
        communication from B.C. International Corporation.
  ***Manufacturing,
        Marketing and Distribution***
 The
        manufacturing methods for producing our genetically engineered strain of *Streptococcus
        mutans* are
        standard fermentation methods. These methods involve culturing bacteria in
        large
        vessels and harvesting them when mature by centrifuge or filtration. The
        cells
        are then suspended in a pharmaceutical medium appropriate for application
        in the
        human mouth. These manufacturing methods are commonplace and readily available
        within the pharmaceutical industry.
  Upon
        successful completion of Phase I clinical trials, we intend to consider
        sublicensing our replacement therapy technology to one or more strategic
        partners that would be responsible for advanced clinical development and
        commercialization including product manufacturing, marketing and distribution.
 
 ***Market
        Opportunity***
 Despite
        the introduction of fluorides in public water systems, fluoridated toothpastes,
        fluoride treatments in the dental office and dental sealants, tooth decay
        still
        affects the majority of children and adults. There are a number of factors
        that
        are likely to increase the incidence and frequency of tooth decay which
        include:
  ·
              increasing
                  consumption of dietary sugar;
  ·
              increasing
                  consumption of bottled water, which generally does not contain
                  fluoride;
                  and
  ·
              increasing
                  age of the population.
  During
        the last 20 years, sugar consumption has increased. Higher dietary intake
        of
        sugar predisposes individuals to higher rates of tooth decay. Moreover,
        according to the Beverage Marketing Corporation, by 2005 consumers will drink
        more bottled water than any other alcoholic or non-alcoholic beverage, with
        the
        exception of carbonated soft drinks. Since bottled water generally does not
        contain fluoride, the protective effects of fluoridated public water systems
        are
        lost. With the aging of the population, the incidence and frequency of tooth
        decay is likely to further increase as most of the baby boomers upon reaching
        retirement age will have a relatively intact dentition unlike previous
        generations. Teeth lose density with age and become more susceptible to decay.
        Therefore, more teeth will be at risk for tooth decay.
  9
 Replacement
        therapy represents a novel approach to preventing tooth decay. The technology
        confers potentially lifelong protection against tooth decay with one treatment,
        is suitable for use by the general population and involves minimal patient
        education and compliance.
  **Competition**
 We
        are
        not aware of any direct competitors with respect to our licensed, patented
        replacement therapy technology. However, there may be several ways to disable
        or
        eradicate *Streptococcus
        mutans* .
        We know
        that certain companies and several academic and research institutions are
        developing and testing caries vaccines aimed at eradicating *Streptococcus
        mutans.* An
        alternative approach involves topical application of adhesion-blocking synthetic
        peptides that prevent *Streptococcus
        mutans* from
        attaching to the tooth surface. Products that result in the elimination of *Streptococcus
        mutans* from the
        natural ecosystem would require major studies to determine whether such
        eradication of a naturally occurring bacteria might not create serious,
        unintended consequences. The problem with eradicating *Streptococcus
        mutans* is that
        it disrupts the natural ecosystem leaving a void for another pathogen
        potentially more harmful than *Streptococcus
        mutans* to
        dominate.
  Academic
        institutions, government agencies and other public and private research
        organizations may conduct research, seek patent protection and establish
        collaborative arrangements for discovery, research and clinical development
        of
        technologies and products that are similar to our replacement therapy
        technology. Also many of the potential competitors have research and development
        capabilities that may allow them to develop new or improved products that
        may
        compete with products based on our technologies.
  Any
        product based on our replacement therapy technology will compete against
        traditional oral care products used to combat tooth decay. These products
        include fluoride-based toothpastes as well as fluoride treatments and tooth
        sealants administered by dentists. These competitors could include, among
        others, Colgate; Procter & Gamble; Unilever; GlaxoSmithKline; and Dentsply.
        All of these companies are much larger and have far greater technical and
        financial resources than us.
  10
  **Mutacin
        1140**
  Most
        clinical isolates of *Streptococcus
        mutans* secrete
        peptides, called mutacins, which exhibit antimicrobial activity against closely
        related streptococcal species and other Gram-positive bacteria. Research
        suggests that these mutacins play a key role in enabling *Streptococcus
        mutans* to
        effectively colonize the oral cavity.
  Two
        types
        of mutacins have been characterized at the molecular level: lantibiotics
        and
        non-lantibiotics. Scientists have identified approximately 20 lantibiotics
        to
        date, including nisin, a substance used as a food preservative that has been
        given status as "GRAS" or "generally recognized as safe" by regulatory
        authorities. In general, lantibiotics have a wider spectrum of activity than
        the
        non-lantibiotic bacteriocins.
 
 ***Technical
        Background***
 Mutacin
        1140 was discovered by our researchers in the course of their research on
        our
        core replacement therapy technology; it is the mutacin produced by our
        genetically engineered effector strain of *Streptococcus
        mutans* .
        Mutacin
        1140 is a lantibiotic, a class of lanthionine-containing antibiotic, which
        we
        believe has the potential to treat a wide variety of infectious diseases.
        Extensive in vitro studies we have conducted demonstrate its effectiveness
        against all tested Gram-positive bacteria, including such commercially relevant
        pathogens as *Staphylococcus
        aureus, Streptococcus pneumoniae, Enterococcus faecalis* and *Listeria monocytogenes* .
        To
        date, our research has not identified any pathogen resistance to mutacin
        1140.
 
 ***Preclinical
        Studies***
 Our
        researchers and others have conducted laboratory studies on mutacin 1140
        to
        determine its efficacy as an antibacterial agent. To test mutacin 1140’s ability
        to kill bacteria, standard microbiological testing methods were employed.
        Mutacin 1140 was purified and incorporated into growth medium at different
        concentrations. The medium was then inoculated with the bacterium under study,
        and its ability to grow in the presence of mutacin 1140 was observed. The
        minimal inhibitory concentration (MIC), which is defined as the lowest
        concentration of mutacin 1140 observed to inhibit growth of the test bacterium,
        was recorded.
 
 We
        believe the results of our laboratory studies demonstrate that mutacin 1140
        is
        effective at killing a broad spectrum of bacteria, including the streptococci
        that cause pharyngitis (“strep throat”), the predominant type of pneumonia, and
        bacterial endocarditis. The antibiotic has also been shown to be effective
        against vancomycin-resistant *Staphylococcus
        aureus* and *Enterococcus
        faecalis* infections,
        both of which are rapidly growing problems within the medical community.
        Mutacin
        1140 was found to kill all Gram-positive bacteria tested at concentrations
        comparable to many therapeutically effective antibiotics. A particularly
        interesting feature of mutacin 1140 is that none of the sensitive species
        of
        bacteria tested was able to acquire genetically stable resistance to purified
        mutacin 1140.
 
 During
        the next two months, we plan to conduct two preclinical studies with MU 1140TM,
        utilizing independent testing labs, that will provide information on Tier
        2
        spectrum of activity against clinically important Gram-positive bacteria
        and the
        effectiveness in a drug resistant *Staphylococcus
        aureus* infected
        animal model system.
  ***Regulatory
        Status***
 Currently,
        mutacin 1140 is in the early stages of preclinical development and we have
        not
        yet filed an Investigational New Drug application with the FDA, however,
        such
        filing is expected after successful completion of animal studies that are
        currently expected to begin in 2006.
  ***Intellectual
        Property***
 We
        have
        exclusively licensed the intellectual property for our mutacin 1140 technology
        from the University of Florida Research Foundation, Inc. See the discussion
        regarding our license in the *Intellectual
        Property* section
        under our Replacement Therapy technology.
  11
 ***Manufacturing,
        Marketing and Distribution***
 Upon
        successful completion of animal studies, we will file an IND application
        for
        mutacin 1140 with the FDA. Once the FDA has approved an IND and we have
        completed Phase I clinical trials, we would expect to seek a strategic partner
        for further clinical development and commercialization, including establishing
        large-scale manufacturing and production capabilities.
 
 ***Market
        Opportunity***
 The
        need
        for novel antibiotics is increasing as a result of the growing resistance
        of
        target pathogens. The Center for Disease Control estimates that bacteria
        resistant to known antibiotics cause 44% of hospital infections. Vancomycin,
        introduced in 1956, serves as the last line of defense against certain
        life-threatening infections. Unfortunately, certain bacteria have developed
        strains which resist even vancomycin.
 
 Our
        antibiotic, mutacin 1140, is a new broad-spectrum antibiotic that has
        demonstrated effectiveness against a wide variety of disease-causing bacteria.
        Moreover, we believe there is no evidence of pathogen resistance to mutacin
        1140. In light of the fact that pathogen resistance has become a major problem
        associated with antibiotics in use today, we believe mutacin 1140 offers
        the
        potential to fulfill a significant and increasing medical need for non-resistant
        antibiotics.
 
 ***Competition***
 Mutacin
        1140 competes directly with antibiotic drugs such as vancomycin. Given the
        growing resistance of target pathogens to many antibiotics, even vancomycin,
        we
        believe that there is ample room in the marketplace for new antibiotics.
        We are
        aware of a mutacin peptide similar to mutacin 1140 patented by the University
        of
        Laval. Successful development of that technology would constitute major
        competition for mutacin 1140.
  Many
        of
        our competitors are taking approaches to drug development differing from
        our
        approach. These approaches include traditional screening of natural products,
        genomics to identify new targets and combinatorial chemistry to generate
        new
        chemical structures. Competition in the pharmaceutical industry is based
        on drug
        safety, efficacy, ease of use, patient compliance, price, marketing and
        distribution. Commercial success of mutacin 1140 technology will depend on
        our
        ability and the ability of our sublicensees to compete effectively in all
        of
        these areas. There can be no assurance that competitors will not succeed
        in
        developing products that are more effective than mutacin 1140 or would render
        mutacin 1140 obsolete and non-competitive.
  Any
        products based on the mutacin 1140 technology will compete against a large
        number of prescription antibiotics currently on the market, and against new
        antibiotic products that will enter the market over the next several years.
        Producers of antibiotic products include many large, international
        pharmaceutical companies, all of which have much greater financial and technical
        resources than us. We intend to compete in the market for antibiotic products
        by
        obtaining a strategic partner with an established sales force calling on
        doctors
        and hospitals. There can be no assurance that we will be able to obtain any
        such
        partner. If not, we will be obliged to develop our own channels of distribution
        for products based on the mutacin 1140 technology. There can be no assurance
        that we will be able to do so.
  12
  **Probiotics**
 
 Probiotics
        are live microorganisms that confer a health benefit to their host when
        administered in adequate amounts. In probiotic therapy, beneficial
        microorganisms are colonized in areas normally colonized by pathogens. By
        being
        better adapted to their ecosystem than the pathogens, these beneficial bacteria
        crowd out harmful bacteria and inhibit colonization and growth of the
        disease-causing pathogens. Examples of common probiotic applications are
        the use
        of yogurt containing live cultures to improve digestion, immune system response,
        and vaginal and urinary tract health.
 
 The
        oral
        cavity provides an ecological niche for 400 -500 bacterial species, some
        of
        which are responsible for periodontal disease (gum disease) and dental caries
        (tooth decay). Of all of the bacteria normally residing in a person’s mouth,
        only about half a dozen are the primary cause of periodontal disease and
        dental
        caries. Our oral rinse probiotics’ technology employs three natural strains of
        beneficial bacteria which promote oral health and inhibit the growth of harmful
        bacteria that cause periodontal disease and tooth decay.
 
 ***Technical
        Background***
 Through
        our research, we have developed a probiotic product containing three natural
        strains of beneficial bacteria that promote oral health. The three bacterial
        strains are *Streptococcus
        oralis* and *Streptococcus uberis* for
        the
        maintenance of periodontal health and *Streptococcus
        rattus* for
        the
        maintenance of dental health.
 
 *Streptococcus
        oralis* and *Streptococcus uberis* are
        among
        several hundred bacterial species of bacteria that constitute normal dental
        plaque. These bacteria, by virtue of their ability to produce hydrogen peroxide,
        appear to promote periodontal health by keeping the number of potentially
        pathogenic organisms below the threshold level necessary to initiate disease.
        These bacteria have demonstrated an ability to inhibit bacteria implicated
        in
        periodontal disease in both laboratory and animal studies. Human studies
        have
        correlated presence of these bacteria with the absence of periodontal pathogens.
        Probiotics containing these bacteria applied frequently can provide significant
        protection against causative organisms of periodontal disease.
 
 Similarly,
        we have identified a bacterial strain closely related to *Streptococcus
        mutans, Streptococcus rattus,* which
        is
        naturally deficient in its ability to produce lactic acid. Studies have shown
        that daily treatment with this strain results in decreased numbers of *Streptococcus
        mutans* ,
        most
        likely by competition for essential nutrients or attachment sites on the
        tooth
        surfaces. Daily application of this strain is likely to provide significant
        protection against tooth decay.
 
 ***Preclinical
        Studies***
 We
        believe preclinical studies have demonstrated the ability of our probiotic
        to
        maintain a healthy oral environment. The probiotic creates a healthful balance
        of total bacteria by reducing the numbers of bacteria that are causative
        agents
        of periodontal disease and dental caries.
 
 *Periodontal
        disease* .
        We
        believe research conducted by our scientists and others has shown that certain
        types of natural bacteria normally present in dental plaque can prevent the
        growth of bacteria that are widely believed to be responsible for periodontal
        disease. *Streptococcus
        oralis* and *Streptococcus
        uberis* have
        been shown in studies to inhibit the growth of disease-causing bacteria both
        in
        laboratory and animal models of infection.  Data
        indicate that the presence of *Streptococcus
        oralis* and *Streptococcus
        uberis* provides
        a good indication of the health of the periodontium (gums).  In
        healthy periodontal sites, *Streptococcus
        oralis* and *Streptococcus
        uberis* are
        commonly found in significant amounts while levels of the pathogenic bacteria
        are usually low. In diseased periodontal sites, the opposite situation prevails; *Streptococcus
        oralis* and *Streptococcus
        uberis* are
        usually undetectable. When these bacteria are absent from sites in the
        periodontium, the sites are much more prone to disease.
 
 *Dental
        caries* .
        We
        believe probiotics can also be used to suppress levels of *Streptococcus
        mutans* ,
        the
        principal cause of tooth decay. *Streptococcus
        mutans* converts
        dietary refined sugar to lactic acid. The lactic acid, in turn, erodes the
        mineral in enamel and dentin, which weakens the tooth resulting in tooth
        decay.
        Research conducted by our scientists has led to the discovery of a close
        relative of *Streptococcus
        mutans* ,
        a
        strain of *Streptococcus
        rattus,* which
        is
        naturally deficient in its ability to produce lactic acid and thus unable
        to
        cause tooth decay.  Because *Streptococcus
        rattus* is
        very
        closely related to *Streptococcus
        mutans* , *Streptococcus
        rattus* reduces
        the number of *Streptococcus
        mutans* by ** competing
        for nutrients, attachment sites, and other important colonization factors.
        As
        animal studies have revealed, daily treatment with this beneficial strain
        can
        promote dental health by significantly reducing the numbers of dental
        caries-causing *Streptococcus
        mutans.*
 
 13
 We
        are
        currently performing studies to determine an appropriate and stable delivery
        system. We expect to initiate a human trial within the next two months to
        support product claims for Probiora 3TM.  While there can be no assurances,
        this study should be completed by early in the third quarter of 2006.
 
 ***Regulatory
        Status***
 Probiotic
        products that claim to confer a health benefit are generally able to enter
        the
        market without the need for extensive regulatory filings and clinical testing.
        This avenue is available for products that do not make any claim that they
        treat, prevent, or cure a disease, which are considered to be drug claims.
        We
        intend to market our probiotic product without any drug claims. In the European
        Union regulatory approval is not required for commercialization of the
        product.
  ***Intellectual
        Property***
 In
        August
        2003, we filed a patent application for our probiotic technology for use
        in
        developing oral care products for the maintenance of dental and periodontal
        health. We own the patent rights to this technology.
 
 ***Manufacturing,
        Marketing and Distribution***
 Manufacturing
        methods used to produce probiotic strains are the standard fermentation methods
        which involve culturing bacteria in large vessels and harvesting them when
        mature by centrifuge or filtration. These methods are relatively commonplace
        and
        readily available within the pharmaceutical industry. We intend to seek one
        or
        more strategic partners for the manufacturing, marketing and distribution
        of our
        oral probiotic technology in Asia and Europe. European and Asian companies
        have
        signaled their intent to establish a licensing agreement with us, while another
        potential partner is completing a laboratory evaluation of the product before
        moving forward with possible licensing discussions.  Product
        launch in select markets is currently expected to occur in 2007.
  ***Market
        Opportunity***
 Probiotics
        are relatively common in Japan and are being adopted with increasing frequency
        in Europe. The probiotics market in the U.S. is still emerging and we expect
        the
        U.S. market will develop slowly. If successfully developed, we expect our
        technology will be one of the first probiotics to be marketed for the promotion
        of oral health.
 
 ***Competition***
 Many
        companies sell probiotics that are principally designed for digestive health,
        vaginal and urinary tract health, and immune system support. Our product
        will
        not compete directly with the products of these companies. Recently, researchers
        at the University of Hiroshima in Japan have published studies indicating
        that *Lactobacillus
        reuteri* aids
        in
        the prevention of tooth decay. *Lactobacillus
        reuteri* is
        widely
        used as a probiotic for other indications and may be used in the future for
        dental health. We are not aware of any product on the market today that is
        targeted to maintain periodontal health.
  14
 **IVIAT
        and CMAT**
 
 In
        March
        2004, we licensed from iviGene Corporation, applications of a novel technology
        that enables the simple, fast identification of novel and potentially important
        gene targets associated with the natural onset and progression of cancers
        and
        other diseases in humans and other living organisms, including plants. This
        licensed technology will offer us the potential to generate and develop a
        number
        of product candidates for future out-licensing to corporate partners,
        particularly in the area of cancer. Two of our directors own an aggregate
        19.1%
        interest in iviGene Corporation.
 
 To
        support the research for this technology in 2004, we received a $100,000
        Phase I
        SBIR Grant from the National Institute of Allergy and Infections Diseases
        (NIAID) of the National Institutes of Health (NIH). This grant supported
        initial
        research to help us identify genes of *Mycobacterium
        tuberculosis* that are
        specifically induced during human infections with that pathogen. This licensed
        technology is in its early stages and will require further development which
        will require additional capital.
 
 ***Technical
        Background***
 This
        technology platform was developed by our founder and chief scientific officer,
        Jeffrey D. Hillman, and University of Florida scientists. It is called *in
        vivo* induced
        antigen technology (IVIAT). IVIAT can quickly and easily identify *in
        vivo* induced
        genes in human infections without the use of animal models, facilitating
        the
        discovery of new targets for the development of vaccines, antimicrobials
        and
        diagnostics. Dr. Hillman and his collaborators have further developed methods
        based on this approach to create Change Mediated Antigen Technology (CMAT).
        CMAT
        can be used to identify gene targets associated with the onset and progression
        of cancerous processes and autoimmune diseases. It can also be used to identify
        novel genes in plant diseases, including genes expressed by the pathogen
        when it
        causes the disease and genes expressed by the plant in response to the
        disease.
  ***Intellectual
        Property***
 Our
        license provides us with exclusive worldwide rights to this broad platform
        technology in the areas of cancer and tuberculosis, as well as agricultural
        and
        other non-human uses. In return, we will pay royalties on revenues we are
        able
        to generate from any products developed using the technology, including
        royalties on sublicense fees, milestone payments and future product sales.
        Under
        the terms of our license with iviGene we are not obligated to make any payments
        to iviGene until we have achieved certain milestone or royalty payments.
        We are
        required to pay all patent-related expenses and commit two full-time staff
        or
        spend at least $200,000 toward product development annually to maintain our
        license. In 2005 we did not meet the requirements of committing two full-time
        staff or spending at least $200,000, however, we obtained a waiver of these
        provisions from iviGene Corporation, thus maintaining our license arrangement
        with them. We have applied for SBIR grant funding from the National Institutes
        of Health and with these funds expect to be able to meet the requirements
        of the
        license agreement in 2006.
 
 15
 
 **Federal
        Food and Drug Administration (FDA) Regulation**
 
 The
        FDA
        and comparable regulatory agencies in state and local jurisdictions and in
        foreign countries impose substantial requirements upon the clinical development,
        manufacture and marketing of drugs. These agencies and other federal, state
        and
        local entities regulate research and development activities and the testing,
        manufacture, quality control, safety, effectiveness, labeling, storage,
        record-keeping, approval, advertising and protection of most products we
        may
        develop.
  **General**
  The
        steps
        required before a new drug may be produced and marketed in the United States
        are:
  1.
              Preclinical
                  laboratory and animal tests2.
              Investigational
                  new drug application3.
              Clinical
                  trials (Phases I, II and III)4.
              New
                  drug application (review and approval)5.
              Post-marketing
                  surveys
  The
        testing and approval procedures require substantial time, effort and financial
        resources and we cannot assure you that any approval will be timely granted,
        or
        at all.
  **Preclinical
        Trials and Investigational New Drug Application**
  Preclinical
        tests are conducted in the laboratory, and usually involve animals. They
        are
        done to evaluate the safety and efficacy of the potential product. The results
        of the preclinical tests are submitted as part of the investigational new
        drug
        application and are fully reviewed by the FDA prior to granting the applicant
        permission to commence clinical trials in humans. Submission of an
        investigational new drug application may not result in FDA approval to commence
        clinical trials.
  **Clinical
        Trials**
  Clinical
        trials are conducted in three phases, normally involving progressively larger
        numbers of patients.
  ***Phase
        I***
  Phase
        I
        clinical trials consist of administering the drug and testing for safety
        and
        tolerated dosages as well as preliminary evidence of efficacy in humans.
        They
        are concerned primarily with learning more about the safety of the drug,
        though
        they may also provide some information about effectiveness. Phase I testing
        is
        normally performed on healthy volunteers. The test subjects are paid to submit
        to a variety of tests to learn what happens to a drug in the human body;
        how it
        is absorbed, metabolized and excreted, what effect it has on various organs
        and
        tissues; and what side effects occur as the dosages are increased. The principal
        objective is to determine the drug's toxicity.
  ***Phase
        II***
  Assuming
        the results of Phase I testing present no toxicity or unacceptable safety
        problems, Phase II trials may begin. In many cases Phase II trials may commence
        before all the Phase I trials are completely evaluated if the disease is
        life
        threatening and preliminary toxicity data in Phase I shows no toxic side
        effects. In life threatening disease, Phase I and Phase II trials are sometimes
        combined to show initial toxicity and efficacy in a shorter period of time.
        Phase II trials involve a study to evaluate the effectiveness of the drug
        for a
        particular indication and to determine optimal dosages and dose interval
        and to
        identify possible adverse side effects and risks in a larger patient group.
        The
        primary objective of this stage of clinical testing is to show whether the
        drug
        is effective in treating the disease or condition for which it is intended.
        Phase II studies may take several months or longer and involve a few hundred
        patients in randomized controlled trials that also attempt to disclose
        short-term side effects and risks in people whose health is impaired. A number
        of patients with the disease or illness will receive the treatment while
        a
        control group will receive a placebo. At the conclusion of Phase II trials,
        we
        and the FDA will have a clear understanding of the short-term safety and
        effectiveness of our technologies and their optimal dosage levels.
  16
 ***Phase
        III***
  Phase
        III
        clinical trials will generally begin after the results of Phase II are
        evaluated. If a product is found to be effective in Phase II, it is then
        evaluated in Phase III clinical trials. The objective of Phase III is to
        develop
        information that will allow the drug to be marketed and used safely. Phase
        III
        trials consist of expanded multi-location testing for efficacy and safety
        to
        evaluate the overall benefit or risk index of the investigational drug in
        relation to the disease treated. Phase III trials will involve thousands
        of
        people with the objective of expanding on the clinical evidence.
  Some
        objectives of Phase III trials are to discover optimum dose rates and schedules,
        less common or even rare side effects, adverse reactions, and to generate
        information that will be incorporated into the drug's professional labeling
        and
        the FDA-approved guidelines to physicians and others about how to properly
        use
        the drug.
  **Pharmaceutical
        Development**
  The
        method of formulation and manufacture may affect the efficacy and safety
        of a
        drug. Therefore, information on manufacturing methods and standards and the
        stability of the drug substance and dosage form must be presented to the
        FDA and
        other regulatory authorities. This is to ensure that a product that may
        eventually be sold to the public has the same composition as that determined
        to
        be effective and safe in the clinical studies. Production methods and quality
        control procedures must be in place to ensure a relatively pure compound,
        essentially free of contamination and uniform with respect to all quality
        aspects.
  **New
        Drug Application**
  The
        fourth step that is necessary prior to marketing a new drug is the new drug
        application submission and approval. In this step, all the information generated
        by the preclinical and human clinical trials, as well as manufacturing
        information for the drug, will be submitted to the FDA and, if successful,
        the
        drug will be approved for marketing.
  **Post
        Marketing Surveys**
  The
        final
        step is the random surveillance or surveys of patients being treated with
        the
        drug to determine its long-term effects. This has no effect on the marketing
        of
        the drug unless highly toxic conditions are found.
  The
        required testing, data collection, analysis and compilation of an
        investigational new drug application and a new drug application are labor
        intensive and costly and may take a great deal of time. Tests may have to
        be
        redone or new tests performed in order to comply with FDA requirements.
        Therefore, we cannot estimate with any certainty the length or the costs
        of the
        approval process. We can offer no assurance that we will ever receive FDA
        approval of products derived from our licensed, patented technologies.
  **Competition**
  *Industry.* The
        pharmaceutical and biotechnology industries are characterized by intense
        competition, rapid product development and technological change. Competition
        is
        intense among manufacturers of dental therapeutics and prescription
        pharmaceuticals. Most of our potential competitors are large, well established
        pharmaceutical, chemical or healthcare companies with considerably greater
        financial, marketing, sales and technological resources than are available
        to
        us. Academic institutions, government agencies and other public and private
        research organizations may also conduct research, seek patent protection
        and
        establish collaborative arrangements for discovery, research and clinical
        development of technologies and products similar to ours. Many of our potential
        competitors have research and development capabilities that may allow them
        to
        develop new or improved products that may compete with products based on
        our
        technologies. Products developed from our technologies could be rendered
        obsolete or made uneconomical by the development of new products to treat
        the
        conditions to be treated by products developed from our technologies,
        technological advances affecting the cost of production, or marketing or
        pricing
        actions by our potential competitors. This could materially affect our business,
        financial condition and results of operations. We cannot assure you that
        we will
        be able to compete successfully.
  17
 *Personnel.* Competition
        among biotechnology and biopharmaceutical companies for qualified employees
        is
        intense, and there can be no assurance we will be able to attract and retain
        qualified individuals. If we fail to do so, this would have a material, adverse
        effect on the results of our operations.
  We
        do not
        maintain any life insurance on the lives of any of our officers and directors.
        We are highly dependent on the services of our directors and officers,
        particularly on those of Jeffrey Hillman. If one or all of our officers or
        directors die or otherwise become incapacitated, our operations could be
        interrupted or terminated.
  **Research
        and Development Costs**
  We
        have
        spent $2,097,223 and $1,990,979 on research and development of our technologies
        in 2005 and 2004, respectively.
  **Costs
        of Enforcing Our Licenses**
  We
        have
        licenses to sell products made using the replacement therapy and *mutacin* 1140
        technologies. The licenses were granted to us by the University of Florida
        Research Foundation, Inc., which owns the patents to these technologies.
        There
        is no assurance, however, that third parties will not infringe on our licenses
        or their patents. In order to protect our license rights and their patents,
        we
        or the University of Florida Research Foundation, Inc. may have to file lawsuits
        and obtain injunctions. If we do that, we will have to spend large sums of
        money
        for attorney fees in order to obtain the injunctions. Even if we do obtain
        the
        injunctions, there is no assurance that those infringing on our licenses
        or the
        University of Florida Research Foundation's patents will comply with the
        injunctions. Further, we may not have adequate funds available to prosecute
        actions to protect or to defend the licenses and patents, in which case those
        infringing on the licenses and patents could continue to do so in the
        future.
  **Our
        Employees**
  We
        are an
        early-stage biotechnology research and development company and currently
        have 10
        full-time employees, none of whom is represented by a labor union. We believe
        that our relationship with our employees is good.
  **Available
        Information**
  Our
        website is www.oragenics.com .
        On our
        website we make available at no cost our annual reports on Form 10-KSB,
        quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments
        to
        those reports filed or furnished as soon as reasonably practicable after
        we
        electronically file such material with, or furnish them to, the United States
        Securities and Exchange Commission (“SEC”). The information contained on our
        website is not a part of this annual report on Form 10-KSB.


18




**Item
        2.**  **Description of Property.**
  Our
        administrative office and laboratory facilities are located at 13700 Progress
        Boulevard, Alachua, Florida 32615. We began leasing this property pursuant
        to a
        five-year operating lease in November 2004. The facility is approximately
        5,300
        square feet of which approximately 60% is laboratory space and the remainder
        is
        office space and common areas. The twelve months rental for 2006 will be
        approximately $79,500, net of insurance, taxes and utilities that are paid
        by
        us. Lease payments escalate by 3% annually. We paid approximately $12,000
        and
        $469,000 in 2005 and 2004, respectively, for leasehold improvements to outfit
        this facility. Such improvements included equipping the building with sufficient
        air-handling and building laboratory stations. We also spent approximately
        $653,000 and $181,000 in 2005 and 2004, respectively, for laboratory equipment
        to outfit our facility. We believe our facilities are sufficient for our
        current
        needs and do not expect significant purchases of property in 2006.
 
 **Item
        3.**  **Legal Proceedings.**
 
 As
        of the
        date hereof, we are not a party to any material legal proceedings.
 
 **Item
        4.  Submission of Matters to a Vote of Security
        Holders.**
 
 None
        during the fourth quarter of the fiscal year covered by this
        report.
  19
 **PART
        II**
 
 **Item
        5. Market for Common Equity and Related Stockholder
        Matters.**
 
 Our
        common stock began trading on the American Stock Exchange under the symbol
        ONI
        on May 20, 2004. Previously it was traded on the TSX Venture Exchange under
        the
        symbol ORA.U. We voluntarily de-listed from the TSX Venture Exchange on October
        12, 2004. The following sets forth the high and low closing bid prices for
        the
        common stock on the TSX Venture Exchange from the beginning of 2004 through
        May
        19, 2004 and on the American Stock Exchange from May 20, 2004 through the
        end of
        2005. Such prices represent prices between dealers without adjustment for
        retail
        mark ups, mark downs, or commissions and may not necessarily represent actual
        transactions.
 
 2005
              
              2004High
              
              
              Low
              
              
              High
              
              
              LowCOMMON
                  STOCKFirst
                  quarter
              
              $
              4.00
              
              $
              1.59
              
              $
              4.35
              
              $
              3.20Second
                  quarter
              
              $
              2.40
              
              $
              1.59
              
              $
              4.40
              
              $
              2.80Third
                  quarter
              
              $
              1.85
              
              $
              1.15
              
              $
              3.75
              
              $
              2.00Fourth
                  quarter
              
              $
              1.00
              
              $
              0.40
              
              $
              4.45
              
              $
              2.65
 
 On
        March
        6, 2006, the closing bid price of the common stock, as reported by the American
        Stock Exchange, was $0.48. As of March 6, 2006, there were approximately
        31
        record holders of our common stock according to our transfer agent. The number
        of record holders does not reflect the number of beneficial owners of the
        common
        stock for whom shares are held by banks, brokerage firms and others.
 
 **Equity
        Compensation Plan Information**
 
 The
        Company has reserved an aggregate of 1,500,000 **** shares
        of
        the Company's common stock for issuance pursuant to its 2002 Stock Option
        and
        Incentive Plan. The per share exercise price of each stock option or similar
        award granted under these plans must be at least equal to the closing fair
        market value of the stock on the date of grant. The following table represents
        the number of shares issuable upon exercise and reserved for future issuance
        under these plans as of December 31, 2005.
 
 **Plan
                  Category**
              **Number
                  of Securities to be issued upon exercise of outstanding options,
                  warrants
                  and****rights**
              **Weighted-average
                  exercise price of outstanding options,****warrants
                  and rights**
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities****reflected
                  in column (a))********(a)**
              **(b)**
              **(c)****Equity
                  compensation**
                **plans
                  approved by**
                **security
                  holders**
              1,260,000
              $1.90
              240,000**Equity
                  compensation**
                **plans
                  not approved by**
                **security
                  holders**
              137,500
                  (1)
                25,000
                  (1)
                35,000
                  (2)
                3,032,500
                  (3)
                35,000
                  (3)
              2.75
                2.25
                1.59
                0.60
                0.40
              ---
                ---
                ---
                ---
                ---**Total**
              4,525,000
              $1.04
              240,000
  20
 ___________________
 (1)
              Represents
                  137,500 warrants with an exercise price of $2.75 per share issued
                  on
                  November 30, 2004, and exercisable for period of four years to
                  investors
                  and the placement agent and 25,000 warrants with an exercise price
                  of
                  $2.25 per share issued to the placement agent in connection with
                  the
                  private placement of 250,000 shares of common stock for gross proceeds
                  of
                  $687,500.
 (2)
              Represents
                  warrants issued to a consultant having provided investor relations
                  services for us during 2005. Such warrants are exercisable for
                  a period of
                  three years.
 (3)
              Represents
                  (i) 2,937,500 warrants with an exercise price of $0.60 per share
                  issued to
                  investors in connection with the private placement of 2,937,500
                  shares of
                  common stock for gross proceeds of $1,175,000, and (ii) warrants
                  issued to
                  Westrock Advisors, Inc. in connection with the termination of an
                  investment advisor agreement, 95,000 warrants with an exercise
                  price of
                  $0.60 per share and 35,000 warrants with an exercise price of $0.40
                  per
                  share. The warrants issued are exercisable for a two year
                  period.
 
 **Dividends**
 
 To
        date,
        we have neither declared nor paid any dividends on our common stock nor do
        we
        anticipate that such dividends will be paid in the foreseeable future. Rather,
        we intend to retain any earnings to finance the growth and development of
        our
        business. Any payment of cash dividends on our common stock in the future
        will
        be dependent, among other things, upon our earnings, financial condition,
        capital requirements and other factors which the board of directors deems
        relevant. In addition, restrictive covenants contained in any financing
        agreements entered into in the future may preclude payment of
        dividends.
 
 **Recent
        Sales of Unregistered Securities**
 
 On
        December 14, 2005, we issued a total of 2,937,500 shares of our common stock
        and
        warrants to purchase 2,937,500 shares of our common stock in a private placement
        to accredited investors. We received gross proceeds of $1,175,000 in the
        private
        placement and incurred estimated costs of approximately $70,000 resulting
        in net
        proceeds of approximately $1,105,000. We intend to use the net proceeds of
        the
        private placement, including any proceeds from exercise of the warrants,
        for
        working capital and general corporate purposes. The warrants representing
        shares
        of common stock are exercisable by the accredited investors at any time over
        a
        two-year period at an exercise price of $0.60 per share.
 
 In
        connection with the termination of an investment advisor agreement between
        us
        and Westrock Advisors, Inc. we issued warrants on similar terms as those
        issued
        in the private placement, representing the right to acquire 130,000 shares
        of
        common stock were issued to Westrock Advisors, Inc. Of the 130,000 shares
        covered by the warrants, 95,000 are at an exercise price of $0.60 per share
        and
        35,000 are at an exercise price of $0.40 per share.
 
 On
        August
        16, 2005, we entered into a consulting agreement for financial public relations
        services with Investor Awareness, Inc. The terms of that agreement provided
        that
        we pay $10,000 per month plus out-of-pocket expenses and that we issue a
        common
        stock purchase warrant for 35,000 shares that has an exercise price of $1.59
        for
        three years. In November 2005, we suspended the continuance of the consulting
        agreement. As of December 31, 2005, no warrants had been exercised.
 
 The
        issuance of the shares of common stock and warrants described above were
        made
        pursuant to exemptions from registration provided by Section 4(2) of the
        Securities Act of 1933 and Regulation D promulgated thereunder.
 
 **Use
        of Proceeds**
 
 On
        June
        24, 2003, we completed an initial public offering (IPO) of our common stock.
        The
        managing underwriter for our initial public offering was Haywood Securities
        Inc.
        The shares of common stock sold in the offering were registered under the
        Securities Act of 1933 on a registration statement (File No. 333-100568)
        that
        was declared effective by the Securities and Exchange Commission on June
        11,
        2003. Under the registration statement, we registered 2,400,000 units at
        a price
        of $1.25 per unit. All 2,400,000 units were sold in the offering that provided
        gross proceeds of $3,000,000 and net proceeds to us of $2,282,612 after
        deducting $717,388 in commissions paid to the underwriter and other expenses
        incurred in connection with the offering.
 
 21
 Each
        unit
        consisted of one share of common stock, one half of one non-transferable
        Series
        A Common Stock Purchase Warrant and one half of one non-transferable Series
        B
        Common Stock Purchase Warrant. One whole Series A warrant was exercisable
        on or
        before December 24, 2003 to acquire one share of common stock at a price
        of
        $2.00 per share. All Series A warrants were exercised on or prior to December
        24, 2003 providing proceeds of $2,400,000. One whole Series B warrant was
        exercisable on or before March 24, 2004 to acquire one share of common stock
        at
        a price of $3.00 per share. A total of 995,400 Series B warrants were exercised
        on or before March 24, 2004 providing proceeds of $2,986,200 and the remaining
        204,600 Series B warrants expired unexercised on March 24, 2004. In addition
        to
        receiving a cash commission for each share sold, the underwriting agent for
        the
        IPO received 100,000 shares of our common stock and warrants to purchase
        500,000
        shares of our common stock at $1.25 per share until June 24, 2005. All
        underwriter warrants were exercised providing additional proceeds to us of
        $625,000. The costs associated with maintaining this registration statement
        totaling $62,421 through December 31, 2005 are netted against proceeds and
        recorded as a component of stockholders’ equity.
 
 Through
        December 31, 2005 we have applied all of the net proceeds of $8,231,391 we
        received from our initial public offering as follows:
 
 Payment
                  of notes payable and accrued interest thereon to directors and
                  officers:Brian
                  McAlister (Cornet Capital Corp.)
              
              $
              179,757Robert
                  Zahradnik
              
              
              88,477Jeffrey
                  Hillman
              
              
              15,429Deferred
                  compensation payable to officers
              
              
              189,302Patent
                  expenses paid to University of Florida
              
              
              100,000Regulatory
                  consulting fees
              
              
              743,018Mutacin
                  1140 production research
              
              
              758,878Pre-clinical
                  research
              
              
              2,554,652General
                  and administration costs
              
              
              2,741,877Repayment
                  of indebtedness incurred to purchase computer and laboratory
                  equipment
              
              
              860,001$
              8,231,391
 
 Other
        than normal and recurring compensation (included in general administration
        costs
        above), the deferred compensation payments and payments on notes payable,
        there
        were no other payments, directly or indirectly, to any of our officers or
        directors or any of their associates, or to any persons owning ten percent
        or
        more of our outstanding common stock from the proceeds of this offering.
        We
        believe we have used the net proceeds from the offering consistent with our
        business strategy.
 
 22
 **Item
        6. Management’s Discussion and Analysis or Plan of
        Operation.**
 
 The
        following discussion and analysis should be read in conjunction with the
        Financial Statements and Notes thereto included elsewhere in this Form 10-KSB.
        This discussion contains certain forward-looking statements that involve
        risks
        and uncertainties. Our actual results and the timing of certain events could
        differ materially from those discussed in these forward-looking statements
        as a
        result of certain factors, including, but not limited to, those set forth
        herein
        and elsewhere in this Form 10-KSB.
 
 **Overview**
 
 We
        are an
        emerging, early-stage biotechnology company aimed at adding value to novel
        technologies and products sourced from innovative research at the University
        of
        Florida and other academic centers. Our strategy is to in-license and to
        develop
        products through human proof-of-concept studies (Phase I and II clinical
        trials
        of the U.S. Food and Drug Administration’s regulatory process) prior to
        partnering with major pharmaceutical, biotechnology or healthcare product
        firms
        for advanced clinical development and commercialization. Since inception,
        we
        have funded a significant portion of our operations from the public and private
        sales of our securities. We have generated no significant revenues from
        operations during the last two years. All of our revenues have been from
        a
        sponsored research agreement and SBIR grants which have expired. We have
        not
        generated revenues from sales of products.
 
 We
        are in
        need of immediate substantial additional funds in order to continue the
        development of our technologies. We continue to seek additional funding
        and evaluate various strategic alternatives that may be available to
        us.  We currently do not have any commitments for funding sufficient to
        fully implement our plan of operation or other strategic options and there
        can be no assurances that we will be able to obtain sufficient funding or
        implement any strategic options in the future.  We
        have
        curtailed our operations, deferred payments to our chief executive officer
        and
        president, chief scientific officer, former chief executive officer and
        president and our board of directors, reduced compensation by 35% to certain
        other executive officers and laid-off approximately one-third of our 16
        employees such that further development of our technologies has been reduced
        to
        a minimum. Our remaining capital resources are expected to be utilized to
        sustain minimal operations while we continue to explore opportunities to
        raise
        additional capital. After the repayment of $495,799 of the outstanding balance
        of our existing loan obligation in the fourth quarter of 2005, the payment
        of
        operating costs and the receipt of funds from our recent private placement,
        our
        remaining available working capital at the end of 2005 was $675,006. Absent
        continued future funding, this remaining capital, together with $600,000
        in
        proceeds we received from another private placement which closed in March
        2006,
        is not sufficient to enable us to continue to operate through the second
        quarter
        of 2006, at which time we will likely need to cease all operations until
        we are
        able to raise additional capital. There can be no assurance that such capital
        will be available to us. We have a contractual obligation to pay a minimum
        royalty of $25,000 per quarter and spend or cause to be spent an aggregate
        of
        $1,000,000 per annum toward research, development and regulatory prosecution,
        in
        order to maintain our license with the University of Florida Research
        Foundation, Inc. for our replacement therapy and Mutacin 1140 technologies.
        If
        we are unable to make these payments, our license could be terminated which
        will
        substantially diminish the value of our company.
 
 We
        hope
        to be in a position to continue to develop several products, each of which
        we
        believe addresses potentially large market opportunities:
 
 **Replacement
        therapy** is a
        single, painless one-time topical treatment that has the potential to offer
        lifelong protection against dental caries (tooth decay). The therapy is based
        on
        genetically altering the bacterium, *Streptococcus
        mutans (S. mutans),* which
        is
        the primary etiologic agent in tooth decay. Present in the normal flora of
        the
        mouth, *Streptococcus
        mutans* converts
        dietary sugar to lactic acid; the lactic acid, in turn, causes the erosion
        of
        tooth enamel that results in the destruction of the tooth surface and eventually
        the entire tooth. Replacement therapy permanently replaces resident
        acid-producing *Streptococcus
        mutans* with
        a
        patented, genetically engineered strain of *Streptococcus
        mutans* that
        does
        not produce lactic acid. Applied topically to tooth surfaces with a swab,
        the
        therapy requires only one application. We have begun Phase I clinical trials
        and
        expect to partner with a major healthcare products or pharmaceutical company
        prior to initiating Phase III clinical trials. To facilitate further patient
        recruitment in our Phase I clinical trial, we opened an additional clinical
        site
        in June 2005, however, we have had very limited patient enrollment through
        December 31, 2005 due to the rigorous requirements for enrollment imposed
        upon
        us by the FDA. In January 2006, we concluded this study and discussed with
        the
        FDA our problems with patient enrollment and how we could modify our protocol
        to
        allow us to move forward in our clinical trials. A formal re-submission of
        an
        amended protocol is expected to be filed with the FDA by the end of February
        2006 and we anticipate instituting a second Phase I clinical study by the
        end of
        the second quarter of 2006. We remain committed to complete the human safety
        study of replacement therapy to the satisfaction of the FDA and we expect
        the
        cost in 2006 will be approximately $350,000.
  23
 **Mutacin
        1140** is a
        highly potent bactericidal peptide that is produced by our strain of *Streptococcus
        mutans* .
        Our
        proprietary mutacin was discovered by our researchers during the course of
        developing replacement therapy and is a novel antibiotic that has broad-spectrum
        antimicrobial activity against essentially all Gram-positive bacteria including
        vancomycin-resistant *Staphylococcus
        aureus* .
        The
        antibiotic currently is in preclinical stages of development. During the
        second
        quarter of 2005, we completed development of a proprietary manufacturing
        process
        for mutacin 1140, which overcame a previous hurdle to that molecule’s
        development. We are now able to manufacture in sufficient quantities to allow
        us
        to conduct preclinical studies needed to enable the filing of an Investigational
        New Drug (IND) application. If we are able to secure adequate funding, we
        plan
        to continue to perform in vitro antimicrobial susceptibility and toxicity
        testing during the first half of 2006 before performing more detailed animal
        safety and efficacy studies using mutacin 1140. For example, in March and
        April
        2006 we plan to conduct two preclinical studies with MU 1140TM, utilizing
        independent testing labs, that will provide information on Tier 2 spectrum
        of
        activity against clinically important Gram-positive bacteria and the
        effectiveness in a drug resistant *Staphylococcus
        aureus* infected
        animal model system. Upon adequate funding and successful completion of this
        testing and the animal studies we would then be positioned to file an IND
        for
        mutacin 1140.
  **Probiotics** are live
        microorganisms that confer health benefits to the host when administered
        in
        adequate amounts; the use of yogurt containing live *Lactobacillus* cultures
        is an example of a probiotic application. We have identified three natural
        strains of bacteria that provide significant protection against the causative
        organisms of periodontal disease and dental caries. Because probiotic treatments
        may be marketed as a cosmetic or as "health supplements" in certain geographic
        areas without the need for extensive regulatory oversight, we believe that
        with
        adequate funding, we may achieve commercialization of our probiotic product
        in
        these markets by late 2006. We are continuing our efforts to seek partners
        in
        Europe and Asia for market opportunities for our oral probiotic technology.
        European and Asian companies have signaled their intent to establish a licensing
        agreement with us, while another potential partner is completing a laboratory
        evaluation of the product before moving forward with possible licensing
        discussions. We expect to initiate a human trial within the next two months
        to
        support product claims for Probiora 3TM.  While there can be no assurances,
        this study should be completed by early in the third quarter of 2006. If
        successfully developed, our oral rinse product will be one of the first
        probiotics to be marketed for the maintenance of oral health.
  **IVIAT
        and CMAT** are
        technologies we licensed from iviGene Corporation. Two of our directors own
        a
        total of 19.1% interest in iviGene Corporation. These technologies enable
        the
        simple, fast identification of novel and potentially important gene targets
        associated with the natural onset and progression of infections, cancers
        and
        other diseases in humans and other living organisms, including plants. These
        licensed technologies offer the potential to generate and develop a number
        of
        product candidates for future out-licensing to corporate partners, particularly
        in the area of cancer and tuberculosis, as well as agricultural and other
        non-human uses. **** We
        are
        required to pay all patent-related expenses and commit two full-time staff
        or
        spend at least $200,000 toward product development annually to maintain our
        license. In 2005 we did not meet the requirements of committing two full-time
        staff or spending at least $200,000, however, we obtained a waiver of these
        provisions from iviGene Corporation, thus maintaining our license arrangement
        with them.  As
        a
        result of our current financial condition we currently do not have the resources
        to pursue our IVIAT and CMAT technologies at this time. However, we filed
        for
        funding under SBIR grants with the National Institutes of Health and, if
        such
        funding becomes available, we will pursue additional research and expect
        that we
        will maintain compliance with our license agreement requirements with iviGene
        Corporation. If additional funding is not available to us, we will need to
        obtain another waiver or renegotiate the terms of our license with iviGene
        Corporation in order to maintain our license.
  24
 
 **Business
        Objectives and Milestones**
  The
        specific goal of our business is to successfully develop, clinically test
        and
        obtain FDA approval for sales of products based on our licensed, patented
        technologies. Our strategy is to develop novel technologies through human
        proof-of-concept studies (Phase II clinical trials) prior to partnering with
        major pharmaceutical, biotechnology or health care product firms for advanced
        clinical development and commercialization. Upon successful completion of
        proof-of-concept studies, we intend to consider sublicensing our licensed,
        patented technologies to one or more strategic partners that would be
        responsible for advanced clinical development, completing the U.S. Food and
        Drug
        Administration’s approval process, and manufacturing and marketing our products.
        In order to accomplish these objectives, we must obtain additional capital
        and
        take the following actions:
  **Replacement
        Therapy**
  1.
              Initiate
                  second Phase I safety trial.
  **Mutacin 1140**
  1.
              Complete
                  preclinical studies, including animal toxicity and efficacy, required
                  for
                  an investigational new drug application submission.2.
              Submit
                  an investigational new drug application to the
                  FDA.
  **Probiotic
        Technology**
  1.
              Develop
                  appropriate manufacturing and packaging systems.2.
              Complete
                  one human study.
  The
        above
        actions, individually and in the aggregate, are expected to be costly to
        undertake and complete and will require additional capital over and above
        what
        we currently have available to us. Our current available capital limits our
        ability to fully develop our technologies. We expect to allocate our limited
        capital resources to the development of our technologies while we continue
        to
        explore additional capital raising opportunities. There can be no assurances
        that such additional capital will be available to us. The time period for
        the
        development of our technologies could change depending on the progress of
        our
        ability to negotiate a partnering arrangement, as well as our efforts to
        raise
        additional capital.
  25
 **Critical
        Accounting Policies**
  Our
        discussion and analysis of our financial condition and results of operations
        are
        based upon our financial statements, which have been prepared in accordance
        with
        accounting principles generally accepted in the United States. The
        preparation of financial statements in accordance with Accounting Principles
        Generally Accepted in the United States requires us to make estimates and
        assumptions that affect reported amounts and related disclosures. We consider
        an
        accounting estimate to be critical if it requires assumptions to be made
        that
        were uncertain at the time the estimate was made; and changes in the estimate
        or
        different estimates that could have been made could have a material impact
        on
        our results of operations or financial condition. Our financial statements
        do
        not include any significant estimates that would have a material impact on
        our
        results of operations or financial condition.
 
 **New
        Accounting Pronouncements**
 
 In
        December 2004, the Financial Accounting Standards Board (FASB) issued FASB
        Statement No. 123 (revised 2004), *Share-Based
        Payment (“* Statement
        123(R)”) *,* a
        revision of FASB Statement No. 123, *Accounting
        for Stock-Based Compensation* .
        Statement 123(R) supersedes APB Opinion No. 25, *Accounting
        for Stock Issued to Employees,* and
        amends FASB Statement No. 95, *Statement
        of Cash Flows.* Statement 123(R), which we expect to adopt in the first quarter of 2006,
        is
        generally similar to Statement 123, however, it will require all share-based
        payments to employees, including grants of employee stock options, to be
        recognized in the financial statements based on their fair values. Thus,
        pro
        forma disclosure will no longer be an alternative to financial statement
        recognition. We do not believe the adoption of Statement 123(R) will have
        a
        material impact on our results of operations or financial position.
  26




**Results
        of Operations**
  *Operating
        Results Summary*
 **Three
                    Months Ended December 31****2005**
                
                
                **2004**Revenue
                
                **$**
                **-**
                
                $
                33,333Operating
                    expenses:Research
                    and development
                
                
                **452,853**
                
                
                742,557General
                    and administration
                
                
                **307,153**
                
                
                565,181Total
                    operating expenses
                
                
                **760,006**
                
                
                1,307,738Loss
                    from operations
                
                
                **(760,006**
                **)**
                
                (1,274,405
                )Other
                    income (expense):Interest
                    income
                
                
                **5,221**
                
                
                15,831Interest
                    expense
                
                
                **(6,610**
                **)**
                
                (442
                )Total
                    other income, net
                
                
                **(1,389**
                **)**
                
                15,389Loss
                    before income taxes
                
                
                **(761,395**
                **)**
                
                (1,259,016
                )Income
                    tax benefit
                
                
                **-**
                
                
                -Net
                    loss
                
                **$**
                **(761,395**
                **)**
                $
                (1,259,016
                )
  **Years
                      ended December 31****2005**
                  
                  
                  **2004**Revenue
                  
                  **$**
                  **-**
                  
                  $
                  196,210Operating
                      expenses:Research
                      and development
                  
                  
                  **2,097,223**
                  
                  
                  1,990,979General
                      and administration
                  
                  
                  **1,166,854**
                  
                  
                  1,329,983Total
                      operating expenses
                  
                  
                  **3,264,077**
                  
                  
                  3,320,962Loss
                      from operations
                  
                  
                  **(3,264,077**
                  **)**
                  
                  (3,124,752
                  )Other
                      income (expense):Interest
                      income
                  
                  
                  **41,874**
                  
                  
                  47,306Interest
                      expense
                  
                  
                  **(29,175**
                  **)**
                  
                  (442
                  )Total
                      other income (expense), net
                  
                  
                  **12,699**
                  
                  
                  46,864Loss
                      before income taxes
                  
                  
                  **(3,251,378**
                  **)**
                  
                  (3,077,888
                  )Income
                      tax benefit
                  
                  
                  **-**
                  
                  
                  -Net
                      loss
                  
                  **$**
                  **(3,251,378**
                  **)**
                  $
                  (3,077,888
                  )
  27
 ***For
        the Quarters Ended December 31, 2005 and 2004***
  We
        had no
        revenues in the three months ended December 31, 2005 as compared to $33,333
        in
        the quarter ended December 31, 2004 that related to a portion of the revenues
        earned on an SBIR grant. Our operating expenses decreased 42% to $760,006
        in the
        three months ended December 31, 2005 from $1,307,738 in same period in 2004.
        Research and development expenses decreased 39% to $452,853 in the three
        months
        ended December 31, 2005 from $742,557 in the same period in 2004, reflecting
        the
        lay-off of five R&D employees in October 2005 amounting to approximately
        $150,000, the reduction in use of outside consultants amounting to approximately
        $122,000, and the reduction of stock option compensation expense of
        approximately $95,000, offset by increases in depreciation totaling $45,000
        associated with new equipment purchases in early 2005, minimum royalty payment
        to the University of Florida amounting to $25,000 and increased utility costs
        of
        approximately $9,000. General and administration expenses decreased 46% to
        $307,153 in the three months ended December 31, 2005 from $565,181 in same
        period in 2004. This lower amount in 2005 reflects fewer administrative
        personnel in 2005 amounting to approximately $29,000, the reduction of stock
        option compensation expense of approximately $152,000, the reduction in use
        of
        outside consultants amounting to approximately $17,000, the reduction in
        travel
        and entertainment expenses of approximately $19,000, the reduction in the
        premium cost of Directors’ and Officers’ Liability Insurance amounting to
        approximately $9,000 and higher than normal supply costs in 2004 to outfit
        our
        new building amounting to approximately $34,000.
  Interest
        income decreased 67% to $5,221 in the three months ended December 31, 2005
        from
        $15,831 in the same period in 2004 as a result of lower cash balances in
        2005.
        Interest expense increased to $6,610 in the three months ended December 31,
        2005
        from $442 during the same period in 2004. This increase of $6,168 reflects
        the
        interest paid on our equipment loan in 2005 that was not active in 2004 and
        was
        retired in December 2005.
  Our
        net
        loss decreased 40% to $761,395 during the three months ended December 31,
        2005
        from $1,259,016 in the same period in 2004. The decrease in our net loss
        was
        principally caused by the lay-off of personnel, the reduction in stock option
        compensation expense and the reduced use of outside consultants.
  ***For
        the Years Ended December 31, 2005 and 2004***
  We
        had no
        revenues in the year ended December 31, 2005 as compared to $196,210 in 2004.
        This is a result of having two Small Business Innovation Research Grants
        for our
        Mutacin 1140 and IVIAT technologies in 2004. Our operating expenses decreased
        2%
        to $3,264,077 for the year ended December 31, 2005 from $3,320,962 in 2004.
        Research and development expenses increased 5% to $2,097,223 in 2005 from
        $1,990,979 in 2004, reflecting higher depreciation costs of approximately
        $203,000 associated with new equipment purchases in early 2005, higher facility
        costs of approximately $70,000 associated with the rent and utilities of
        the
        building we began renting in late 2004, the start of paying minimum royalty
        fees
        to the University of Florida amounting to $100,000, higher personnel costs
        for
        the entire year of approximately $46,000 and the payment of product liability
        insurance premiums of approximately $19,000 associated with our clinical
        trials,
        offset by the reduction of stock option compensation expense of approximately
        $208,000, higher recruiting and relocation costs in 2004 of approximately
        $77,000, higher outside consulting costs in 2004 of approximately $44,000
        mostly
        caused by the manufacture of clinical trial materials and higher travel expenses
        in 2004 of approximately $11,000. General and administration expenses decreased
        12% to $1,166,854 in 2005 from $1,329,983 in 2004, reflecting the reduction
        of
        stock option compensation expense of approximately $333,000, fees of
        approximately $64,000 paid to the American Stock Exchange in 2004 for the
        initial listing of our shares, the reduction in the use of outside consultants
        amounting to approximately $49,000, the reduction of travel and entertainment
        expenses in 2005 approximating $47,000, higher than normal supply costs in
        2004
        to outfit the our new building amounting to approximately $34,000 and staff
        lay-offs amounting to approximately $9,000, offset by fees associated with
        attempted financings of approximately $108,000, increased legal and accounting
        fees approximating $114,000, the severance charges for our former CEO
        approximating $90,000, costs associated with hiring a new CEO totaling
        approximately $28,000, higher depreciation costs of approximately $16,000
        in
        2005 and higher facility costs in 2005 of approximately $14,000.
  Interest
        income decreased 11% to $41,874 in the year ended December 31, 2005 from
        $47,306
        in 2004, which was a result of higher average cash balances maintained in
        2004
        due to the exercise of Series A and Series B common stock warrants in December
        2003 and March 2004, respectively. Interest expense increased to $29,175
        in 2005
        from $442 in 2004. This increase of $28,733 reflects the payments on our
        equipment loan in 2005 that was not active in 2004 and was retired in December
        2005.
  28
 Our
        net
        loss increased 6% to $3,251,378 in the year ended December 31, 2005 from
        $3,077,888 in 2004. The increase in our net loss was principally caused by
        having no revenues in 2005, incurring fees associated with attempted financings,
        increased fees paid for professional services, increased depreciation charges
        and minimum royalty fees paid to the University of Florida, offset by the
        reduction of stock option compensation expenses, and the significant cut-backs
        in the fourth quarter of 2005 for personnel, use of outside consultants and
        travel costs.
  **Liquidity
        and Capital Resources**
  Our
        operating activities used cash of $3,437,118 for the year ended
        December 31, 2005 and $2,745,243 for the year ended December 31, 2004.
        Our working capital was $675,006 as of December 31, 2005. Cash used by
        operations in the year ended December 31, 2005 resulted primarily from
        operating losses from operations of $3,251,378.
  Our
        investing activities used cash of $663,268 for the year ended December 31,
        2005 for the acquisition of laboratory equipment.
  Our
        financing activities provided $1,372,195 in cash for the year ended
        December 31, 2005, which came from four sources. In the first quarter of
        2005, we entered into a loan agreement with a bank that provided funds of
        approximately $615,000, however, the entire loan principal was repaid before
        year end. Common stock warrants issued in connection with our IPO in June
        2003
        were exercised during the first half of 2005 providing funds of approximately
        $345,000. In the third quarter of 2005, we issued common stock under our
        agreement with Fusion Capital that provided funds of $35,000. In the fourth
        quarter of 2005, we issued common stock and warrants in a private placement
        that
        provided gross proceeds of $1,175,000. Additional details of these financings
        are provided below:
 
 **Loan
        Agreement** - On
        February 24, 2005, we entered into a Business Loan Agreement with a bank
        that
        funded $615,192 of laboratory equipment purchases. We made monthly payments
        of
        interest and principal, having also made an accelerated payment of $200,000
        in
        October 2005 and a final payment of approximately $296,000 in December 2005.
        Thus, the entire loan balance had been repaid at December 31, 2005. The loan
        had
        a term of 37 months with the first month’s payment of interest only and the
        remaining monthly payments of principal and interest of approximately $19,000
        per month. Interest was calculated at the prime rate as published in the
        Wall
        Street Journal (8.00% in December, 2005) plus 1.00%. The loan was collateralized
        by the equipment purchased, as well as all equipment owned by us at the time
        of
        the agreement. The original loan terms required us to maintain working capital
        and tangible net worth of at least $750,000 and not allow debt to be greater
        than 50% of stockholders’ equity. Effective September 30, 2005, the bank amended
        the working capital covenant to provide that working capital not be lower
        than
        $350,000. The bank also amended the debt-to-equity covenant whereby debt
        could
        not be greater than 56% of stockholders’ equity. Thus, we were in compliance
        with the loan covenants throughout the term of the loan. We incurred interest
        of
        $29,176 during the year.
 
 **Exercise
        of Warrants** - On
        June 24, 2003, we completed the filing of an IPO whereby the underwriting
        agent
        received 100,000 shares of our common stock and warrants to purchase 500,000
        shares of our common stock at $1.25 per share that were exercisable until
        June
        24, 2005. All of these warrants have been exercised. During 2005, the remaining
        outstanding warrants to acquire 276,180 shares of common stock were exercised
        prior to their expiration and 276,180 shares of common stock were issued
        providing additional proceeds to the Company of $345,225.
 
 **Fusion
        Capital** - On May
        23, 2005, we entered into a Common Stock Purchase Agreement (“Purchase
        Agreement”) with Fusion Capital. Pursuant to the terms of the Purchase
        Agreement, Fusion Capital has agreed to purchase from us up to $9,000,000
        of our
        common stock over a 30 month period. On each trading day during the term
        of the
        Purchase Agreement, we have the right to sell to Fusion Capital $15,000 of
        our
        common stock at a price based upon the market price of the common stock on
        the
        date of each sale without any fixed discount to the market price. At our
        option,
        Fusion Capital can be required to purchase fewer or greater amounts of common
        stock each month. Fusion Capital does not have the right or obligation to
        purchase shares of our common stock from us in the event that the price of
        our
        common stock is less than $0.75. Subject to the foregoing, we have the right
        to
        control the timing and the number of shares sold to Fusion Capital. This
        offering was made pursuant to an exemption from registration provided by
        Section
        4(2) of the Securities Act of 1933, as amended. Pursuant to the terms of
        a
        registration rights agreement we entered into with Fusion Capital in connection
        with the Purchase Agreement, dated May 23, 2005, we agreed to file a
        registration statement with the Securities and Exchange Commission covering
        the
        resale of the shares which may be purchased by Fusion Capital under the Purchase
        Agreement. The registration statement was declared effective on June 23,
        2005
        and the American Stock Exchange approved the listing of the shares on July
        7,
        2005. We incurred costs of approximately $150,000 for legal, accounting,
        stock
        exchange, and regulatory fees in connection with this financing arrangement.
        During the year, we sold 22,092 of our shares to Fusion Capital pursuant
        to the
        Purchase Agreement for total proceeds of $35,000. Because our stock price
        has
        traded below the $0.75 threshold since November 23, 2006, Fusion Capital
        is not
        obligated to purchase any shares of our common stock from us.
 
 29
 **Private
        Placement, December 2005** - On
        December 14, 2005, we issued a total of 2,937,500 shares of our common stock
        and
        warrants to purchase 2,937,500 shares of our common stock in a private placement
        to accredited investors. The issuance of the shares of common stock and warrants
        was made pursuant to the exemptions from registration provided by Section
        4(2)
        of the Securities Act and Regulation D promulgated thereunder. We received
        gross
        proceeds of $1,175,000 in the private placement and incurred estimated costs
        of
        approximately $70,000 resulting in net proceeds of approximately $1,105,000.
        We
        intend to use the net proceeds of the private placement, including any proceeds
        we may receive from exercise of the warrants, for working capital and general
        corporate purposes. The warrants representing shares of common stock are
        exercisable by the accredited investors at any time over a two-year period
        at an
        exercise price of $0.60 per share. Pursuant to the terms of a registration
        rights agreement, dated December 14, 2005, the Company agreed to file a
        registration statement with the Securities and Exchange Commission covering
        the
        resale of the acquired shares and the shares able to be acquired upon exercise
        of the warrants. The Company filed a registration statement on January 13,
        2006
        and it was declared effective on January 27, 2006.
 
 **Private
        Placement, March 2006**  **-** On
        March
        6, 2006, we issued a total of 1,500,000 shares of our common stock and warrants
        to purchase 1,500,000 shares of our common stock in a private placement to
        accredited investors. The issuance of the shares of common stock and warrants
        was made pursuant to the exemptions from registration provided by Section
        4(2)
        of the Securities Act and Regulation D promulgated thereunder. We received
        gross
        proceeds of $600,000 in the private placement and incurred estimated costs
        of
        approximately $75,000 resulting in net proceeds of approximately $525,000.
        We
        intend to use the net proceeds of the private placement, including any proceeds
        we may receive from exercise of the warrants, for working capital and general
        corporate purposes. There was no underwriter or placement agent associated
        with
        this transaction. Each warrant is exercisable on or before January 6, 2008
        to
        acquire one share of common stock at a price of $0.60 per share. Pursuant
        to the
        terms of a registration rights agreement, dated January 6, 2006, the Company
        agreed to file a registration statement with the Securities and Exchange
        Commission covering the resale of the acquired shares in the private placement
        and the shares able to be acquired upon exercise of the warrants within 45
        of
        days of the closing of the transaction.
  Our
        business is based on commercializing entirely new and unique technologies,
        and
        our current business plan contains a variety of assumptions and expectations
        that are subject to uncertainty, including assumptions and expectations about
        manufacturing capabilities, clinical testing cost and pricing, continuing
        technological improvements, strategic licensing relationships and other relevant
        matters. These assumptions take into account recent financings, as well as
        expected but currently unidentified additional financings. We have experienced
        losses from operations during the last two fiscal years and have an accumulated
        deficit of $8,723,362 as of December 31, 2005. Cash used in operations for
        2005
        and 2004 was $3,434,382 and $2,745,243, respectively. At December 31, 2005,
        our
        principal source of liquidity was $937,789 of cash and cash equivalents.
        These
        operating results occurred while developing and attempting to commercialize
        and
        manufacture products from entirely new and unique technologies. Our business
        plan requires significant spending related primarily to clinical testing
        expenditures, as well as conducting basic research. These factors place a
        significant strain on our limited financial resources and adversely affect
        our
        ability to continue as a going concern. Our ultimate success depends on our
        ability to continue to raise capital for our operations.
  30
 Because
        of our limited available financial resources, we took steps during the second
        half of 2005 to reduce our expenditure of cash. We curtailed hiring, froze
        salaries, reduced our matching contributions for the employee retirement
        plan,
        appreciably reduced travel and other operating costs, decreased the use of
        outside consultants and delayed the production of additional supplies of
        our
        replacement therapy technology to be used in later clinical studies. These
        efforts resulted in reducing operating expenses to below $200,000 per month.
        As
        of December 31, 2005, we also deferred, $56,500 in compensation to certain
        officers and board members, consisting of $26,250 each in payments to Jeffrey
        Hillman, our Chief Scientific Officer, and Robert Zahradnik, our President
&
Chief Executive Officer, and $3,500 in Audit Committee meeting fees to
        directors. The officer compensation deferrals and meeting fee
        deferral amounts were agreed to be deferred until such time as we
        obtain sufficient funding that payment can be made.  There is no time
        period on the payment of the deferred amounts concerning our officers
        and directors.  As of December 31, 2005, we also orally agreed
        with our former chief executive officer to defer certain payments due pursuant
        to our separation agreement, which amounted to a deferral of $40,500 of
        such payments due to our former chief executive officer.  As part
        of the oral agreement with our former chief executive officer, we are
        currently paying $7,500 per month which is one half of the monthly amount
        due of $15,000 under the separation agreement.  These payments were
        originally to be concluded in July of 2006, but due to the deferred amount
        and the current payment schedule these payments are expected to continue
        beyond that time period until paid.  The deferrals of payments to our
        former chief executive officer, current officers and directors, do not reduce
        our expenses, but serve to preserve our limited cash resources to the extent
        necessary to maintain our operations.
  Our
        capital requirements for 2006 will depend on numerous factors, including
        the
        success of our research and development, the resources we devote to develop
        and
        support our technologies and the success of pursuing strategic licensing
        and
        funded product development relationships with external partners. Subject
        to our
        ability to raise additional capital, we expect to need to incur substantial
        expenditures to further develop each of our technologies including continued
        increases in costs related to research, preclinical testing and clinical
        studies, as well as significant costs associated with being a public company.
        Our working capital at December 31, 2005 is not adequate to meet our business
        objectives as presently structured. We will require substantial funds to
        conduct
        research and development and preclinical and Phase I clinical testing of
        our
        licensed, patented technologies and to develop sublicensing relationships
        for
        the Phase II and III clinical testing and manufacture and marketing of any
        products that are approved for commercial sale. We recognize that we must
        generate additional capital resources to enable us to continue as a going
        concern. Our plans include seeking financing, alliances or other partnership
        agreements with entities interested in our technologies, or other business
        transactions that would generate sufficient resources to assure continuation
        of
        our operations and research and development programs.
  Our
        future success depends on our ability to continue to raise capital and
        ultimately generate revenue and attain profitability. We cannot be certain
        that
        additional capital, whether through selling additional debt or equity securities
        or obtaining a line of credit or other loan, will be available to us or,
        if
        available, will be on terms acceptable to us. If we issue additional securities
        to raise funds, these securities may have rights, preferences, or privileges
        senior to those of our common stock, and our current stockholders may experience
        substantial dilution.
 
 To
        date,
        we have not obtained financing sufficient to fully support our plans going
        forward. Until such time as additional financing for our operations is obtained,
        we expect to continue to need to curtail our spending. While we continue
        to
        focus on completing the Phase I clinical trial for our replacement therapy
        technology, conducting animal studies for our mutacin 1140 antibiotic technology
        and developing strategic partners for our probiotic technology, we do not
        have
        sufficient capital resources to complete these projects. With continued limits
        on spending, and considering the recent private placement financings, we
        believe
        we will have cash resources to continue minimum operations through the end
        of
        the second quarter of 2006. Thereafter, without sufficient capital to fund
        our
        operations, we will be unable to continue as a going concern and will have
        to
        cease operations.
 
 31
 
 **RISK
        FACTORS**
  *You
        should carefully consider the risks described below before making an investment
        decision in our securities. These risk factors are effective as of the date
        of
        this Form 10-KSB* ****** *and
        shall be deemed to be modified or superseded to the extent that a statement
        contained in our future filings incorporated herein by reference modifies
        or
        replaces such statement. All of these risks may impair our business operations.
        The forward-looking statements in this Form 10-KSB* ****** *and
        in the documents incorporated herein by reference involve risks and
        uncertainties and actual results may differ materially from the results we
        discuss in the forward-looking statements. If any of the following risks
        actually occur, our business, financial condition or results of operations
        could
        be materially adversely affected. In that case, the trading price of our
        stock
        could decline, and you may lose all or part of your
        investment.*
 
 **Risks
        Associated with Our Company**
 
 **We
        will require additional financing to sustain our operations and without it
        we
        will not be able to continue operations.**
 
 We
        have
        incurred annual operating losses of $3,251,378, $3,077,888 and $1,672,954,
        respectively, during the past three fiscal years of operation. As a result,
        at
        December 31, 2005 we had an accumulated deficit of $8,723,362. We have generated
        minimal revenues to date and our revenues have not been sufficient to sustain
        our operations. Although we recently completed two financings totaling
        $1,775,000 for the private placement of equity securities, we do not currently
        expect to have sufficient capital to sustain our operations beyond the second
        quarter of 2006. If we are not able to raise additional capital, among other
        things:
 
 ·
              We
                  will need to cease operations and be unable to pursue further development
                  of our technologies;
 ·
              We
                  will have to lay-off our personnel;
 ·
              We
                  could be unable to continue to make public
                  filings;
 ·
              We
                  will be delisted from the American Stock Exchange;
                  and
 ·
              Our
                  licenses for our replacement technology and Mutacin 1140 technology
                  could
                  be terminated which would significantly harm our
                  business.
 
 At
        December 31, 2005, we had working capital of approximately $675,000. The
        independent registered public accounting firm’s report for the year ended
        December 31, 2005, includes an explanatory paragraph to their audit opinion
        stating that our recurring losses from operations and limited working capital
        raise substantial doubt about our ability to continue as a going concern.
        We
        have an operating cash flow deficit of $3,434,382 for the year ended December
        31, 2005, and have sustained operating cash flow deficits of $2,745,243 in
        2004
        and $1,218,910 in 2003. Our ability to obtain additional funding will determine
        our ability to continue as a going concern. Our financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.
 
 ***We
        have a limited operating history with significant losses and expect losses
        to
        continue for the foreseeable future.***
 
 We
        have
        yet to establish any history of profitable operations. Our limited revenues
        to
        date have not been related to the commercialization or licensing of our products
        and have not been sufficient to sustain our operations. We expect that our
        revenues will not be sufficient to sustain our operations for the foreseeable
        future. Our profitability will require the successful commercialization of
        our
        replacement therapy, probiotic and Mutacin 1140 technologies. No assurances
        can
        be given when this will occur or that we will ever be profitable.
  ***We
        must spend at least $1 million annually on development of our replacement
        therapy and*** **Mutacin** ***1140 technologies and $100,000 annually as minimum royalties under our license
        agreements with the University of Florida Research Foundation, Inc. We must
        also
        comply with certain other conditions of our licenses. If we do not, our licenses
        to these technologies may be terminated, and we may have to cease operations.***
  32
 We
        hold
        our replacement therapy and Mutacin ** 1140
        technologies under licenses from the University of Florida Research Foundation,
        Inc. Under the terms of the licenses, we must spend at least $1 million per
        year
        on development of those technologies before the first commercial sale of
        products derived from those technologies. In addition, we must pay $25,000
        per
        quarter as minimum royalties to the University of Florida Research Foundation,
        Inc. under our license agreements. If we do not, our licenses on these
        technologies could be terminated. We also hold a license for our IVIAT and
        CMAT
        technologies from iviGene Corporation, which required us to either find two
        full
        time resources or invest $200,000 annually toward development of these
        technologies. In 2005 we did not meet the requirements of committing two
        full-time staff or spending at least $200,000, however, we obtained a waiver
        of
        these provisions from iviGene Corporation, thus maintaining our license
        arrangement with them. We have applied for SBIR grant funding from the National
        Institutes of Health and with these funds expect to be able to meet the
        requirements of the license agreement in 2006. Until commercial sales of
        any
        developed products take place, we will not be earning revenues from the sale
        of
        products and will, therefore, have to raise the money we must spend on
        development of our technologies by other means, such as the sale of our common
        stock. There is no assurance we will be able to raise the financing necessary
        to
        meet our obligations under our licenses. If we cannot, we may lose our licenses
        to these technologies and have to cease operations.
  The
        University of Florida Research Foundation, Inc. may terminate our licenses
        in
        respect of our replacement therapy technology and our Mutacin ** 1140
        technology if we breach our obligations to timely pay monies to it, submit
        development reports to it or commit any other breach of the covenants contained
        in the license agreements. There is no assurance that we will be able to
        comply
        with these conditions. If our license is terminated, our investment in
        development of our replacement therapy and Mutacin 1140 technologies will
        become
        valueless and we may have to cease operations. In addition, iviGene Corporation
        may terminate our license in respect of our IVIAT and CMAT technologies if
        we
        breach or are unable to meet our obligations under the terms of our license.
        There can be no assurance that we will be able to comply with the obligations
        of
        our license with iviGene Corporation. If our license is terminated we will
        be
        unable to develop these technologies.
  ***If
        we are unable to maintain regulatory clearance or obtain approval for our
        technologies, we will be unable to generate revenues and may have to cease
        operations.***
  Only
        our
        replacement therapy technology has been granted clearance to begin Phase
        1 human
        clinical trials by the Food and Drug Administration (FDA). Clinical trials
        on
        our replacement therapy are expected to take 4-5 years to fully complete.
        Our
        other technologies have not been cleared for testing in humans. Our technologies
        have not been cleared for marketing by the FDA or foreign regulatory authorities
        and they will not be able to be commercially distributed in the United States
        or
        any international markets until such clearances are obtained. Before regulatory
        approvals can be obtained, our technologies will be subject to extensive
        preclinical and clinical testing. These processes are lengthy and expensive.
        We
        cannot assure that such trials will demonstrate the safety or effectiveness
        of
        our technologies. There is a possibility that our technologies may be found
        to
        be unsafe or ineffective or otherwise fail to satisfy regulatory requirements.
        If we are unable to resolve the FDA's concerns, we will not be able to proceed
        further to obtain regulatory approval for that technology. If we fail to
        maintain regulatory clearance for our replacement therapy or fail to obtain
        FDA
        clearance for our other technologies, we may have to cease
        operations.
  ***Our
        product candidates are in the preliminary development stage, and may not
        be
        effective at a level sufficient to support a profitable business venture.
        If
        they are not, we will be unable to create marketable products, and we may
        have
        to cease operations.***
  All
        of
        our product candidates are in the preliminary development state. Although
        we
        have current data which indicates the promise of the concept of our replacement
        therapy and Mutacin 1140 technologies, we can offer you no assurance that
        the technologies will be effective at a level sufficient to support a profitable
        business venture. If they are not, we will be unable to create marketable
        products, we will not generate revenues from our operations, and we may have
        to
        cease operations. The science on which our replacement therapy and
        Mutacin 1140 technologies are based may also fail due to flaws or
        inaccuracies on which the data are based, or because the data are totally
        or
        partially incorrect, or not predictive of future results. If our science
        proves
        to be flawed, incorrect or otherwise fails, we will not be able to create
        a
        marketable product or generate revenues and we may have to cease
        operations.
  33
 ***The
        success of our research and development activities is uncertain. If they
        do not
        succeed, we will be unable to generate revenues from our operations and we
        will
        have to cease doing business.***
  We
        intend
        to continue with research and development of our technologies for the purpose
        of
        licensing these technologies to third parties or obtaining regulatory approval
        to manufacture and market them. Research and development activities, by their
        nature, preclude definitive statements as to the time required and costs
        involved in reaching certain objectives. Actual costs may exceed the amounts
        we
        have budgeted  and
        actual time may exceed our expectations. If research and development requires
        more funding than we anticipate, then we may have to reduce technological
        development efforts or seek additional financing. There can be no assurance
        that
        we will be able to secure any necessary additional financing or that such
        financing would be available on favorable terms. Additional financings could
        result in substantial dilution to existing stockholders. We anticipate we
        will
        remain engaged in research and development for a  considerable
        period of time, and there can be no assurance that we will be able to generate
        adequate revenue from operations.
  ***Each
        of the technologies we are developing for eventual commercialization will
        face
        various forms of competition from other products in the
        marketplace.***
  The
        pharmaceutical and biotechnology industries are characterized by intense
        competition, rapid product development and technological change. Most of
        the
        competition that the products developed from our technologies will face will
        come from companies that are large, well established and have greater financial,
        marketing, sales and technological resources than we have. Commercial success
        of
        our technologies will depend on our ability and the ability of our sublicensees
        to compete effectively in product development areas such as, but not limited
        to,
        drug safety, efficacy, ease of use, patient or customer compliance, price,
        marketing and distribution. There can be no assurance that competitors will
        not
        succeed in developing products that are more effective than the products
        developed from our technologies or that would render our products obsolete
        and
        non-competitive.
  ***We
        rely on the significant experience and specialized expertise of our senior
        management and must retain and attract qualified scientists and other highly
        skilled personnel in a highly competitive job environment to maintain and
        grow
        our business*** *.*
 
 Our
        performance is substantially dependent on the continued services and on the
        performance of our senior management and our team of research scientists,
        who
        have many years of experience and specialized expertise in our business.
        Our
        performance also depends on our ability to retain and motivate our other
        executive officers and key employees. The loss of the services of our Chief
        Executive Officer, Robert T. Zahradnik and our Chief Scientific Officer,
        Dr.
        Jeffrey D. Hillman, and any of our other executive officers or of our
        researchers could harm our ability to develop and commercialize our
        technologies. We have no “key man” life insurance policies. We have three year
        employment agreement with Dr. Hillman, which automatically renews for one-year
        term unless 90 days written notice is given by either party.
 
 Our
        future success also depends on our ability to identify, attract, hire, train,
        retain and motivate highly skilled technical, managerial and research personnel.
        If we fail to attract, integrate and retain the necessary personnel, our
        ability
        to maintain and build our business could suffer significantly.
 
 ***It
        is possible that our replacement therapy and*** ***oral
        probiotic technologies will be less effective in humans than they have been
        shown to be in animals. It is possible our Mutacin
        1140*** ***technology will be shown to be ineffective or harmful in humans. If any of
        these
        technologies are shown to be ineffective or harmful in humans, we will be
        unable
        to generate revenues from them, and we may have to cease
        operations.***
  To
        date
        the testing of our replacement therapy technology has been undertaken solely
        in
        animals. Those studies have proven our genetically altered strain of *S.*  *mutans* to be
        effective in preventing tooth decay in animals. It is possible that our strain
        of *S.
        mutans* will be
        shown to be less effective in preventing tooth decay in humans in clinical
        trials. If our replacement therapy technology is shown to be ineffective
        in
        preventing tooth decay in humans, we will be unable to commercialize and
        generate revenues from this technology. To date the testing of our oral
        probiotic technology has been undertaken solely in animals. Those studies
        have
        shown our technology to be effective at helping to reduce certain bacteria
        that
        are believed to cause periodontal disease. It is possible that our probiotic
        technology will not be effective in reducing those bacteria and will not
        improve
        periodontal health. If our oral probiotic technology is shown to be ineffective
        or harmful to humans, we will be unable to commercialize it and generate
        revenues from sales. To date the testing of the antibiotic substance,
        Mutacin ** 1140,
        has
        been undertaken solely in the laboratory. We have not yet conducted animal
        or
        human studies of Mutacin ** 1140.
        It
        is possible that when these studies are conducted, they will show that
        Mutacin ** 1140
        is
        ineffective or harmful. If Mutacin ** 1140
        is
        shown to be ineffective or harmful, we will be unable to commercialize it
        and
        generate revenues from sales of Mutacin ** 1140.
        If
        we are unable to generate revenues from our technologies, we may have to
        cease
        operations.
  34
 ***It
        is possible we will be unable to find a method to produce Mutacin 1140 in
        large-scale commercial quantities. If we cannot, we will be unable to undertake
        the clinical trials that are required in order to obtain FDA permission to
        sell
        it, we will be unable to generate revenues from product sales, and we may
        have
        to cease operations.***
  Our
        antibiotic technology, Mutacin ** 1140,
        is
        a substance produced by our genetically altered strain of *S.*  *mutans* .
        To
        date, it has been produced only in laboratory cultures. In March 2005 we
        successfully developed a methodology for manufacturing Mutacin 1140 in
        quantities sufficient to undertake the preclinical studies necessary to prepare
        an Investigational New Drug (IND) application to the FDA. We believe we will
        be
        able to optimize this methodology to allow large-scale commercial production
        of
        the antibiotic. However, this methodology may not be feasible for large-scale
        manufacture of the Mutacin 1140 antibiotic. If we are not able to optimize
        this
        methodology, we will be unable to generate revenues from this technology
        and we
        may have to cease operations.
 
 ***If
        clinical trials for our product candidates are unsuccessful or delayed, we
        will
        be unable to meet our anticipated development and commercialization timelines,
        which could cause our stock price to decline and we may have to cease
        operations.***
  Before
        obtaining regulatory approvals for the commercial sale of any products, we
        must
        demonstrate through preclinical testing and clinical trials that our products
        are safe and effective for use in humans. Conducting clinical trials is a
        lengthy, time-consuming and expensive process.
  Completion
        of clinical trials may take several years. Commencement and rate of completion
        of clinical trials may be delayed by many factors, including:
  •
              lack
                  of efficacy during the clinical trials;
 •
              unforeseen
                  safety issues;
 •
              slower
                  than expected patient recruitment; and
 •
              government
                  or regulatory delays.
  Results
        from preclinical testing and early clinical trials are often not predictive
        of
        results obtained in later clinical trials. A number of new products have
        shown
        promising results in clinical trials, but subsequently failed to establish
        sufficient safety and efficacy data to obtain necessary regulatory approvals.
        Data obtained from preclinical and clinical activities are susceptible to
        varying interpretations, which may delay, limit or prevent regulatory approval.
        In addition, regulatory delays or rejections may be encountered as a result
        of
        many factors, including perceived defects in the design of the clinical trials
        and changes in regulatory policy during the period of product development.
        Any
        delays in, or termination of, our clinical trials will materially and adversely
        affect our development and commercialization timelines, which would adversely
        affect our business and cause our stock price to decline and may cause us
        to
        cease operations.
  ***We
        intend to consider relying on third parties to pay the majority of costs
        relating to regulatory approvals necessary to manufacture and sell products
        using our technologies. If we are unable to obtain agreements with third
        parties
        to fund such costs, we will have to fund the costs ourselves. We may be unable
        to do so, and if we are not, we may have to cease operations.***
  35
 We
        intend
        to consider sublicensing our technologies to strategic partners prior to
        commercialization. If we do so, our sublicensees will pay the costs of any
        remaining clinical trials, and manufacturing and marketing of our technologies.
        If we are unable to sublicense our technologies, we will have to pay for
        the
        costs of Phase II and III trials and new drug applications to the FDA ourselves.
        We would also have to set up our own manufacturing facilities and find our
        own
        distribution channels. This would greatly increase our future capital
        requirements and we cannot be assured we would be able to obtain the necessary
        financing. If we cannot obtain financing, we may have to cease
        operations.
  ***If
        our expected collaborative partnerships do not materialize or fail to perform
        as
        expected, we will be unable to develop our products as
        anticipated.***
  We
        expect
        to enter into collaborative arrangements with third parties to develop certain
        products by sublicensing our technologies to strategic partners. We cannot
        assure you that we will be able to enter into these collaborations or that,
        if
        entered, they will produce successful products. If we fail to maintain our
        existing collaborative arrangements or fail to enter into additional
        collaborative arrangements, the number of products from which we could receive
        future revenues would decline.
  Our
        dependence on collaborative arrangements with third parties subjects us to
        a
        number of risks. These collaborative arrangements may not be on terms favorable
        to us. Agreements with collaborative partners typically allow partners
        significant discretion in electing whether or not to pursue any of the planned
        activities. We cannot control the amount and timing of resources our
        collaborative partners may devote to products based on the collaboration,
        and
        our partners may choose to pursue alternative products. Our partners may
        not
        perform their obligations as expected. Business combinations or significant
        changes in a collaborative partner's business strategy may adversely affect
        a
        partner's willingness or ability to complete its obligations under the
        arrangement. Moreover, we could become involved in disputes with our partners,
        which could lead to delays or termination of the collaborations and
        time-consuming and expensive litigation or arbitration. Even if we fulfill
        our
        obligations under a collaborative agreement, our partner can terminate the
        agreement under certain circumstances. If any collaborative partner were
        to
        terminate or breach our agreement with it, or otherwise fail to complete
        its
        obligations in a timely manner, our chances of successfully commercializing
        products would be materially and adversely affected.
  ***If
        our intellectual property rights do not adequately protect our products or
        technologies, or if third parties claim we are infringing their intellectual
        property rights, others could compete against us more directly or we could
        suffer significant litigation. Such results could prevent us from marketing
        our
        products and hurt our profitability***
  Our
        success depends in part on our ability to obtain patents or rights to patents,
        protect trade secrets, operate without infringing upon the proprietary rights
        of
        others, and prevent others from infringing on our patents, trademarks and
        other
        intellectual property rights. We will be able to protect our intellectual
        property from unauthorized use by third parties only to the extent that it
        is
        covered by valid and enforceable patents, trademarks and licenses. Patent
        protection generally involves complex legal and factual questions and,
        therefore, enforceability of patent rights cannot be predicted with certainty.
        Patents, if issued, may be challenged, invalidated or circumvented. Thus,
        any
        patents that we own or license from others may not provide adequate protection
        against competitors. In addition, any future patent applications may fail
        to
        result in patents being issued. Also, those patents that are issued may not
        provide us with adequate proprietary protection or competitive advantages
        against competitors with similar technologies. Moreover, the laws of certain
        foreign countries do not protect intellectual property rights to the same
        extent
        as do the laws of the United States.
  In
        addition to patents and trademarks, we rely on trade secrets and proprietary
        know-how. We seek protection of these rights, in part, through confidentiality
        and proprietary information agreements. These agreements may not provide
        meaningful protection or adequate remedies for violation of our rights in
        the
        event of unauthorized use or disclosure of confidential and proprietary
        information. Failure to protect our proprietary rights could seriously impair
        our competitive position.
  36
 In
        the
        event of an infringement or violation, we may face litigation and may be
        prevented from pursuing product development or commercialization. We may
        receive
        in the future, notice of claims of infringement of other parties’ proprietary
        rights. Infringement or other claims could be asserted or prosecuted against
        us
        in the future and it is possible that past or future assertions or prosecutions
        could harm our business. We received notification from B.C. International
        Corporation on July 29, 2002 that a gene utilized in our licensed, patented
        strain of *S.
        mutans* infringes a patent which it holds under a license. B.C. International
        Corporation’s notification did not state that they intended to pursue legal
        remedies. Our management does not believe the gene in question infringes
        that
        patent. We have sent them correspondence setting out our position and we
        have
        not heard anything further from B.C. International Corporation. If necessary,
        we
        would need to be prepared to assert our rights vigorously with respect to
        such
        matter, which we may not be able to do without sufficient funding. If litigation
        should ensue and we are unsuccessful in that litigation, we could be enjoined
        for a period of time from marketing products which infringe any valid patent
        rights held or licensed by B.C. International Corporation and/or we could
        owe
        substantial damages.
  ***We
        are subject to substantial government regulation, which could materially
        adversely affect our business.***
  The
        production and marketing of products which may be developed from our
        technologies and our ongoing research and development, preclinical testing
        and
        clinical trial activities are subject to extensive regulation and review
        by
        numerous governmental authorities. Most of the technologies we are developing
        must undergo rigorous preclinical and clinical testing and an extensive
        regulatory approval process before they can be marketed. This process makes
        it
        longer, harder and more costly to bring products which may be developed from
        our
        technologies to market, and we cannot guarantee that any of such products
        will
        be approved. The pre-marketing approval process can be particularly expensive,
        uncertain and lengthy, and a number of products for which FDA approval has
        been
        sought by other companies have never been approved for marketing. In addition
        to
        testing and approval procedures, extensive regulations also govern marketing,
        manufacturing, distribution, labeling, and record-keeping procedures. If
        we do
        not comply with applicable regulatory requirements, such violations could
        result
        in warning letters, non-approval, suspensions of regulatory approvals, civil
        penalties and criminal fines, product seizures and recalls, operating
        restrictions, injunctions, and criminal prosecution.
  Delays
        in
        or rejection of FDA or other government entity approval of our technologies
        may
        also adversely affect our business. Such delays or rejection may be encountered
        due to, among other reasons, government or regulatory delays, lack of efficacy
        during clinical trials, unforeseen safety issues, slower than expected rate
        of
        patient recruitment for clinical trials, inability to follow patients after
        treatment in clinical trials, inconsistencies between early clinical trial
        results and results obtained in later clinical trials, varying interpretations
        of data generated by clinical trials, or changes in regulatory policy during
        the
        period of product development in the United States. In the United States
        more
        stringent FDA oversight in product clearance and enforcement activities could
        result in our experiencing longer approval cycles, more uncertainty, greater
        risk, and higher expenses. Even if regulatory approval of a product is granted,
        this approval may entail limitations on uses for which the product may be
        labeled and promoted. It is possible, for example, that we may not receive
        FDA
        approval to market products based on our licensed, patented technologies
        for
        broader or different applications or to market updated products that represent
        extensions of our basic technologies. In addition, we may not receive FDA
        approval to export our products based on our licensed, patented technologies
        in
        the future, and countries to which products are to be exported may not approve
        them for import.
  Any
        manufacturing facilities would also be subject to continual review and
        inspection. The FDA has stated publicly that compliance with manufacturing
        regulations will be scrutinized more strictly. A governmental authority may
        challenge our compliance with applicable federal, state and foreign regulations.
        In addition, any discovery of previously unknown problems with one of our
        products or facilities may result in restrictions on the product or the
        facility, including withdrawal of the product from the market or other
        enforcement actions.
  From
        time
        to time, legislative or regulatory proposals are introduced that could alter
        the
        review and approval process relating to our technologies. It is possible
        that
        the FDA will issue additional regulations further restricting the sale of
        our
        proposed products. Any change in legislation or regulations that govern the
        review and approval process relating to our future technologies could make
        it
        more difficult and costly to obtain approval for new products based on our
        technologies, or to produce, market, and distribute such products if
        approved.
  37
 ***We
        can offer you no assurance the government and the public will accept our
        licensed patented technologies. If they do not, we will be unable to generate
        sufficient revenues from our technologies, which may cause us to cease
        operations.***
  The
        commercial success of our replacement therapy, oral probiotics and
        Mutacin 1140 technologies will depend in part on government and public
        acceptance of their production, distribution and use. Biotechnology has enjoyed
        and continues to enjoy substantial support from the scientific community,
        regulatory agencies and many governmental officials in the United States
        and
        around the world. Future scientific developments, media coverage and political
        events may diminish such support. Public attitudes may be influenced by claims
        that health products based on biotechnology are unsafe for consumption or
        pose
        unknown risks to the environment or to traditional social or economic practices.
        Securing governmental approvals for, and consumer confidence in, such products
        poses numerous challenges, particularly outside the United States. The market
        success of technologies developed through biotechnology such as ours could
        be
        delayed or impaired in certain geographical areas because of such factors.
        Products based on our technologies may compete with a number of traditional
        dental therapies and drugs manufactured and marketed by major pharmaceutical
        companies and other biotechnology companies. Market acceptance of products
        based
        on our technologies will depend on a number of factors including potential
        advantage over alternative treatment methods. We can offer you no assurance
        that
        dentists, physicians, patients or the medical and dental communities in general
        will accept and utilize products developed from our technologies. If they
        do
        not, we may be unable to generate sufficient revenues from our technologies,
        which may cause us to have to cease operations.
  ***We
        may be exposed to product liability claims if products based on our technologies
        are marketed and sold. Because our liability insurance coverage will have
        limitations, if a judgment is rendered against us in excess of the amount
        of our
        coverage, we may have to cease operations.***
  Because
        we are testing new technologies, and will be involved either directly or
        indirectly in the manufacturing and distribution of the technologies, we
        are
        exposed to the financial risk of liability claims in the event that the use
        of
        the technologies results in personal injury or death. There can be no assurance
        that we will not experience losses due to product liability claims in the
        future, or that adequate insurance will be available in sufficient amounts,
        at
        an acceptable cost, or at all. A product liability claim, product recall
        or
        other claim, or claims for uninsured liabilities or in excess of insured
        liabilities, may have a material adverse effect on our business, financial
        condition and results of operations. Although we currently carry $2,000,000
        in
        general liability insurance, such insurance may not be sufficient to cover
        any
        potential liability. We could be sued for a large sum of money and held liable
        in excess of our liability coverage. **** If we
        cannot pay the judgment, we may have to cease operations.
  ***There
        is uncertainty relating to favorable third-party reimbursement in the United
        States. If we can't obtain third party reimbursement for products based on
        our
        technologies, it could limit our revenue.***
  In
        the
        United States, success in obtaining payment for a new product from third
        parties
        such as insurers depends greatly on the ability to present data which
        demonstrates positive outcomes and reduced utilization of other products
        or
        services as well as cost data which shows that treatment costs using the
        new
        product are equal to or less than what is currently covered for other products.
        If we are unable to obtain favorable third party reimbursement and patients
        are
        unwilling or unable to pay for our products out-of-pocket, it could limit
        our
        revenue and harm our business.
  ***We
        have limited resources which exposes us to potential risks resulting from
        new
        internal control requirements under Section 404*** ***of the Sarbanes-Oxley Act of 2002.***
  We
        are
        evaluating our internal controls in order to allow management to report on,
        and
        our independent registered public accounting firm to attest to, our internal
        controls, as required by Section 404of the
        Sarbanes-Oxley Act of 2002. We may encounter unexpected delays in implementing
        the requirements relating to internal controls, therefore, we cannot be certain
        about the timing of completion of our evaluation, testing and remediation
        actions or the impact that these activities will have on our operations.
        We also
        expect to incur additional expenses and diversion of management’s time as a
        result of performing the system and process evaluation, testing and remediation
        required in order to comply with the management certification and auditor
        attestation requirements. We are a small company with limited resources that
        will make it difficult for us to timely comply with the requirements of Section
        404. If we are not able to timely comply with the requirements set forth
        in
        Section 404,
        we
        might be subject to sanctions or investigation by regulatory authorities.
        Any
        such action could adversely affect our business and financial results. The
        requirement to comply with Section 404
        of
        the Sarbanes-Oxley Act of 2002 will be no earlier than our fiscal year ending
        December 31, 2006.
  38
 In
        addition, in our system of internal controls we may rely on the internal
        controls of third parties such as payroll service providers. In our evaluation
        of our internal controls, we will consider the implication of our reliance
        on
        the internal controls of third parties. Until we have completed our evaluation,
        we are unable to determine the extent of our reliance on those controls,
        the
        extent and nature of the testing of those controls, and remediation actions
        necessary where that reliance cannot be adequately evaluated and
        tested.
   **Risk
        Factors Relating to our Common Stock**
 
 ***Any
        sale of our common stock to Fusion Capital under its Common Stock Purchase
        Agreement with us will cause dilution and the sale of the shares of common
        stock
        acquired by Fusion Capital thereunder could cause the price of our common
        stock
        to decline.***
  We
        have
        entered into a stock purchase agreement with Fusion Capital to sell up to
        $9.0
        million of our common stock to them. However, Fusion Capital neither has
        the
        right nor the obligation to purchase any shares of our common stock on any
        trading days that the market price of our common stock is less than $0.75.
        Our
        common stock price has traded below $0.75 and as of March 6, 2006 was trading
        below $0.75, which prohibits the availability of funding from Fusion Capital
        under our agreement with them. The
        purchase price for the common stock to be sold to Fusion Capital pursuant
        to the
        common stock purchase agreement with Fusion Capital will fluctuate based
        on the
        price of our common stock. All shares acquired by Fusion Capital and resold
        pursuant to a registration statement will be freely tradable. Fusion Capital
        may
        sell none, some or all of the shares of common stock purchased from us at
        any
        time. We expect that the shares offered pursuant to the registration statement
        we filed in connection with our obligation under the Fusion Capital transaction
        will be sold over a period of up to 30 months from the date of the effectiveness
        of the registration statement. Depending upon market liquidity at the time,
        a
        sale of such shares at any given time could cause the trading price of our
        common stock to decline. The sale of a substantial number of shares of our
        common stock, or anticipation of such sales, could make it more difficult
        for us
        to sell equity or equity-related securities in the future at a time and at
        a
        price that we might otherwise wish to  effect
        sales. As long as our stock price is below $0.75 we will not be able to sell
        any
        shares of our common stock to Fusion Capital in which case our ability to
        acquire needed capital will be adversely affected and our business could
        be
        harmed.
 
 ***Our
        stock price historically has been volatile and our stock’s trading volume has
        been low.***
  The
        market price of our common stock has been and is expected to continue to
        be
        highly volatile. Factors, including announcements of technological innovations
        by us or other companies, regulatory matters, new or existing products or
        procedures, concerns about our financial position, operating results,
        litigation, government regulation, developments or disputes relating to
        agreements, patents or proprietary rights, may have a significant impact
        on the
        market price of our stock. In addition, potential dilutive effects of future
        sales of shares of common stock by stockholders and by the Company, including
        Fusion Capital pursuant to this prospectus and subsequent sale of common
        stock
        by the holders of warrants and options could have an adverse effect on the
        market price of our shares.
  Although
        our common stock began trading on the American Stock Exchange under the symbol
        “ONI” on May 20, 2004, the trading price of our common stock has been, and may
        be, subject to wide fluctuations in response to a number of factors, many
        of
        which are beyond our control. These factors include:
  39
  ·
              quarter-to-quarter
                  variations in our operating results;
 ·
              the
                  results of testing, technological innovations, or new commercial
                  products
                  by us or our competitors;
 ·
              governmental
                  regulations, rules, and orders;
 ·
              general
                  conditions in the healthcare, dentistry, or biotechnology industries;
 ·
              comments
                  and/or earnings estimates by securities analysts;
 ·
              developments
                  concerning patents or other intellectual property rights;
 ·
              litigation
                  or public concern about the safety of our
                  products;
 ·
              announcements
                  by us or our competitors of significant acquisitions, strategic
                  partnerships, joint ventures or capital
                  commitments;
 ·
              additions
                  or departures of key personnel;
 ·
              release
                  of escrow or other transfer restrictions on our outstanding shares
                  of
                  common stock or sales of additional shares of common
                  stock;
 ·
              potential
                  litigation;
 ·
              adverse
                  announcements by our competitors;
                  and
 ·
              the
                  additional sale of common stock by us in a capital raising
                  transaction.
  Historically,
        the daily trading volume of our common stock has been relatively low. We
        cannot
        guarantee that an active public market for our common stock will be sustained
        or
        that the average trading volume will remain at present levels or increase.
        In
        addition, the stock market in general, has experienced significant price
        and
        volume fluctuations. Volatility in the market price for particular companies
        has
        often been unrelated or disproportionate to the operating performance of
        those
        companies. Broad market factors may seriously harm the market price of our
        common stock, regardless of our operating performance. In addition, securities
        class action litigation has often been initiated following periods of volatility
        in the market price of a company's securities. A securities class action
        suit
        against us could result in substantial costs, potential liabilities, and
        the
        diversion of management's attention and resources. Since our initial public
        offering and through January 9, 2006 our stock price has fluctuated from
        $4.45
        to $0.35 per share. To the extent our stock price fluctuates and/or remains
        low,
        it could impair our ability to raise capital through the offering of additional
        equity securities.
  ***Future
        sales of our common stock may depress our stock
        price.***
  The
        market price of our common stock could decline as a result of sales of
        substantial amounts of our common stock in the public market, or the perception
        that these sales could occur. In addition, these factors could make it more
        difficult for us to raise funds through future offerings of common stock.
        As of
        March 6, 2006, there were 19,646,117 shares of our common stock
        outstanding, with another 4,765,000 shares of common stock issuable upon
        exercise of warrants to investors and underwriters, 1,170,000 shares issuable
        upon exercise of options issued and an additional 330,000 shares available
        for
        issuance under our stock option plans. The issuance of our stock underlying
        these options is covered by an S-8 registration statement we filed with the
        SEC
        and may be resold into the market. As of March 6, 2006, we had 1,320,106
        shares
        of common stock held in escrow pursuant to Canadian law and underwriter
        requirements in connection with our initial public offering pursuant to escrow
        agreements. These shares are subject to release from escrow on June 24, 2006
        and
        until such time are subject to the limitations of the respective escrow
        agreements. Of these shares 1,230,115 are held by principals of the Company
        and
        two former Directors of the Company and 89,991 are held by the University
        of
        Florida Research Foundation, Inc. Through March 6,  2006,
        approximately 6,970,649 shares held by principals (including former directors)
        and 509,949 shares held by the University of Florida Research Foundation,
        Inc.
        have been released from escrow. The released shares held by the principals
        (excluding former directors) may be resold into the market under Rule 144.
        This
        could cause the market price of our common stock to drop significantly. The
        shares held by the University of Florida Research Foundation, Inc. are eligible
        for resale without restriction once released from escrow.
  ***We
        may be unable to maintain the listing of our common stock on the American
        Stock
        Exchange and that would make it more difficult for stockholders to dispose
        of
        their common stock.***
 
 Our
        common stock is listed on the American Stock Exchange. We cannot guarantee
        that
        it will always be listed. The American Stock Exchange rules for continual
        listing include minimum market capitalization and other requirements, which
        we
        may not meet in the future, particularly if the price of our common stock
        declines.
 
 40
 If
        our
        common stock is de-listed from the American Stock Exchange, trading in our
        common stock would be conducted, if at all, on the NASD’s OTC Bulletin Board in
        the United States. This would make it more difficult for stockholders to
        dispose
        of their common stock and more difficult to obtain accurate quotations on
        our
        common stock. This could have an adverse effect on the price of our common
        stock.
 
 The
        Securities and Exchange Commission has adopted Rule 3a51-1 which establishes
        the
        definition of a “penny stock,”
for the purposes relevant to us, as any equity security that has a market
        price
        of less than $5.00 per share or with an exercise price of less than $5.00
        per
        share, subject to certain exceptions. For any transaction involving a penny
        stock, unless exempt, Rule 15g-9 require:
  •
              that
                  a broker or dealer approve a person’s account for transactions in
                  pennystocks; and
 •
              the
                  broker or dealer receives from the investor a written agreement
                  to the
                  transaction, setting forth the identity and quantity of the
                  pennystock to be purchased.
  In
        order
        to approve a person’s account for transactions in penny stocks,
        the broker or dealer must:
  •
              obtain
                  financial information and investment experience objectives of the
                  person;
                  and
 •
              make
                  a reasonable determination that the transactions in pennystocks are suitable for that person and the person has sufficient
                  knowledge and experience in financial matters to be capable of
                  evaluating
                  the risks of transactions in penny
                  stocks.
  The
        broker or dealer must also deliver, prior to any transaction in a
        penny stock, a
        disclosure schedule prescribed by the SEC relating to the penny stock market,
        which, in highlight form:
  •
              sets
                  forth the basis on which the broker or dealer made the suitability
                  determination; and
 •
              that
                  the broker or dealer received a signed, written agreement from
                  the
                  investor prior to the transaction.
  Generally,
        brokers may be less willing to execute transactions in securities subject
        to the
“penny stock”
rules. This may make it more difficult for investors to dispose of our common
        stock and cause a decline in the market value of our stock.
  Disclosure
        also has to be made about the risks of investing in penny stocks
        in both public offerings and in secondary trading and about the commissions
        payable to both the broker-dealer and the registered representative, current
        quotations for the securities and the rights and remedies available to an
        investor in cases of fraud in penny stock transactions. Finally, monthly
        statements have to be sent disclosing recent price information for the penny
        stock held in the account and information on the limited market in penny
        stocks.
 
 **Forward-Looking
        Statements**
 
 41
 The
        terms
“Oragenics,” “Company,” “we,” “our,” and “us” refer to Oragenics, Inc. Certain
        oral statements made by management from time to time and certain statements
        contained herein and in documents incorporated herein by reference that are
        not
        historical facts are “forward-looking statements” within the meaning of Section
        27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
        Act
        of 1934, as amended. Such forward-looking statements include statements
        regarding, among other things, (a) our projected sales and profitability,
        (b)
        our growth strategies, (c) anticipated trends in our industry, (d) trends
        affecting our financial condition or results of operations, (e) our ability
        to
        continue to control costs and to meet our liquidity and other financing needs,
        (f) our ability to respond to and meet regulatory demands, and (g) our
        anticipated needs for working capital. Because such statements involve risks
        and
        uncertainties, actual results may differ materially from those expressed
        or
        implied by such forward-looking statements. Forward-looking statements, which
        involve assumptions and describe our future plans, strategies, and expectations,
        are generally identifiable by use of the words “may,” “will,” “should,”
“expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the
        negative of these words or other variations on these words or comparable
        terminology. These statements are not guarantees of future performance and
        are
        subject to a number of known and unknown risks, uncertainties, and other
        factors, including those discussed above and elsewhere in this report, that
        could cause actual results to differ materially from future results,
        performances, or achievements expressed or implied by such forward-looking
        statements. Consequently, undue reliance should not be placed on these
        forward-looking statements. Although we believe our expectations are based
        on
        reasonable assumptions, we can give no assurance that the anticipated results
        will occur. We undertake no obligation to update publicly any forward-looking
        statements, whether as a result of new information, future events or otherwise.
  42




**Item
        7. Financial Statements.**
 
 Incorporated
        by reference to pages F-1 to F-17 at the end of this report.
 
 **Item
        8. Changes in and Disagreements with Accountants on Accounting and Financial
        Disclosure.**
 
 Changes
        in Registrant's Certifying Accountants
 (a)
        Dismissal of Previous Independent Registered Public Accounting
        Firm:
  (i)
        On
        August 26, 2005 the Audit Committee of the Board of Directors of Oragenics,
        Inc.
        ("the Company"), dismissed Ernst & Young LLP as the Company's independent
        registered public accounting firm.
  (ii)
        The
        reports of Ernst & Young LLP on the Company's financial statements as of and
        for the years ended December 31, 2003 and 2004, did not contain an adverse
        opinion or a disclaimer of opinion and were not qualified or modified as
        to
        uncertainty, audit scope or accounting principles, except that the report
        of
        Ernst & Young LLP on the Company's financial statements as of and for the
        year ended December 31, 2004 was modified for a going concern uncertainty.
  (iii)
        During the Company's fiscal years ended December 31, 2003 and 2004, and the
        subsequent interim period from January 1, 2005 through August 26, 2005, there
        were no disagreements with Ernst & Young LLP on any matters of accounting
        principles or practices, financial statement disclosure, or auditing scope
        and
        procedures which, if not resolved to the satisfaction of Ernst & Young LLP
        would have caused Ernst & Young LLP to make reference to the matter in their
        report.
  (iv)
        The
        Company requested Ernst & Young LLP to furnish it with a letter addressed to
        the Commission stating whether it agrees with the above statements. A copy
        of
        that letter, dated August 29, 2005, was filed as Exhibit 16 to the Form 8-K
        originally filed on August 29, 2005 and amended on August 31, 2005.
  (b)
        Engagement of New Independent Registered Public Accounting Firm:
  On
        August
        26, 2005, the Audit Committee of the Company's Board of Directors approved
        the
        engagement of Kirkland, Russ, Murphy and Tapp, PA as the Company's independent
        registered public accounting firm for the year ending December 31, 2005.
        Prior
        to the dismissal of Ernst & Young LLP, the Company did not consult with
        Kirkland, Russ, Murphy and Tapp, PA regarding:
  (i)  the
        application of accounting principles to a specified transaction, either
        completed or proposed; or
  (ii)
        the
        type of audit opinion that might be rendered on the Company's financial
        statement.
 
 **Item
        8A. Controls and Procedures.**
  **Evaluation
        of Disclosure Controls and Procedures**
  We
        maintain "disclosure controls and procedures," as such term is defined in
        Rule
        13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"),
        that
        are designed to ensure that information required to be disclosed in our Exchange
        Act reports is recorded, processed, summarized and reported within the time
        periods specified in the Securities and Exchange Commission rules and forms,
        and
        that such information is accumulated and communicated
        to our management, including our Chief Executive Officer and Chief Financial
        Officer, as appropriate, to allow timely decisions regarding required
        disclosure. We conducted an evaluation (the "Evaluation"), under the supervision
        and with the participation of our Chief Executive Officer ("CEO") and Chief
        Financial Officer ("CFO"), of the effectiveness of the design and operation
        of
        our disclosure controls and procedures ("Disclosure Controls") as of the
        end of
        the period covered by this report pursuant to Rule 13a-15 of the Exchange
        Act.
        Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls
        were effective as of the end of the period covered by this
        report.
  43
 **Changes
        in Internal Controls**
  We
        have
        also evaluated our internal controls for financial reporting, and there have
        been no significant changes in our internal controls or in other factors
        that
        could significantly affect those controls subsequent to the date of their
        last
        evaluation.
  **Limitations
        on the Effectiveness of Controls**
  Our
        management, including our CEO and CFO, does not expect that our Disclosure
        Controls and internal controls will prevent all errors and all fraud. A control
        system, no matter how well conceived and operated, can provide only reasonable,
        not absolute, assurance that the objectives of the control system are met.
        Further, the design of a control system must reflect the fact that there
        are
        resource constraints, and the benefits of controls must be considered relative
        to their costs. Because of the inherent limitations in all control systems,
        no
        evaluation of controls can provide absolute assurance that all control issues
        and instances of fraud, if any, within the Company have been detected. These
        inherent limitations include the realities that judgments in decision-making
        can
        be faulty, and that breakdowns can occur because of a simple error or mistake.
        Additionally, controls can be circumvented by the individual acts of some
        persons, by collusion of two or more people, or by management or board override
        of the control.
  The
        design of any system of controls also is based in part upon certain assumptions
        about the likelihood of future events, and there can be no assurance that
        any
        design will succeed in achieving its stated goals under all potential future
        conditions; over time, controls may become inadequate because of changes
        in
        conditions, or the degree of compliance with the policies or procedures may
        deteriorate. Because of the inherent limitations in a cost-effective control
        system, misstatements due to error or fraud may occur and not be detected.
  **CEO
        and CFO Certifications**
  Appearing
        immediately following the Signatures section of this report there are
        Certifications of the CEO and the CFO. The Certifications are required in
        accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section
        302
        Certifications). This Item of this report, which you are currently reading
        is
        the information concerning the Evaluation referred to in the Section 302
        Certifications and this information should be read in conjunction with the
        Section 302 Certifications for a more complete understanding of the topics
        presented.
  **Item
        8B. Other Information.**
 
 None.
  44
 **PART
        III**
 
 Certain
        information required by Part III is omitted from this Report in that we expect
        to file a definitive proxy statement with the Securities and Exchange Commission
        (the “Commission”) within 120 days after the end of our fiscal year pursuant to
        Regulation 14A, as promulgated by the Commission, for our 2006 annual meeting
        of
        shareholders (the “Proxy Statement”), and certain information included in the
        Proxy Statement will be incorporated herein by reference.
 
 **Item
        9. Directors and Executive Officers of the Registrant.**
 
 The
        information required by this Item 9 with respect to identification of our
        directors will be included under the captions “Proposal I Election of Directors”
and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated
        herein by reference to our Proxy Statement. We have adopted a Code of Business
        Conduct and Ethics (the "Code") that applies to all of our Directors, officers
        and employees, including our principal executive officer and principal financial
        officer. The Code is posted on our websiteat
        www.oragenics.com. We intend to disclose any amendments to the Code by posting
        such amendments on our website. In addition, any waivers of the Code for
        Directors or executive officers of the Company will be disclosed in a report
        on
        Form 8-K.
  **Item
        10. Executive Compensation** .
  The
        information required by this Item 10 with respect to management remuneration
        and
        transactions is incorporated herein by reference to our Proxy Statement under
        the heading “Executive Compensation.”
  **Item
        11. Security Ownership of Certain Beneficial Owners and
        Management** .
  The
        information required by this Item 11 with respect to the security ownership
        of
        certain beneficial owners and management is incorporated herein by reference
        to
        our Proxy Statement under the heading “Security Ownership of Certain Beneficial
        Owners and Management.
 
 **Item
        12. Certain Relationships and Related Transactions** .
  The
        information required by this Item 12 with respect to transactions between
        us and
        certain related entities is incorporated herein by reference to our Proxy
        Statement under the heading “Certain Relationships and Related
        Transactions .”
 
 **Item
        13. Exhibits.**
 
 Incorporated
        by reference to the Exhibit Index immediately following the signature
        page.
  **Item
        14. Principal Accountant Fees and Services.**
 
 The
        information required by this Item 14 is incorporated herein by reference
        to our
        Proxy Statement under the heading “Principal Accountant Fees and
        Services."
 
 45
 
 Oragenics,
        Inc.
 
 Financial
        Statements
 
 
 Years
        ended December 31, 2005 and 2004
 
 **Contents**
 Index
                    to Financial Statements
                F-1Report
                    of Kirkland Russ Murphy & Tapp, PA, Independent Registered Public
                    Accounting Firm
                F-2Report
                    of Ernst & Young LLP, Independent Registered Public Accounting
                    Firm
                F-3Audited
                    Financial StatementsBalance
                    Sheet
                F-4Statements
                    of Operations
                F-5Statements
                    of Changes in Stockholders’ Equity
                F-6Statements
                    of Cash Flows
                F-7Notes
                    to Financial Statements
                F-8
  F-1




REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  To
        the
        Board of Directors and
 Stockholders
        of Oragenics, Inc.
 
  We
        have
        audited the accompanying balance sheet of Oragenics, Inc. as of December
        31,
        2005, and the related statements of operations, stockholders’ equity, and cash
        flows for the year ended December 31, 2005. These financial statements are
        the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these financial statements based on our audit.
  We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
  In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Oragenics, Inc. as of December
        31,
        2005, and the results of its operations and its cash flows for the year ended
        December 31, 2005 in conformity with accounting principles generally accepted
        in
        the United States of America.
  The
        accompanying financial statements have been prepared assuming Oragenics,
        Inc.
        will continue as a going concern. As more fully described in Note 1, the
        Company
        has incurred recurring operating losses, negative operating cash flows and
        has
        an accumulated deficit. These conditions raise substantial doubt about the
        Company’s ability to continue as a going concern. Management’s plans in regard
        to these matters are also described in Note 1. The financial statements do
        not
        include any adjustments to reflect the possible future effects on the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the outcome of this uncertainty.
   February
        15, 2006, except for Note 11
 as
        to
        which the date is March 6, 2006
 Clearwater,
        Florida
  /s/
        Kirkland Russ Murphy & Tapp, PA
 Certified
        Public Accountants
 
 F-2
  Report
        of
        Independent Registered Public Accounting Firm on Financial
        Statements
 
 The
        Board
        of Directors and Shareholders of
 Oragenics,
        Inc.
 
 We
        have
        audited the statements of operations, changes in stockholders’ equity and cash
        flows of Oragenics, Inc for the year ended December 31, 2004. These financial
        statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, and evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the results of operations and cash flows of Oragenics,
        Inc.
        for the year ended December 31, 2004, in conformity with accounting principles
        generally accepted in the United States.
 
 The
        accompanying financial statements have been prepared assuming that Oragenics,
        Inc. will continue as a going concern. As more fully described in Note 1,
        the
        Company has incurred operating losses, negative operating cash flows and
        has an
        accumulated deficit. These conditions raise substantial doubt about the
        Company’s ability to continue as a going concern. Management’s plans in regard
        to these matters are also described in Note 1. The financial statements do
        not
        include any adjustments to reflect the possible future effects on the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the outcome of this uncertainty.
 
 
 /s/
        Ernst
& Young LLP
 Certified
        Public Accountants
 January
        28, 2005
 Tampa,
        Florida
  F-3
  Oragenics,
        Inc.
 
 Balance
        Sheet
 December
        31, 2005
 **Assets**Current
                    assets:Cash
                    and cash equivalents
                
                $
                937,789Prepaid
                    expenses and other current assets
                
                
                112,047Total
                    current assets
                
                
                1,049,836Property
                    and equipment, net
                
                
                1,096,564Total
                    assets
                
                $
                2,146,400**Liabilities
                    and stockholders’ equity**Current
                    liabilities:Accounts
                    payable and accrued expenses
                
                $
                374,830Total
                    current liabilities
                
                
                374,830Stockholders’
                    equity:Preferred
                    stock, no par value; 20,000,000 shares authorized; none issued
                    and
                    outstanding
                
                
                -Common
                    stock, $0.001 par value; 100,000,000 shares authorized; 18,146,117
                    shares
                    issued and outstanding
                
                
                18,146Additional
                    paid in capital
                
                
                10,476,786Accumulated
                    deficit
                
                
                (8,723,362
                )Total
                    stockholders’ equity
                
                
                1,771,570Total
                    liabilities and stockholders’ equity
                
                $
                2,146,400
 *See
        accompanying report of Independent Registered Public Accounting Firm and
        notes
        to the financial statements.*


F-4




Oragenics,
        Inc.
 
 Statements
        of Operations
 
 **Year
                  ended December 31****2005**
              
              
              **2004**Revenue
              
              **$**
              **-**
              
              **$**
              196,210Operating
                  expenses:Research
                  and development
              
              
              **2,097,223**
              
              
              1,990,979General
                  and administration
              
              
              **1,166,854**
              
              
              1,329,983Total
                  operating expenses
              
              
              **3,264,077**
              
              
              3,320,962Loss
                  from operations
              
              
              **(3,264,077**
              **)**
              
              (3,124,752
              )Other
                  income (expense):Interest
                  income
              
              
              **41,875**
              
              
              47,306Interest
                  expense
              
              
              **(29,176**
              **)**
              
              (442
              )Total
                  other income (expense), net
              
              
              **12,699**
              
              
              46,864Loss
                  before income taxes
              
              
              **(3,251,378**
              **)**
              
              (3,077,888
              )Income
                  tax benefit
              
              
              **-**
              
              
              -Net
                  loss
              
              **$**
              **(3,251,378**
              **)**
              $
              (3,077,888
              )Basic
                  and diluted net loss per share
              
              **$**
              **(0.22**
              **)**
              $
              (0.22
              )Shares
                  used to compute basic and diluted net loss per share
              
              
              **15,082,098**
              
              
              14,118,129
 
 *See
        accompanying report of Independent Registered Public Accounting Firm and
        notes
        to the financial statements.*
  F-5




Oragenics,
        Inc.
 
 Statements
        of Changes in Stockholders’ Equity
 Years
        ended December 31, 2005 and 2004
  **Common
                    Stock****Shares**
              
              
              **Amount**
              
              
              **Additional
                    Paid In Capital**
              
              
              **Accumulated
                    Deficit**
              
              
              **Total**
                  **Stockholders’
                    Equity**Balance
                  at December 31, 2003
              
              
              13,296,204
              
              
              13,296
              
              
              5,820,697
              
              
              (2,394,096
              )
              
              3,439,897Exercise
                  of common stock warrants
              
              
              1,048,720
              
              
              1,049
              
              
              3,034,724
              
              
              -
              
              
              3,035,773Costs
                  associated with filing initial public offering post effective
                  amendment
              
              
              -
              
              
              -
              
              
              (62,421
              )
              
              -
              
              
              (62,421
              )Issuance
                  of common stock and warrants
              
              
              250,000
              
              
              250
              
              
              544,676
              
              
              -
              
              
              544,926Compensation
                  credit relating to option issuances
              
              
              -
              
              
              -
              
              
              156,157
              
              
              -
              
              
              156,157Net
                  loss
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              (3,077,888
              )
              
              (3,077,888
              )Balance
                  at December 31, 2004
              
              
              14,594,924
              
              
              14,595
              
              
              9,493,833
              
              
              (5,471,984
              )
              
              4,036,444Exercise
                  of common stock warrants
              
              
              276,180
              
              
              276
              
              
              344,949
              
              
              **-**
              
              
              345,225Issuance
                  of common stock and warrants
              
              
              3,275,013
              
              
              3,275
              
              
              1,023,695
              
              
              **-**
              
              
              1,026,970Compensation
                  expense relating to option issuances
              
              
              **-**
              
              
              **-**
              
              
              (385,691
              )
              
              **-**
              
              
              (385,691
              )Net
                  loss
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              (3,251,378
              )
              
              (3,251,378
              )Balance
                  at December 31, 2005
              
              
              18,146,117
              
              **$**
              18,146
              
              **$**
              10,476,786
              
              **$**
              (8,723,362
              )
              **$**
              1,771,570
 
 
 *See
        accompanying report of Independent Registered Public Accounting Firm and
        notes
        to the financial statements.*
 
 F-6




Oragenics,
        Inc.
 
 Statements
        of Cash Flows
 
 **Year
                  ended December 31****2005**
              
              
              **2004****Operating
                  activities**Net
                  loss
              
              **$**
              **(3,251,378**
              **)**
              $
              (3,077,888
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              **260,636**
              
              
              41,987Stock-based
                  compensation (credit) expense
              
              
              **(385,691**
              **)**
              
              156,157Changes
                  in operating assets and liabilities:Prepaid
                  expenses and other current assets
              
              
              **(3,151**
              **)**
              
              (84,258
              )Accounts
                  payable and accrued expenses
              
              
              **(54,798**
              **)**
              
              289,013Accrued
                  interest
              
              
              **-**
              
              
              (25,582
              )Deferred
                  compensation
              
              
              **-**
              
              
              (44,672
              )Net
                  cash used in operating activities
              
              
              **(3,434,382**
              **)**
              
              (2,745,243
              )**Investing
                  activity**Purchases
                  of property and equipment
              
              
              **(666,268**
              **)**
              
              (690,548
              )Net
                  cash used in investing activity
              
              
              **(666,268**
              **)**
              
              (690,548
              )**Financing
                  activities**Net
                  proceeds from issuance of common stock
              
              
              **1,372,195**
              
              
              3,518,278Net
                  proceeds from bank loan
              
              
              **615,192**
              
              
              -Repayments
                  of bank loan principal
              
              
              **(615,192**
              **)**
              
              -Net
                  cash provided by financing activities
              
              
              **1,372,195**
              
              
              3,518,278Net
                  (decrease) increase in cash and cash equivalents
              
              
              **(2,728,455**
              **)**
              
              82,487Cash
                  and cash equivalents at beginning of year
              
              
              **3,666,244**
              
              
              3,583,757Cash
                  and cash equivalents at end of year
              
              $
              **937,789**
              
              $
              3,666,244**Supplemental
                  disclosure of cash flow information**Interest
                  paid
              
              **$**
              **29,176**
              
              $
              26,024
 
 *See
        accompanying report of Independent Registered Public Accounting Firm and
        notes
        to the financial statements.*
  F-7




Oragenics,
        Inc.
 
 Notes
        to
        Financial Statements
 December 31,
        2005
  **1.
        Organization and Significant Accounting Policies**
 
 Oragenics,
        Inc. is dedicated to developing technologies associated with oral health,
        broad
        spectrum antibiotics and other general health benefits. The Company has licensed
        two unique technologies from the University of Florida: replacement therapy
        for
        the prevention of tooth decay and mutacin 1140, a novel antibiotic. The Company
        has also developed a probiotics technology to provide protection against
        the
        causative organisms of periodontal disease and has licensed two related platform
        technologies that enable the simple, fast identification of gene targets
        associated with the natural onset and progression of infections, cancers
        and
        other diseases.
 
 **Basis
        of Presentation**
 
 The
        financial statements of the Company have been prepared in accordance with
        accounting principles generally accepted in the United States of America
        including the assumption of a going concern basis which contemplates the
        realization of assets and the settlement of liabilities and commitments in
        the
        normal course of business. The Company incurred a net loss of $3,251,378
        for the
        year ended December 31, 2005 and as of that date had an accumulated deficit
        of
        $8,723,362. Cash used in operations for the years ended December 31, 2005
        and 2004 was $3,434,382 and $2,745,243, respectively, and cash flow from
        operations was negative throughout 2005. The Company expects to incur
        substantial expenditures to further develop each of its technologies. The
        Company believes its working capital at December 31, 2005 will be insufficient
        to meet the business objectives as presently structured. Management recognizes
        that the Company must generate additional capital resources or consider
        modifications to its technology development plans to enable it to continue
        as a
        going concern. Management’s plans include seeking financing, alliances or other
        partnership agreements with entities interested in the Company’s technologies,
        or other business transactions that would generate sufficient resources to
        assure continuation of the Company’s operations and research and development
        programs.
 
 The
        Company intends to seek additional funding through sublicensing arrangements,
        joint venturing or partnering, sales of rights to technology, government
        grants
        and public or private financings. During 2005 the Company conducted a private
        placement to raise capital. During 2006 the Company expects to raise additional
        capital through selling additional debt or equity securities on terms acceptable
        to the Company. There can be no assurance that additional financing will
        be
        available to the Company on acceptable terms, or at all. The Company’s future
        success depends on its ability to raise capital and ultimately generate revenue
        and attain profitability. The Company cannot be certain that additional capital,
        whether through selling additional debt or equity securities or obtaining
        a line
        of credit or other loan, will be available to it or, if available, will be
        on
        terms acceptable to the Company. If the Company issues additional securities
        to
        raise funds, these securities may have rights, preferences, or privileges
        senior
        to those of its common stock, and the Company’s current stockholders may
        experience dilution. If the Company is unable to obtain funds when needed
        or on
        acceptable terms, the Company may be required to curtail its current development
        programs, cut operating costs and forego future development and other
        opportunities. Without sufficient capital to fund its operations, the Company
        will be unable to continue as a going concern. The accompanying financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 **Concentrations
        of Credit Risk**
 
 The
        Company’s cash and cash equivalents are deposited in a financial institution and
        consist of demand deposits and overnight repurchase agreement investments
        and at
        times deposits are in excess of federally insured limits.
 
 F-8
  Oragenics,
        Inc.
 
 Notes
        to
        Financial Statements (continued)
  **1.
        Organization and Significant Accounting Policies
        (continued)**
 
 **Use
        of Estimates**
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
 **Fair
        Value of Financial Instruments**
 
 The
        fair
        value of the Company’s cash and cash equivalents, accounts payable and accrued
        expenses approximate their carrying values due to their short-term
        nature.
 
 **Cash
        Equivalents**
 
 The
        Company considers all highly liquid investments with an original maturity
        of
        three months or less when purchased to be cash equivalents.
 
 **Property
        and Equipment, net**
 
 Property
        and equipment, net is stated at cost less accumulated depreciation and
        amortization. Depreciation is provided on the straight-line method over the
        estimated useful lives of the assets (three to seven years). Leasehold
        improvements are amortized over the shorter of the estimated useful life
        or the
        lease term of the related asset (five years).
 
 **Business
        Segments**
 
 Pursuant
        to Statement of Financial Accounting Standards (SFAS) No. 131, *Disclosure
        About Segments of a Business Enterprise and Related Information* ,
        the
        Company is required to report segment information. As the Company only operates
        principally in one business segment, no additional reporting is
        required.
 
 **Stock-Based
        Compensation**
 
 The
        Company has a stock-based employee compensation plan, which is described
        more
        fully in Note 5. The Company accounts for the plan under the recognition
        and
        measurement principles of APB Opinion No. 25, *Accounting
        for Stock Issued to Employees,* and
        related Interpretations. The following table illustrates the effect on net
        loss
        per share if the Company had applied the fair value recognition provisions
        of
        SFAS No. 123, *Accounting
        for Stock-Based Compensation,* to
        stock-based employee compensation.
 
 F-9
  Oragenics,
        Inc.
 
 Notes
        to
        Financial Statements (continued)
 
 **1.
        Organization and Significant Accounting Policies
        (continued)**
 **Year
                    ended December 31****2005**
                
                
                **2004**Net
                    loss, as reported
                
                $
                (3,251,378
                )
                $
                (3,077,888
                )Effect
                    of stock-based employee compensation expense (credit) included
                    in reported
                    net loss
                
                
                (385,691
                )
                
                156,157Total
                    stock-based employee compensation expense determined under fair
                    value
                    based method for all awards
                
                
                (200,233
                )
                
                (152,545
                )Pro
                    forma net loss
                
                $
                (3,837,302
                )
                $
                (3,074,276
                )Loss
                    per share:Basic
                    and diluted - as reported
                
                $
                (0.22
                )
                $
                (0.22
                )Basic
                    and diluted - pro forma
                
                $
                (0.25
                )
                $
                (0.22
                )Shares
                    used to compute basic and diluted net loss per share
                
                
                15,082,098
                
                
                14,118,129
 **Net
        Loss Per Share**
 
 During
        all periods presented, the Company had securities outstanding that could
        potentially dilute basic earnings per share in the future, but were excluded
        from the computation of diluted net loss per share, as their effect would
        have
        been antidilutive. Because the Company reported a net loss for all periods
        presented, shares associated with the stock options and warrants are not
        included because they are antidilutive. Basic and diluted net loss per share
        amounts are the same for the periods presented.
 
 **Revenue
        Recognition**
 
 Grant
        revenues are recognized as the reimbursable expenses are incurred over the
        life
        of the related grant.
 
 **Impairment
        of Long-Lived Assets**
 
 The
        Company periodically reviews their long-lived assets for impairment and reduces
        the carrying value to fair value whenever events or changes in circumstances
        indicate that the carrying value may not be recoverable. There were no
        impairment losses recorded during the years ended December 31, 2005 and
        2004.
 
 **Research
        and Development Expenses**
 
 Expenditures
        for research and development are expensed as incurred. The majority of the
        Company’s activities are research and development related.
 
 F-10
 
 Oragenics,
        Inc.
 
 Notes
        to
        Financial Statements (continued)
 
 **1.
        Organization and Significant Accounting Policies
        (continued)**
 
 **Income**  **Taxes**
 
 Income
        taxes are accounted for under the asset and liability method. Deferred tax
        assets and liabilities are recognized for future tax consequences attributable
        to differences between the financial statement carrying amounts of existing
        assets and liabilities and their respective tax bases and operating loss
        and tax
        credit carryforwards. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered or settled. The
        effect
        on deferred tax assets and liabilities of a change in tax rate is recognized
        in
        operations in the period that includes the enactment date. Deferred tax assets
        are reduced to estimated amounts expected to be realized by the use of a
        valuation allowance.
 
 **Recently
        Issued Accounting Pronouncements**
 
 In
        December 2004, the FASB issued Statement of Financial Accounting Standards
        No.
        123 (revised 2004) "Share Based Payment" ("FAS 123(R)"), which is a revision
        of
        FASB Statement No. 123 "Accounting for Stock Based Compensation" ("FAS 123").
        This statement supersedes APB Opinion No. 25, "Accounting for Stock Issued
        to
        Employees" ("Opinion 25") which allowed companies to use the intrinsic value
        method of valuing share-based payment transactions and amends FAS Statement
        No.
        95, "Statement of Cash Flows". FAS 123(R) requires all share-based payments
        to
        employees, including grants of employee stock options, to be recognized in
        the
        income statement based on their fair values. Pro forma disclosure is no longer
        an alternative. The Company will adopt FAS 123 (R) on January 1,
        2006.
 
 FAS
        123(R) permits public companies to adopt its requirements using one of two
        methods. A "modified prospective" method in which compensation cost is
        recognized beginning with the effective date (a) based on the requirements
        of
        FAS 123(R) for all share-based payments granted after the effective date
        and (b)
        based on the requirements of FAS 123 for all awards granted to employees
        prior
        to the effective date of FAS 123(R) that remain unvested on the effective
        date.
        A "modified retrospective" method which includes the requirements of the
        modified prospective method described above, but also permits entities to
        restate based on the amounts previously recognized under FAS 123 for purposes
        of
        pro forma disclosures either (a) all prior periods presented or (b) prior
        interim periods of the year of adoption. The Company will determine which
        method
        to adopt prior to the effective date of FAS 123(R).
  The
        impact of adoption of FAS 123(R) cannot be accurately predicted at this time
        since it will depend on levels of share-based payments granted in the future.
        However, had the Company adopted FAS 123(R) in prior periods, the impact
        of the
        standard would have approximated the impact of FAS 123 as described in the
        disclosure of pro forma net loss and loss per share in Note 1 to the financial
        statements. FAS 123(R) also requires the benefits of tax deductions in excess
        of
        recognized compensation cost to be reported as a financing cash flow, rather
        than as an operating cash flow as required under current literature. This
        requirement will reduce net operating cash flows and increase net financing
        cash
        flows in periods after adoption. While the Company cannot estimate what those
        amounts will be in the future (because they depend on, among other things,
        when
        employees exercise stock options), there were no amounts of operating cash
        flows
        recognized in prior periods for such excess tax deductions in 2005 and 2004.
 
 As
        permitted by FAS 123, the Company currently accounts for share-based payments
        using Opinion 25's intrinsic value method and, as such, generally recognizes
        no
        compensation cost for employee stock options.
 
 F-11
 Oragenics,
          Inc.
 
 Notes
          to
          Financial Statements (continued)
 
 **2.
          Property and Equipment, net**
 
 Property
          and equipment, net consists of the following as of December 31,
          2005:
 
 Laboratory
                    equipment
                
                $
                876,343Leasehold
                    improvements
                
                
                **481,606**Office
                    and computer equipment
                
                
                **55,107****1,413,056**Accumulated
                    depreciation and amortization
                
                
                **(316,492**
                **)**$
                1,096,564
 
 Depreciation
          and amortization expense for 2005 and 2004 was $260,636 and $41,987,
          respectively.
 
 
 
 **3.
          Related Party Transactions**
 
 At
          December 31, 2005 and 2004, $55,000 and $75,000, respectively, was owed
          and
          included in accounts payable and accrued expenses for consulting services
          provided by a stockholder of the Company in prior years. No interest is
          being
          accrued on this outstanding debt.
 
 In
          January 2004, payments were made to an officer totaling $41,539 in settlement
          of
          deferred compensation and accrued interest thereon.
 
 In
          July
          2005, the Company entered into a severance agreement with its former Chief
          Executive Officer (CEO) agreeing to continue payments of $15,000 per month
          for
          one year post separation from employment with the Company. The agreement
          requires the former CEO to be available as a consultant to management.
          In the
          fourth quarter of 2005, $40,500 of these payments were deferred and included
          in
          accounts payable and accrued expenses at December 31, 2005. Beginning January
          1,
          2006, the Company continued to defer 50% of the payments due to the former
          CEO.
          Interest is not being accrued on the deferred amounts.
 
 In
          the
          fourth quarter of 2005, five members of management and the board of directors
          began deferring a portion of their compensation. In December 2005, three
          members
          of management were paid the amounts deferred, however, at December 31,
          2005 two
          officers were owed $52,500 and amounts due to directors totaled $3,500.
          Interest
          is not being accrued on the deferred amounts.
 
 F-12
  Oragenics,
          Inc.
 
 Notes
          to
          Financial Statements (continued)
 
 **4.
          Business Loan Agreement**
 
 On
          February 24, 2005, the Company entered into a Business Loan Agreement with
          a
          bank that funded $615,192 of laboratory equipment purchases. The Company
          made
          monthly payments of interest and principal, having also made an accelerated
          payment of $200,000 in October 2005 and a final payment of approximately
          $296,000 in December 2005. Thus, the entire loan balance had been repaid
          at
          December 31, 2005. The loan had a term of 37 months with the first month’s
          payment of interest only and the remaining monthly payments of principal
          and
          interest of approximately $19,000 per month. Interest was calculated at
          the
          prime rate as published in the Wall Street Journal (8.00% in December,
          2005)
          plus 1.00%. The loan was collateralized by the equipment purchased, as
          well as
          all equipment owned by the Company at the time of the agreement. The original
          loan terms required the Company to maintain working capital and tangible
          net
          worth of at least $750,000 and not allow debt to be greater than 50% of
          stockholders’ equity. Effective September 30, 2005, the bank amended the working
          capital covenant to provide that working capital not be lower than $350,000.
          The
          bank also amended the debt-to-equity covenant whereby debt could not be
          greater
          than 56% of stockholders’ equity. Thus, the Company was in compliance with the
          loan covenants throughout the term of the loan. The Company incurred interest
          of
          $29,176 during the year.
  **5.
          Stockholders’ Equity**
 
 **Common
          Stock**
 
 On
          June
          24, 2003, the Company completed the filing of 2,400,000 units at $1.25
          per unit
          as an initial public offering (IPO) for gross proceeds of $3,000,000. Each
          unit
          consisted of one share of the Company’s common stock, one-half Series A Common
          Share Purchase Warrant and one-half Series B Common Share Purchase Warrant.
          One
          whole Series A warrant allowed the holder to purchase a share of the Company’s
          stock at $2.00 per share until December 24, 2003. All Series A warrants
          were
          exercised before the expiration date providing proceeds to the Company
          of
          $2,400,000. One whole Series B warrant allowed the holder to purchase a
          share of
          the Company’s stock at $3.00 per share until March 24, 2004. A total of 995,400
          Series B warrants were exercised on or before March 24, 2004 providing
          proceeds
          of $2,986,200 and the remaining 204,600 Series B warrants expired unexercised
          on
          March 24, 2004. In addition to receiving a cash commission for each share
          sold,
          the underwriting agent for the IPO received 100,000 shares of common stock
          of
          the Company and warrants to purchase 500,000 shares of common stock of
          the
          Company at $1.25 per share until June 24, 2005. All 500,000 underwriter
          warrants
          were exercised, of which 276,180 shares of common stock were issued in
          2005
          providing additional proceeds to the Company of $345,225. The cost of the
          IPO,
          including the filing of a post effective amended registration statement
          in
          October 2004, was $779,809 including the agent’s commission.
 
 On
          November 30, 2004, the Company completed a private placement of its stock,
          through a placement agent, selling 25 units at $27,500 per unit totaling
          $687,500. Each unit consisted of 10,000 shares of common stock and 5,000
          warrants to purchase common stock at a price of $3.50 per share until November
          30, 2008. The total cost associated with this financing was approximately
          $142,500 including the underwriter’s commission.
 
 On
          May
          23, 2005, Oragenics entered into a financing arrangement whereby an investor
          has
          agreed to purchase from the Company up to $9,000,000 of its common stock
          over a
          30 month period. The arrangement provides that on each trading day, the
          Company
          has the right to sell to the investor $15,000 of its common stock at a
          price
          based upon the market price of the common stock. The investor does not
          have the
          right or obligation to purchase shares of our common stock from us in the
          event
          that the price of our common stock is less than $0.75. The Company incurred
          costs of approximately $150,000 for legal, accounting, stock exchange,
          and
          regulatory fees in connection with this financing arrangement. During the
          year,
          the Company sold 22,092 of its common stock to the investor pursuant to
          the
          arrangement for total proceeds of $35,000.
 
 F-13
  Oragenics,
          Inc.
 
 Notes
          to
          Financial Statements (continued)
  **5.
          Stockholders’ Equity (continued)**
 
 On
          December 14, 2005, the Company issued a total of 2,937,500 shares of its
          common
          stock and warrants to purchase 2,937,500 shares of our common stock in
          a private
          placement to accredited investors. The Company received gross proceeds
          of
          $1,175,000 in the private placement and incurred estimated costs of
          approximately $70,000 resulting in net proceeds of approximately $1,105,000.
          The
          warrants representing shares of common stock are exercisable by the accredited
          investors at any time over a two-year period at an exercise price of $0.60
          per
          share. In connection with the termination of an investment advisor agreement,
          the Company issued warrants on similar terms as those issued in the private
          placement. The warrants represent the right to acquire 130,000 shares of
          common
          stock, of which 95,000 are at an exercise price of $0.60 per share and
          35,000
          are at an exercise price of $0.40 per share.
 
 **Stock
          Compensation Plan**
 
 The
          Company’s 2002 Stock Option and Incentive Plan (the Plan) was adopted by the
          Board of Directors (the Board). The purpose is to advance the interests
          of the
          Company by affording certain employees and directors of the Company and
          key
          consultants and advisors an opportunity to acquire or increase their proprietary
          interests in the Company. The Plan authorizes the grant of stock options
          (incentive and non-statutory), stock appreciation rights and restricted
          stock.
          As of December 31, 2005, the Company had not awarded stock appreciation
          rights
          or restricted stock under the Plan. The Company has reserved an aggregate
          of
          1,500,000 shares of common stock for grants under the Plan, of which 240,000
          shares are available for future grants as of December 31, 2005. The exercise
          price of each option shall be determined by the Board and an option’s maximum
          term is ten years.
 
 In
          September 2002, the Company issued 195,000 options that were re-priced
          upon the
          change in the initial public offering price. As a result, these options
          were
          subjected to variable accounting treatment. In accordance with Financial
          Accounting Standards Board Interpretation No. 44, *Accounting
          for Certain Transactions Involving Stock Compensation* (FIN
          44), stock options must be accounted for as variable under such circumstances.
          Variable accounting requires companies to re-measure compensation costs
          for the
          variable options until the options are exercised, cancelled, or forfeited
          without replacement. Compensation is dependent on fluctuations in the quoted
          stock prices for the Company's common stock. Such compensation costs will
          be
          recognized over a three-year vesting schedule until the options are fully
          vested, exercised, cancelled, or forfeited, after which time the compensation
          will be recognized immediately at each reporting period. During 2004, the
          Company recognized compensation expense of $156,157. During 2005, the Company
          recognized a credit to compensation expense of $385,691 as a result of
          the
          decline in the fair market value of the Company’s common stock below the price
          of $1.25 at the IPO.
 
 F-14
  Oragenics,
            Inc.
 
 Notes
            to
            Financial Statements (continued)
  **5.
            Stockholders’ Equity (continued)**
 
 A
            summary
            of the status of the Company’s outstanding stock options as of December 31, 2005
            and 2004 and changes during the periods ending on those dates is presented
            below:
 
 **Options**
                  
                  
                  **Option
                      Price Per Share**
                  
                  
                  **Weighted
                      Average Exercise Price**Outstanding
                      at January 1, 2004
                  
                  
                  600,000
                  
                  $
                  1.25
                      - 4.00
                  
                  $
                  2.22Forfeited
                  
                  
                  (20,000
                  )
                  
                  2.65
                  
                  
                  2.65Granted
                  
                  
                  175,000
                  
                  
                  3.30
                      - 4.25
                  
                  
                  3.83Granted
                  
                  
                  315,000
                  
                  
                  2.25
                      - 2.65
                  
                  
                  2.38Outstanding
                      at December 31, 2004
                  
                  
                  1,070,000
                  
                  
                  1.25
                      - 4.25
                  
                  
                  2.52Forfeited
                  
                  
                  (392,000
                  )
                  
                  1.25
                      - 3.30
                  
                  
                  2.25Granted
                  
                  
                  582,000
                  
                  
                  0.53
                      - 2.25
                  
                  
                  1.00Outstanding
                      at December 31, 2005
                  
                  
                  1,260,000
                  
                  
                  0.53
                      - 4.25
                  
                  $
                  1.90Exercisable
                      at end of year
                  
                  
                  686,664
                  
                  $
                  0.53
                      - 4.25
                  
                  $
                  1.80
 
 The
            range
            of exercise price is $0.53 to $4.25 per share. The weighted-average per
            option
            fair value of options granted during 2005 and 2004 was $0.62 and $1.48,
            respectively, and the weighted average remaining contractual life of
            those
            options is 4.3 years. Options vest over a period of three to four years
            from
            respective grant dates and the options expire 5 years after the date
            of grant.
            The fair value of these options was estimated at the date of grant using
            the
            Black-Scholes option pricing model with the following weighted-average
            assumptions: weighted average risk-free interest rate of 1.00-2.87%;
            dividend
            yields of 0%; weighted-average volatility factors of the expected market
            price
            of the Company’s common stock of 55%; and an expected life of the option of four
            years.
  **6.
            Licenses**
 
 The
            Company has two license agreements with the University of Florida Research
            Foundation, Inc. (“UFRF”) for their technologies. The Company issued 599,940
            shares of common stock as partial consideration. Beginning in 2004, the
            license
            agreements provide for, among other things, the Company to make minimum
            annual
            research expenditures of $1,000,000 and to adhere to specific milestones.
            Beginning in 2005, the Company is required to pay minimum royalties on
            product
            sales of $50,000 annually per agreement. If the Company fails to perform
            certain
            of its obligations, UFRF may terminate the license agreements.
 
 F-15
 
 Oragenics,
            Inc.
 
 Notes
            to
            Financial Statements (continued)
 
 **6.
            Licenses (continued)**
 
 In
            March
            2004, the Company licensed from iviGene Corporation (iviGene), a company
            whose
            major shareholders also own a significant number of shares of the Company’s
            common stock, applications of two novel technologies referred to as IVIAT
            and
            CMAT. The license provides the Company with exclusive worldwide rights
            to this
            broad platform technology in the areas of cancer and tuberculosis, as
            well as
            agricultural and other non-human uses. In return, the Company will pay
            royalties
            on revenues it is able to generate from any products developed using
            the
            technology, including royalties on sublicense fees, milestone payments
            and
            future product sales. Under the terms of the license with iviGene, the
            Company
            is not obligated to make any payments to iviGene until it has achieved
            certain
            milestone or royalty payments, however, Oragenics is required to spend
            up to
            $200,000 annually on these technologies to maintain its license. To support
            the
            research for this technology in 2004, the Company received a Phase I
            Small
            Business Innovation Research Grant from the National Institute of Allergy
            and
            Infectious Diseases (NIAID) of the National Institutes of Health (NIH)
            that paid
            to the Company $96,210. In 2005 Oragenics did not meet the requirements
            of
            committing two full-time staff or spending at least $200,000, however,
            the
            Company obtained a waiver of these provisions from iviGene, thus maintaining
            our
            license arrangement with them.
  **7.
            Retirement Plan**
 
 In
            January 2004, the Company established a defined contribution retirement
            plan,
            replacing the previous plan that had been established in 2001. The new
            plan
            covers all employees and provides for a Company match of up to 3% of
            all
            employee contributions to the plan. During 2005 and 2004, employee contributions
            were limited to $10,000 and $9,000, respectively, except for individuals
            50
            years or older for which the contribution limitations were $12,000 and
            $10,500,
            respectively. Total matching contributions made by the Company in 2005
            and 2004
            were $31,895 and $28,315, respectively.
  **8.
            Income Taxes**
 
 At
            December 31, 2005, the Company had temporary differences between the
            carrying
            amounts of assets and liabilities for financial reporting purposes and
            their
            respective income tax bases, as measured by enacted state and federal
            tax rates,
            as follows:
 Deferred
                        tax assets:Net
                        operating loss carryforward
                    
                    **$**
                    3,170,707Consulting
                        services
                    
                    
                    57,010Non
                        qualified stock options
                    
                    
                    20,320Tax
                        credits
                    
                    
                    195,326Total
                        deferred tax assets
                    
                    
                    3,443,363Less
                        valuation allowance
                    
                    
                    (3,443,363
                    )Total
                        net deferred taxes
                    
                    **$**
                    -
 
 F-16
 
 Oragenics,
              Inc.
 
 Notes
              to
              Financial Statements (continued)
  **8.
              Income Taxes (continued)**
 
 The
              following is a reconciliation of tax computed at the statutory federal
              rate to
              the income tax benefit in the statements of operations for the years
              ended
              December 31, 2005 and 2004:
 
 **Year
                        ended December 31****2005**
                    
                    
                    **2004**Income
                        tax benefit computed at statutory federal rate of 34%
                    
                    $
                    (1,105,469
                    )
                    $
                    (1,046,482
                    )State
                        income tax benefits, net of federal expense/benefit
                    
                    
                    (118,025
                    )
                    
                    (111,727
                    )Change
                        in valuation allowance
                    
                    
                    1,387,567
                    
                    
                    1,178,040Non-deductible
                        expenses
                    
                    
                    (98,021
                    )
                    
                    60,721Research
                        and development credit
                    
                    
                    (66,052
                    )
                    
                    (80,552
                    )Total
                    
                    $
                    -
                    
                    $
                    -
 
 SFAS
              No.
              109, *Accounting
              for Income Taxes* ,
              requires a valuation allowance to reduce the deferred tax assets reported
              if,
              based on the weight of the evidence, it is more likely than not that
              some
              portion or all of the deferred tax assets will not be realized. After
              consideration of all of the evidence, both positive and negative, management
              has
              determined that a valuation allowance of $3,443,363 at December 31,
              2005 is
              necessary to reduce the deferred tax assets to the amount that will
              more likely
              than not be realized. The change in the valuation allowance for the
              year ended
              December 31, 2005 was $1,387,567. At December 31, 2005, the Company has
              available net operating loss carryforwards of approximately $8,426,000
              that
              begin to expire in 2021. The Company also has a research and development
              credit
              carryforward of $195,326 that is available to reduce future tax liabilities
              through 2025.
 
 In
              connection with the initial public offering and other equity financings
              undertaken, it is possible that the Company has experienced a change
              in control
              within the meaning of Section 382 of the Internal Revenue Code. If
              so, the
              ability of the Company to use its net operating losses may be limited
              and
              subject to annual limitation that could result in the expiration of
              some net
              operating losses prior to utilization.
 
 F-17
 Oragenics,
                Inc.
 
 Notes
                to
                Financial Statements (continued)
 
 **9.
                Commitments and Contingencies**
 
 The
                Company leased its laboratory and office space, as well certain equipment,
                under
                a 12-month cancelable operating lease with annual renewal options.
                That lease
                agreement terminated in November 2004 when the Company moved into
                a new
                facility. The rent expense incurred through November 2004 was $47,376.
 
 The
                new
                facility is being leased from a real estate developer for a term
                of five years
                subject to renewal provisions that include 3% increases in lease
                payments. This
                operating lease agreement required the Company to pay a deposit of
                $6,400 and
                provides for monthly lease payments of $6,400, exclusive of utilities,
                insurance, sales taxes and real estate taxes. Total rent expense
                under this
                lease was $81,653 and $10,184 for the years ended December 31, 2005
                and 2004,
                respectively. In addition, the Company has entered into certain operating
                leases
                for office equipment.
 
 Future
                annual minimum payments under all noncancelable operating leases
                are
                approximately as follows:
 
 Year
                          ended:2006
                      
                      $
                      86,6002007
                      
                      
                      88,6002008
                      
                      
                      87,8002009
                      
                      
                      82,600Thereafter
                      
                      
                      -$
                      345,600
 **10.
                Unaudited Quarterly Financial Information**
 
 The
                quarterly interim financial information shown below has been prepared
                by the
                Company’s management and is unaudited. It should be read in conjunction with
                the
                audited financial statements appearing herein.
 
 **2005****First**
                      
                      
                      **Second**
                      
                      
                      **Third**
                      
                      
                      **Fourth**Total
                          operating expenses
                      
                      $
                      879,105
                      
                      $
                      874,963
                      
                      $
                      750,003
                      
                      $
                      760,006Net
                          loss
                      
                      
                      (866,130
                      )
                      
                      (872,681
                      )
                      
                      (751,172
                      )
                      
                      (761,395
                      )Loss
                          per share:Basic
                          and Diluted
                      
                      $
                      (0.06
                      )
                      $
                      (0.06
                      )
                      $
                      (0.05
                      )
                      $
                      (0.05
                      )
  **2004****First**
                            
                            
                            **Second**
                            
                            
                            **Third**
                            
                            
                            **Fourth**Revenue
                            
                            $
                            -
                            
                            $
                            44,235
                            
                            $
                            118,642
                            
                            $
                            33,333Total
                                operating expenses
                            
                            
                            544,461
                            
                            
                            723,202
                            
                            
                            745,561
                            
                            
                            1,307,738Net
                                loss
                            
                            
                            (537,440
                            )
                            
                            (667,662
                            )
                            
                            (613,770
                            )
                            
                            (1,259,016
                            )Loss
                                per share:Basic
                                and Diluted
                            
                            $
                            (0.04
                            )
                            $
                            (0.05
                            )
                            $
                            (0.04
                            )
                            $
                            (0.09
                            )
  F-18
 Oragenics,
                Inc.
 
 Notes
                to
                Financial Statements (continued)
 
 **11.
                Subsequent Event**
 
 On
                March
                6, 2006, the Company issued a total of 1,500,000 shares of our common
                stock and
                warrants to purchase 1,500,000 shares of our common stock in a private
                placement
                to accredited investors. The Company received gross proceeds of $600,000
                in the
                private placement and incurred estimated costs of approximately $75,000
                resulting in net proceeds of approximately $525,000. There was no
                underwriter or
                placement agent associated with this transaction. Each warrant is
                exercisable on
                or before January 6, 2008 to acquire one share of common stock at
                a price of
                $0.60 per share.
 
 F-19




**SIGNATURES**
 
 Pursuant
        to the requirements of Section 13 and 15(d) of the Securities Exchange Act
        of
        1934, the registrant has duly caused this amended report to be signed on
        its
        behalf by the undersigned, thereunto duly authorized.
 
 Dated:
        March 23, 2006
 
 ORAGENICS,
        INC.
 (Registrant)
 
 
 By :
        /s/
        Robert T. Zahradnik
 Robert
        T.
        Zahradnik, Chief Executive Officer and President
  By :
        /s/
        Paul A. Hassie
 Paul
        A.
        Hassie, Chief Financial Officer, Secretary and
 Treasurer
        (Principal Financial and Accounting Officer)
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this amended
        report
        has been signed below by the following persons on behalf of the registrant
        and
        in the capacities and on the dates indicated.
 **Signature**
                **Title**
                **Date**/s/
                    Robert T. Zahradnik
                Chief
                    Executive Officer and President
                March
                    23, 2006Robert
                    T. Zahradnik/s/
                    Paul A. Hassie
                Chief
                    Financial Officer
                March
                    23, 2006Paul
                    A. Hassie/s
                    David J. Gury
                Chairman
                March
                    23, 2006David
                    J. Gury/s/
                    Brian Anderson
                Director
                March
                    23, 2006Brian
                    Anderson/s/
                    George T. Hawes
                Director
                March
                    23, 2006George
                    T. Hawes/s/
                    Jeffrey D. Hillman
                Director
                March
                    23, 2006Jeffrey
                    D. Hillman
  64
  **Exhibit
        Index**
  **Incorporated
                by
                Reference****Exhibit**
                **Number**
              **Exhibit
                  Description**
              
              **Form**
              **File
                  No**
              **Exhibit**
              **Filing
                  Date**
              **Filed**
                **Herewith**3.1
              Amended
                  and Restated Articles of Incorporation
              
              SB-2
              333-100568
              3.3
              10/16/023.2
              Bylaws
              
              SB-2
              333-100568
              3.2
              10/16/024.1
              Specimen
                  Stock Certificate
              
              SB-2
              333-100568
              4.1
              10/16/024.2
              Form
                  of November 2004 private placement warrant
              
              10-KSB
              000-50614
              4.3
              03/14/054.3
              Form
                  of November 2004 private placement Subscription Agreement (including
                  registration rights)
              
              10-KSB
              000-50614
              4.4
              03/14/054.4
              Warrant
                  Amendment Agreement (including form of replacement warrant) between
                  the
                  Company and The Arbitrage Fund, Mark Campbell, The Harold T. Grisham
                  Living Trust and Westminster Securities dated May 31, 2005 to November
                  2004 warrant
              
              SB-2
              333-125660
              4.5
              06/09/054.5
              Common
                  Stock Purchase Agreement with Fusion Capital Fund II, LLC, dated
                  as of May
                  23, 2005
              
              8-K
              000-50614
              4.5
              05/23/054.6
              Registration
                  Rights Agreement with Fusion Capital Fund II, LLC, dated as of
                  May 23,
                  2005
              
              8-K
              000-50614
              4.6
              05/23/054.7
              Securities
                  Purchase Agreement, dated November 20, 2005, among the purchasers
                  and
                  Oragenics, Inc.
              
              S-3
              333-131015
              4.2
              01/13/064.8
              Registration
                  Rights Agreement dated November 20, 2005, among the investors and
                  Oragenics, Inc.
              
              S-3
              333-131015
              4.3
              01/13/064.9
              Specimen
                  private placement December 2005 warrant certificate
              
              S-3
              333-131015
              4.4
              01/13/0610.1
              License
                  Agreement between the Company and the University of Florida Research
                  Foundation, Inc. effective August 4, 1998 for Replacement Therapy
                  for
                  Dental Caries (the “Replacement Therapy License
                  Agreement”)
              
              SB-2
              333-100568
              10.1
              10/16/0210.2
              First
                  Amendment to Replacement Therapy License Agreement dated September
                  15,
                  2000
              
              SB-2
              333-100568
              10.2
              10/16/0210.3
              Second
                  Amendment to Replacement Therapy License Agreement dated June
                  2002
              
              SB-2
              333-100568
              10.3
              10/16/0210.4
              Third
                  Amendment to Replacement Therapy License Agreement dated September
                  25,
                  2002
              
              SB-2
              333-100568
              10.4
              10/16/0210.5
              Fourth
                  Amendment to Replacement Therapy License Agreement and Antimicrobial
                  Polypeptide License Agreement dated March 2003
              
              SB-2/A-3
              333-100568
              10.36
              4/9/0310.6
              License
                  Agreement between the Company and the University of Florida Research
                  Foundation, Inc. effective June 22, 2000 (the “Antimicrobial Polypeptide
                  License Agreement”)
              
              SB-2
              333-100568
              10.5
              10/16/02
  
  10.7
              First
                  Amendment to the Antimicrobial Polypeptide License Agreement dated
                  September 15, 2000
              
              SB-2
              333-100568
              10.6
              10/16/0210.8
              Second
                  Amendment to the Antimicrobial Polypeptide License Agreement dated
                  June
                  10, 2002
              
              SB-2
              333-100568
              10.7
              10/16/0210.9
              Third
                  Amendment to the Antimicrobial Polypeptide License Agreement dated
                  September 25, 200210.10
              Equity
                  Agreement between the Company and the University of Florida Research
                  Foundation dated August 4, 1998 (including registration
                  rights)
              
              SB-2/A-2
              333-100568
              10.8
              02/10/0310.11
              Escrow
                  Agreement between our principals, the Company and Computershare
                  Trust
                  Company
              
              SB-2
              333-100568
              99.10
              10/16/0210.12
              Value
                  Escrow Agreement between the Company, the University of Florida
                  Research
                  Foundation, Inc. and Computershare Trust Company
              
              SB-2
              333-100568
              99.11
              10/16/0210.20+
              2002
                  Stock Option and Incentive Plan
              
              SB-2
              333-100568
              99.16
              10/16/0210.21+
              Amendment
                  No. 1 to the 2002 Stock Option and Incentive Plan
              
              DEF
                  14A
              333-100568
              App.
                  E
              04/22/0410.31
              Proprietary
                  Information Agreements between the Company, Brian Anderson, Robert
                  Zahradnik and Howard Kuramitsu,
              
              SB-2
              333-100568
              99.23
              10/16/0210.32*
              Proprietary
                  Information and Invention Agreement between the Company and Jeffrey
                  D.
                  Hillman
              
              SB-2
              333-100568
              99.4
              10/16/0210.43*
              Employment
                  agreement of Jeffrey Hillman
              
              10-KSB
              000-50614
              10.43
              03/17/0410.44*
              Employment
                  agreement of Paul Hassie
              
              10-KSB
              000-50614
              10.44
              03/17/0410.45
              Memorandum
                  of Agreement - License Agreement between iviGene Corporation and
                  the
                  Company
              
              10-QSB
              000-50614
              10.1
              08/11/0410.46
              Letter
                  dated February 3, 2006 waiving iviGene license requirements for
                  2005
              
              10-KSB
              000-50614
              10.46
              3/8/0610.47
              Lease
                  Agreement between the Company and Hawley-Wiggins LLC dated January
                  28,
                  2004; Subordination Agreement dated April 14, 2004; and First Amendment
                  dated November 15, 2004
              
              10-KSB
              001-32188
              10.46
              03/14/0510.48
              Termination
                  Agreement between Westrock Advisors, Inc. and Oragenics,
                  Inc.
              
              S-3
              333-131015
              10.1
              1/13/0610.49
              Agreement
                  of Separation and Release between the Company and Mento S.
                  Soponis
              
              10-QSB
              001-32188
              10.1
              08/11/0510.50
              Employment
                  Agreement of Robert Zahradnik
              
              10-QSB
              001-32188
              10.2
              08/11/0516.0
              Letter
                  regarding change in certifying accountant
              
              8-K
              001-32188
              16.0
              08/29/0523.1
              Consent
                  of Kirkland Russ Murphy & Tapp, PA
              
              
              
              
              
              X23.2
              Consent
                  of Ernst & Young LLP
              
              
              
              
              
              X
  
 31.1
              Rule
                  13a-14(a)/15d-14(a) Certification
              
              
              
              
              
              X31.2
              Rule
                  13a-14(a)/15d-14(a) Certification
              
              
              
              
              
              X32.1
              Section
                  1350 Certifications
              
              
              
              
              
              X32.2
              Section
                  1350 Certifications
              
              
              
              
              
              X
 __________________
 *
        management contract
 +
        compensatory plan or arrangement