**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
                2008**




o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE TRANSITION PERIOD FROM _____________ TO
                __________________**




**Commission
      file number 000-50601**




**EUGENE
      SCIENCE, INC.**


**(Exact
      name of registrant as specified in its charter)**




**Delaware**
            
            **33-0827004****(State
                or other jurisdiction**
              **of
                incorporation or organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                No.)**





**8TH
      FLOOR, LG PALACE BUILDING, 165-8 DONGGYO-DONG, MAPO-GU, SEOUL,
      KOREA**


**(Address
      of principal executive offices)**




**Registrant’s
      telephone number, including area code: 82-2-338-6284**




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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large
      accelerated filer o


Accelerated
      filer o Non-accelerated filer o Smaller
      reporting company þ





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





The
      number of shares of the registrant’s common stock outstanding as of June 30,
      2008 was 40,315,705 shares.





**PART
      I—FINANCIAL INFORMATION**




**Item
      1. Financial Statements.**


**EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 
 CONSOLIDATED
        FINANCIAL STATEMENTS
 
 JUNE
        30,
        2008
 
 (UNAUDITED)
  
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **CONTENTS**
              
              **PAGE****FINANCIAL
                  STATEMENTS**Consolidated
                  Interim Balance Sheets
              
              3Consolidated
                  Interim Statements of Operations and Comprehensive Loss
              
              5Consolidated
                  Interim Statements of Stockholders’ Deficit
              
              6Consolidated
                  Interim Statements of Cash Flows
              
              7Notes
                  to Consolidated Financial Statements
              
              9
                  -
                  23
  2
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES** ****
 **CONSOLIDATED** **INTERIM
        BALANCE SHEETS**
 **JUNE
        30, 2008 AND DECEMBER 31, 2007**
 **(UNAUDITED)**
  
 **ASSETS**June 30, 2008
              
              Dec. 31, 2007Current
                  assets:Cash
                  and cash equivalents (Note 2)
              
              $
              7,319
              
              $
              32,342Restricted
                  cash (Note 3)
              
              
              1,604
              
              
              6,112Accounts
                  receivable (Notes 2 and 17)
              
              
              107,884
              
              
              175,504Inventories
                  (Note 2)
              
              
              35,414
              
              
              39,952Due
                  from related parties (Note 4)
              
              
              -
              
              
              52,308Receivable
                  from unsettled contract (Note 6)
              
              
              568,971
              
              
              650,959Prepaid
                  expenses and other current assets (Note 7)
              
              
              172,538
              
              
              156,125Total
                  current assets
              
              
              893,730
              
              
              1,113,302Property,
                  plant and equipment, net (Note 5)
              
              
              1,158,228
              
              
              1,482,680Other
                  assets:Investments
                  (Note 8)
              
              
              1
              
              
              354Intangible
                  assets
              
              
              112,606
              
              
              141,688Deposits
              
              
              6,907
              
              
              8,795Total
                  other assets
              
              
              119,514
              
              
              150,837Total
                  assets
              
              $
              2,171,472
              
              $
              2,746,819
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
 3
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED** **INTERIM
        BALANCE SHEETS**
 **JUNE
        30, 2008 AND DECEMBER 31, 2007**
 **(UNAUDITED)**
  
 
 **LIABILITIES
                  AND STOCKHOLDERS’ DEFICIT**June 30, 2008
              
              Dec. 31, 2007Current
                  liabilities:Accounts
                  payable and accrued expense
              
              $
              2,971,262
              
              $
              2,942,034Accrued
                  interest payable
              
              
              4,758,231
              
              
              4,848,221Deposit
                  from customers
              
              
              88,459
              
              
              98,951Loan
                  payable, current portion (Note 9)
              
              
              4,483,926
              
              
              5,548,996Convertible
                  debenture (Note 10)
              
              
              2,683,766
              
              
              2,250,000Due
                  to related parties (Note 11)
              
              
              167,210
              
              
              65,065Total
                  current liabilities
              
              
              15,152,854
              
              
              15,753,267Long-term
                  liabilities:Accrued
                  severance benefits (Note 12)
              
              
              19,965
              
              
              316,232Rental
                  deposits
              
              
              57,317
              
              
              64,116Long-term
                  debt, net of current portion (Note 9)
              
              
              2,030,721
              
              
              2,135,087Long-term
                  liabilities
              
              
              2,108,003
              
              
              2,515,435Total
                  liabilities
              
              
              17,260,857
              
              
              18,268,702Stockholders'
                  deficit:Common
                  stocks (Note 13)
              
              
              41,116
              
              
              41,116Additional
                  paid-in capital
              
              
              16,579,251
              
              
              16,579,251Accumulated
                  other comprehensive loss
              
              
              (1,753,483
              )
              
              (3,307,874
              )Accumulated
                  deficit
              
              
              (29,956,269
              )
              
              (28,834,376
              )Total
                  stockholders’ deficit
              
              
              (15,089,385
              )
              
              (15,521,883
              )Total
                  liabilities and stockholders' deficit
              
              $
              2,171,472
              
              $
              2,746,819
  The
          accompanying notes are an integral part of these consolidated financial
          statements .
 4
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        INTERIM STATEMENTS OF OPERATION** **S
        AND COMPREHENSIVE LOSS**
 **THREE
        MONTHS** **AND
        SIX MONTHS ENDED JUNE 30, 2008 AND 2007**
 **(UNAUDITED)**
  
 
 Three Months
                Ended
                June 30, 2008
              
              Three Months
                Ended
                June 30, 2007
              
              Six Months
                Ended
                June 30, 2008
              
              Six Months
                Ended
                June 30, 2007
                (Restated,
                Note 18)Net
                  Sales (Note 15)
              
              $
              204,237
              
              $
              154,808
              
              $
              327,657
              
              $
              309,575Cost
                  of goods sold (Note 15)
              
              
              48,294
              
              
              123,131
              
              
              129,621
              
              
              160,871Gross
                  profits
              
              
              155,943
              
              
              31,677
              
              
              198,036
              
              
              148,704Operating
                  expenses
              
              
              360,473
              
              
              330,174
              
              
              792,657
              
              
              738,928Operating
                  losses
              
              
              (204,530
              )
              
              (298,497
              )
              
              (594,621
              )
              
              (590,224
              )Other
                  Income (expenses):Allowance
                  for related party loan
              
              
              -
              
              
              (565,794
              )
              
              -
              
              
              (1,921,973
              )Net
                  rental income (expense)
              
              
              (34,763
              )
              
              7,120
              
              
              (34,763
              )
              
              -Miscellaneous
                  income (expense)
              
              
              (125,581
              )
              
              114,663
              
              
              (114,736
              )
              
              111,681Net
                  interest expenses
              
              
              (185,697
              )
              
              (294,666
              )
              
              (232,657
              )
              
              (590,041
              )Loss
                  on sale of property
              
              
              (145,116
              )
              
              (2,600
              )
              
              (145,116
              )
              
              (479,789
              )Loss
                  on currency transaction
              
              
              -
              
              
              (462
              )
              
              -
              
              
              (462
              )Net
                  other expenses
              
              
              (491,157
              )
              
              (741,739
              )
              
              (527,272
              )
              
              (2,880,584
              )Loss
                  before income taxes
              
              
              (695,687
              )
              
              (1,040,236
              )
              
              (1,121,893
              )
              
              (3,470,808
              )Income
                  tax provision (Note 14)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              (695,687
              )
              
              (1,040,236
              )
              
              (1,121,893
              )
              
              (3,470,808
              )Other
                  comprehensive loss:Foreign
                  currency translation adjustment
              
              
              724,611
              
              
              95,002
              
              
              1,554,391
              
              
              1,185,239Comprehensive
                  income (loss)
              
              $
              28,924
              
              $
              (945,234
              )
              $
              432,498
              
              $
              (2,285,569
              )Basic
                  loss per share
              
              $
              (0.02
              )
              $
              (0.03
              )
              $
              (0.03
              )
              $
              (0.09
              )Weighted
                  average number of shares outstanding during the period-basic and
                  diluted
                  (Note 13)
              
              
              41,115,705
              
              
              40,315,705
              
              
              41,115,705
              
              
              40,315,705
  The
        accompanying notes are an integral part of these consolidated financial
        statements .
  5
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED** **INTERIM
        STATEMENTS OF STOCKHOLDERS’ EQUITY**
 **SIX** **MONTHS ENDED JUNE 30, 2008**
 **(UNAUDITED)**
  
 
 Common stock
              
              Additional
                paid-in
                capital
              
              Cumulative
                other
                comprehensive
                income (loss)
              
              Retained
                earnings
                (Accumulated
                deficit)
              
              TotalShares
              
              AmountBalance, January 1,
                  2008
              
              
              41,115,705
              
              $
              41,116
              
              $
              16,579,251
              
              $
              (3,307,874
              )
              $
              (28,834,376
              )
              $
              (15,521,883
              )Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              1,554,391
              
              
              -
              
              
              1,554,391Net
                  loss for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,121,893
              )
              
              (1,121,893
              )Balance,
                  June 30, 2008
              
              
              41,115,705
              
              $
              41,116
              
              $
              16,579,251
              
              $
              (1,753,483
              )
              $
              (29,956,269
              )
              $
              (15,089,385
              )
  The
        accompanying notes are an integral part of these consolidated financial
        statements .
  6
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED** **INTERIM
        STATEMENTS OF CASH FLOWS**
 **SIX** **MONTHS ENDED JUNE 30, 2008 AND 2007**
 **(UNAUDITED)**
  
  2008
              
              2007
                (Restated, Note 18)Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,121,893
              )
              $
              (3,470,808
              )Adjustments
                      to reconcile net loss to net cash used in
                      operating activities:Depreciation
              
              
              50,008
              
              
              57,620Provision
                  for loss on uncollectible related party loans
              
              
              -
              
              
              1,921,973Loss
                  on sale of property
              
              
              136,539
              
              
              -Loss
                  on investment
              
              
              -
              
              
              479,512(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              67,620
              
              
              (7,695
              )Inventory
              
              
              4,538
              
              
              18,344Due
                  from related parties
              
              
              52,308
              
              
              -Receivable
                  fro unsettled contract
              
              
              81,988
              
              
              -Prepaid
                  expenses and other assets
              
              
              (16,413
              )
              
              70,899Increase
                  (decrease) in liabilities:Accounts
                  payable
              
              
              29,228
              
              
              661,301Accrued
                  pension payable
              
              
              (296,267
              )
              
              (236,505
              )Accrued
                  interest payable
              
              
              (89,990
              )
              
              -Cash
                  used in operating activities
              
              
              (1,102,334
              )
              
              (505,359
              )Cash
                  flows from investing activities:Investment
              
              
              353
              
              
              (146,074
              )Deposits
              
              
              (4,911
              )
              
              (3,435
              )Acquisition
                  of property
              
              
              137,905
              
              
              (12,803
              )Intangible
                  assets
              
              
              29,082
              
              
              8,268Cash
                  provide by (used in) investing activities
              
              
              162,429
              
              
              (154,044
              )Cash
                  flows from financing activities:Net
                  advances from (to) shareholder and officers
              
              
              102,145
              
              
              (42,548
              )Net
                  advance from related party
              
              
              -
              
              
              512,900Net
                  advance to customers
              
              
              (10,492
              )
              
              (140,070
              )Proceeds
                  from disposition of property
              
              
              -
              
              
              270,795Convertible
                  debenture
              
              
              433,766
              
              
              -Loan
                  payable
              
              
              (1,169,436
              )
              
              56,992Cash
                  provided by (used in) financing activities
              
              
              (644,017
              )
              
              658,069Foreign
                  currency translation adjustment
              
              
              1,554,391
              
              
              (106
              )
  (Continued)
 The
          accompanying notes are an integral part of these consolidated financial
          statements .
  7
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED** **INTERIM
        STATEMENTS OF CASH FLOWS**
 **SIX** **MONTHS ENDED JUNE 30, 2008 AND 2007**
 **(UNAUDITED)**
  
  (Continued)
 
 2008
              
              
              2007
                (Restated, Note 18
              )Net
                  decrease in cash and cash equivalent
              
              
              (29,531
              )
              
              (1,440
              )Cash
                  and cash equivalent - beginning of period
              
              
              38,454
              
              
              14,849Cash
                  and cash equivalent - end of period
              
              $
              8,923
              
              $
              13,409**Supplemental
                  disclosure of cash flows information:**Cash
                  paid during the period for:Interest
              
              $
              49,960
              
              $
              -
  The
        accompanying notes are an integral part of these consolidated financial
        statements .
  8
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        1 – Nature of Business and Going Concern**
  Description
        of Business
  Eugene
        Science Inc. (“the Company”) was incorporated in August 1998 under the laws of
        state of Delaware, and owns 89.5% of Eugene Science, Inc. in Korea (“the Korean
        subsidiary”) which manufactures certain cholesterol lowering food ingredients.
        The Company currently has no other business.
  Initially
        registered as Orcas, Ltd, the Company changed its name to Ezcomm Inc. in
        January
        2000, and again to Ezcomm Enterprises, Inc. (EEI) in July 2004, and finally
        to
        the current name in September 2005 as it acquired the control of the Korean
        subsidiary.
  The
        control of the Korean subsidiary was acquired in September 2005 by a share
        exchange transaction. By this exchange, EEI acquired 89.5% of Eugene Science,
        Inc. by issuing 88.5% of its own common stock to the shareholders of the
        Korean
        company. As a result, the Korean company has become 89.5% subsidiary of EEI
        while the shareholders of the Korean subsidiary hold 88.5% control in EEI
        in the
        United States. Immediately following the share exchange, EEI changed its
        name to
        Eugene Science, Inc. so that both companies are known under a common
        name.
  The
        Korean subsidiary, located in Kyunggi-Do, Korea, was organized in July 1997
        under the laws of the Republic of Korea, and is in business of manufacturing
        and
        selling CZ TM series
        cholesterol-lowering functional food ingredients, beverages and capsules,
        and
        vegetable oil products that include those ingredients.
  Going
        Concern
  The
        Company's financial statements are presented on a going concern basis, which
        contemplates the realization of assets and satisfaction of liabilities in
        the
        normal course of business. The Company has experienced recurring losses since
        2000 and has negative cash flows from operations. With the loss continuing,
        the
        Company’s net loss amounted to $1,121,893 for the period ended June 30, 2008 and
        its working capital deficiency was $14,259,124 as of June 30, 2008. These
        factors raise substantial doubt about the Company’s ability to continue as a
        going concern.
  The
        Company's ability to continue as a going concern is also contingent upon
        its
        ability to secure additional financing, initiating sale of its product and
        attaining profitable operations.
  In
        May
        2005, plant sterols, the main ingredient of CZ TM series,
        was formally **** approved
        as a health function food ingredient by the Korean Food & Drug
        Administration, making it possible for the Company to advertise the
        cholesterol-lowering function of CZ TM and food
        enriched with CZ TM .
        The
        Company expects that the favorable change in the regulation will strongly
        help
        in selling CZ TM to major
        food companies. The Company has also developed new capsule products that
        are
        efficient and convenient in delivering the health function of CZ TM .
        The
        Company is actively developing sales channels for CZ TM and the
        capsule products.
  The
        Company also plans to strengthen the cooperation with its international partners
        to restart shipping to overseas markets. The Company expects to sell
        CZ TM to major
        food companies through its international strategic partners. For marketing
        the
        CZ TM capsules, the Company established a distribution channel in the United States
        in
        2006.
  In
        addition, management is pursuing various sources of equity financing, although
        there can be no assurance that the Company will be able to secure financing
        when
        needed or obtain such on terms satisfactory to the Company.
  9
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 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 possible inability
        of
        the Company to continue as a going concern.
  **Note
            2 -** **Significant
            Accounting Policies**
  The
        following summary of significant accounting polices of the Company is presented
        to assist in understanding the Company’s financial statements. These accounting
        policies conform to the accounting principles generally accepted in the United
        States of America, and have been consistently applied in the preparation
        of the
        financial statements.
  Basis
        of Financial Statement Presentation
  These
        financial statements have been prepared with the assumption that the Company
        will be able to realize its assets and discharge its liabilities in the normal
        course of business.
  Basis
        of Consolidation
  The
        reverse-takeover transaction between the Company and Eugene Science Inc.
        in
        Korea has been recorded as the recapitalization of the Company, with the
        net
        assets of the Company brought forward at their historical basis. Since the
        company is a shell company listed on a U.S. stock market, Eugene Science
        Inc. in
        Korea acquired the Company to enter the U.S. market. As such, accounting
        for the
        reverse-takeover as the recapitalization of the Company is deemed
        appropriate.
  The
        consolidated financial statements included the accounts of Eugene Science,
        Inc.
        (formerly Ezcomm Enterprises, Inc.) in the United States, Eugene Science,
        Inc.
        in Korea and its subsidiary, Ucolebio, Inc. in Korea. Significant inter-company
        transactions, if any, have been eliminated in consolidation.
  Minority
        interests are recorded to the extent of their equity. Losses in excess of
        minority interest equity capital are charged against the majority interest
        and
        will be reversed when the losses reverse.
 
 Use
        of
        Estimates
  Preparation
        of financial statements in accordance with accounting principles generally
        accepted in the United States of America requires management to make estimates
        and assumptions that affect the amounts reported in the financial statements
        and
        related notes to financial statements. These estimates are based on management's
        best knowledge of current events and actions the Company may undertake in
        the
        future. Actual results may ultimately differ from estimates, although management
        does not believe such changes will materially affect the financial statements
        in
        any individual year.
  Revenue
        Recognition
  The
        Company generates revenues from sales of manufactured goods and merchandise
        and
        rental of the Company's buildings.
  Revenue
        from product sales is recognized in accordance with Staff Accounting Bulletin
        No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101").
  For
        manufactured finished goods, the Company recognizes revenue when there is
        a
        definitive sales agreement, and upon shipment of products, when title is
        passed
        and the amount collectible can reasonably be determined.
  10
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 For
        merchandise sales, the Company recognizes revenue upon shipment of products,
        when title is passed and the amount collectible can reasonably be
        determined.
  For
        rental income, the Company retains substantially all of the benefits and
        risks
        of ownership of its income properties and therefore recognizes revenue upon
        receipt of monthly rent.
 
 Government
        Grants
  Government
        grants are recognized as income over the periods that are necessary to match
        them with the related costs.
  Currency
        Translation
  The
        Company's functional currency is Korean Won. Adjustments occurring in
        translating the currency into U.S. dollars at the balance sheet date are
        recorded as a component of other comprehensive income (loss).
  Foreign
        currency transactions of the Korean operations have been translated to Korean
        Won at the rate prevailing at the time of the transaction. Realized foreign
        exchange gains and losses were taken into current period.
  Cash
        and Cash Equivalents
  Highly
        liquid investments with maturities of three months or less when purchased
        are
        considered cash equivalents and recorded at cost, which approximates fair
        value.
  Allowance
        for Doubtful Accounts
 
 Allowance
        for doubtful accounts is computed based on the Company’s historical experience
        and management’s analysis of possible bad debts. The Company had no allowance
        for doubtful accounts at June 30, 2008 and December 31, 2007.
  Properties
        and Equipment
  Properties
        and equipment are stated at cost. Major renewals and betterments are capitalized
        and expenditures for repairs and maintenance are charges to expense as incurred.
        Depreciation is computed using the straight-line method over the following
        periods:
 
 Building
                  and improvements
              
              
              20-40
                  yearsMachinery
                  and equipment
              
              
              10
                  yearsVehicles
              
              
              5
                  yearsOffice
                  furniture and fixtures
              
              
              3-5
                  years
  Intangible
        Assets
  Intangible
        assets such as cost of obtaining industrial rights and patents are stated
        at
        cost, net of amortization computed using the straight-line method over five
        to
        ten years.
  11
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 Inventories
  Inventories
        are stated at the lower of cost or net realizable value. Net realizable value
        is
        determined by deducting selling expenses from selling price.
 
 The
        cost
        of inventories is determined on the first-in first-out method, except for
        materials-in-transit for which the specific identification method is used.
        The
        components of inventories were as follows at:
 
 June 30, 2008
              
              Dec. 31, 2007Raw
                  materials
              
              $
              17,783
              
              $
              15,156Finished
                  goods
              
              
              17,631
              
              
              24,796Total
              
              $
              35,414
              
              $
              39,952
  Investments
  Investments
        in available-for-sale securities are being recorded in accordance with FAS-115
        "Accounting for Certain Investments in Debt and Equity Securities". Equity
        securities that are not held principally for the purpose of selling in the
        near
        term are reported at fair market value with unrealized holding gains and
        losses
        excluded from earnings and reported as a separate component of stockholders'
        equity.
  Financial
        Instruments
  Fair
        values of cash equivalents, short-term and long-term investments and short-term
        debt approximate their costs. The estimated fair values of other financial
        instruments, including debt, equity and risk management instruments, have
        been
        determined using market information and valuation methodologies, primarily
        discounted cash flow analysis. These estimates require considerable judgment
        in
        interpreting market data, and changes in assumptions or estimation methods
        could
        significantly affect the fair value estimates.
 
 Concentration
        of Credit Risk
 
 SFAS
        No.
        105, *Disclosure
        of Information about Financial Instruments with Off-Balance Sheet Risk and
        Financial Instruments with Concentration of Credit Risk* ,
        requires disclosure of any significant off-balance sheet risk and credit
        risk
        concentration. The Company does not have significant off-balance sheet risk
        or
        credit concentration. The Company maintains cash, cash equivalents and
        short-term investments with major Korean financial institutions.
 
 The
        Company provides credit to its customers in the normal course of operations.
        It
        carries out, on a continuing basis, credit checks of its customers, and
        maintains allowance for credit losses contingent upon management’s forecasts.
        For other receivables, the Company determines, on a continuing basis, the
        probable losses and sets up a provision for losses based on the estimated
        realizable value.
  Concentration
        of credit risk arises when a group of clients having similar characteristics
        such that their ability to meet their obligations is expected to be affected
        similarly by changes in economic conditions.
  12
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 Income
        Taxes
 
 The
        Company accounts for income taxes pursuant to SFAS No. 109, *Accounting
        for Income Taxes* .
        Deferred tax assets and liabilities are recognized for the 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 carry forwards. Deferred tax assets
        are
        reduced by a valuation allowance when, in the opinion of management, it is
        more
        likely than not that some portion or all of the deferred tax assets will
        not be
        realized. Deferred tax assets and liabilities are adjusted for the effects
        of
        changes in tax laws and rates on the date of enactment.
 
 Comprehensive
        Income
 
 The
        Company records its other comprehensive income under SFAS No. 130, *Reporting
        of Comprehensive Income* .
        SFAS
        130 which establishes standards for reporting and presentation of comprehensive
        income and its components. The Company’s other comprehensive income represents
        unrealized gain or loss on available-for-sale marketable securities and foreign
        currency translation adjustment.
 
 Earnings
        per Share
 
 SFAS
        No.
        128, “Earnings per Share” requires disclosure on the financial statements of
        basic and diluted earnings per share. Basic earning (loss) per share is computed
        by dividing the net earning (loss) by the weighted average number of shares
        of
        common stock outstanding during the year. Diluted earning (loss) per share
        is
        determined using the weighted average number of common shares outstanding
        during
        the year, adjusted for the dilutive effect of common stock equivalents,
        consisting of shares that might be issued upon exercise of common stock options
        and warrants.
 
 Commitments
        and Contingencies
 
 Liabilities
        for loss contingencies arising from claims, assessments, litigation, fines
        and
        other sources are recorded when it is probable that a liability has been
        incurred and the amount of the assessment can be reasonable estimated.
 
 Recent
        Accounting Pronouncements
 
 In
        June
        2006, the Financial Accounting Standard Board (“FASB”) issued Interpretation
        No. 48, *Accounting
        for Uncertainty in Income Taxes* (“FIN
        48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
        in the Company’s financial statements in accordance with SFAS No. 109. FIN
        48 prescribes a recognition threshold and measurement attributes for the
        financial statement recognition and measurement of a tax position taken or
        expected to be taken in a tax return. The provisions of FIN 48 are effective
        for
        the fiscal years beginning after December 15, 2006. The Company does not
        expect that the adoption of FIN 48 will have a significant effect on its
        financial statements.
  13
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108, *Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements* (“SAB
        No
        108”). SAB No. 108 provides interpretive guidance on how the effects of the
        carryover or reversal of prior year misstatements should be considered in
        quantifying a current year misstatement. Under SAB No. 108, the Company
        should quantify errors using both a balance sheet and income statement approach
        (“dual approach”) and evaluate whether either approach results in a misstatement
        that is material when all relevant quantitative and qualitative factors are
        considered. The adoption of SAB 108 did not have any impact on the Company’s
        financial statements.
  In
        February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
        Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits
        entities to measure financial instruments and certain other items at fair
        value
        that are not currently required to be measured at fair value. An entity would
        report unrealized gains and losses on items for which the fair value option
        has
        been elected in earnings at each subsequent reporting date. The objective
        is to
        improve financial reporting by providing entities with the opportunity to
        mitigate volatility in reported earnings caused by measuring related assets
        and
        liabilities differently without having to apply complex hedge accounting
        provisions. The decision about whether to elect the fair value option is
        applied
        instrument by instrument, with a few exceptions; the decision is irrevocable;
        and it is applied only to entire instruments and not to portions of instruments.
        SFAS No. 159 requires disclosures that facilitate comparisons (a) between
        entities that choose different measurement attributes for similar assets
        and
        liabilities and (b) between assets and liabilities in the financial statements
        of an entity that selects different measurement attributes for similar assets
        and liabilities. SFAS No. 159 is effective for financial statements issued
        for
        fiscal years beginning after November 15, 2007. Early adoption is permitted
        as
        of the beginning of a fiscal year provided the entity also elects to apply
        the
        provisions of SFAS No. 157 "Fair Value Measurements.” Upon implementation, an
        entity shall report the effect of the first remeasurement to fair value as
        a
        cumulative-effect adjustment to the opening balance of retained earnings.
        Since
        the provisions of SFAS No. 159 are applied prospectively, any potential impact
        will depend on the instruments selected for fair value measurement at the
        time
        of implementation. The Company is currently evaluating the impact, if any,
        adoption of SFAS No. 159 will have on its financial statements.
 
 Reclassification
 
 Certain
        accounts in the 2007 consolidated financial statements have been reclassified
        for comparative purposes to conform with the presentation in the current
        year
        consolidated financial statements. Total equity and net income are unchanged
        due
        to these reclassifications.
 
 **Note
        3 – Restricted Cash**
  The
        Company had a restricted cash of $1,604 at June 30, 2008, and $6,112 at December
        31, 2007, which was pledged as security for future purchases from a vendor.
 
 **Note
        4 – Due from Related Party**
  Loans
        receivable from an affiliate by virtue of common ownership was carried at
        $52,308 at December 31, 2007. The loans were cleared during the first quarter
        of
        2008.
  14
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        5 - Properties and Equipment**
  Properties
        and equipment consisted of the following at:
 
 June
                  30, 2008
              
              Dec.
                  31, 2007Buildings
              
              $
              769,462
              
              $
              857,522Equipment
                  and vehicles
              
              
              526,365
              
              
              926,996Furniture
                  and fixtures
              
              
              844,341
              
              
              1,042,348Construction
                  in progress
              
              
              231,701
              
              
              259,1842,371,869
              
              
              3,086,050Less:
                  accumulated depreciation
              
              
              1,213,641
              
              
              1,603,370Net
                  property and equipment
              
              $
              1,158,228
              
              $
              1,482,680
  Depreciation
        expenses for the periods ended June 30, 2008 and 2007 were $68,090 and $88,929,
        respectively.
 
 **Note
        6 – Receivables from Sale of Assets**
 
 The
        Company had outstanding proceeds receivable of $568,971 and $650,959 at June
        30,
        2008 and December 31, 2007, respectively, from the sales of real estate property
        and machinery and equipment in August 2006. The receivable is due on demand
        and
        no interest has been accrued on the outstanding balance.
 
 **Note
        7 – Prepaid Expenses and Other Current Assets**
  Prepaid
        expenses and other current assets consisted of the following at:
 
 June 30, 2008
              
              Dec. 31, 2007Prepaid
                  fees for certain patent registration andrelated
                  legal costs
              
              $
              57,214
              
              $
              64,001Advance
                  payment
              
              
              115,324
              
              
              92,124Total
              
              $
              172,538
              
              $
              156,125
 
 **Note
        8 – Investments**
  The
        following is a summary of investments at:
 
 June 30, 2008
              
              Dec. 31, 2007Other
                  marketable securities
              
              $
              1
              
              $
              354
  15
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        9 - Loans Payable**
 
 Loans
        payable consisted of the following at:
 
 June 30, 2008
              
              Dec. 31, 2007Notes
                  payable to Kook Min Bank with interest at 18% to 21%, unsecured,
                  due on
                  demand, and guaranteed by chief executive officer. These loans
                  are in
                  default.
              
              $
              1,195,784
              
              $
              1,337,620Note
                  payable to Korea Technology Credit Guarantee Fund (KOTEC), a government
                  operated fund, with interest at 21%, and guaranteed by corporate
                  officer.
                  The loan was restructured in July 2007 and the detail terms are
                  noted
                  below.***(A)***
              
              
              1,910,580
              
              
              2,112,520Note
                  payable to National Agricultural Cooperative Federation (NACF)
                  with
                  interest at 4.6% to 18%, unsecured, due on demand and guaranteed
                  by KOTEC
                  and corporate officer. The loan is in default.
              
              
              1,199,033
              
              
              1,365,934Note
                  payable to Shinhan Bank with interest at 18% due on demand. The
                  loan is in
                  default.
              
              
              271,897
              
              
              304,148Note
                  payable to a customer (Hokuyo) with interest at 3%, unsecured,
                  and due on
                  demand. The note is in default.
              
              
              1,799,348
              
              
              2,012,775Notes
                  payable to unrelated parties with interest at 9%, unsecured and
                  due on
                  demand.
              
              
              -
              
              
              438,066Notes
                  payable to employees with interest at 9% to 10%, unsecured, and
                  due on
                  demand.
              
              
              -
              
              
              70,470Government
                  loan, non-interest bearing, unsecured, payable on demand.
              
              
              38,038
              
              
              42,550Convertible
                  loan offering creditor option to convert to stocks after
                  maturity.
              
              
              99,967
              
              
              -Total
                  notes payable
              
              
              6,514,647
              
              
              7,684,083Less:
                  current portion
              
              
              4,483,926
              
              
              5,548,996Long-term
                  debt, net of current
              
              $
              2,030,721
              
              $
              2,135,087
 
 ***(A)*** - In
        July 2007, the Company executed a Debt Rescheduling Agreement with Korea
        Technology Credit Guarantee Fund (KOTEC) ,
        in
        which the Company made a partial payment of $82,000 and KOTEC agreed to convert
        the remaining balance into a long term debt. The new loan is payable in monthly
        installments of $18,527 (KRW 17,093,620) over 10-year period beginning in
        2010.
  16
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 Following
        is a summary of principal maturities of notes payable over the next five
        years:
 
 Years
                  ending December 31,
              
              Amount2008
              
              $
              4,679,8082009
              
              
              99,9672010
              
              
              92,6352011
              
              
              222,3242012
                  and thereafter
              
              
              1,419,913Total
              
              $
              6,514,647
 
 **Note
        10 – Convertible Debenture**
 
 In
        July
        2007, the Company issued $2,250,000 secured convertible notes with warrants
        to
        purchase 3,200,000 shares of the Company’s common stock at an exercise price of
        $0.25 per share. The notes bear interest at 10% per annum, and, at the option
        of
        the purchasers, are convertible into shares of the common stock during the
        first
        six months following the issue date of the notes at a conversion price of
        $0.65.
        The Company intends to use the proceeds to complete the build out of its
        new
        22,000-square-foot corporate production and research facility scheduled for
        opening in late November, restructure bank debt, advance its patented production
        process toward commercialization, and general corporate purposes.
 
 In
        November 2007, the Company issued $600,000 secured convertible notes with
        warrants to purchase 1,560,000 shares of the Company’s common stock at an
        exercise price of $0.25 per share. The notes bear interest at 10% per annum,
        and, at the option of the purchaser, are convertible into shares of the common
        stock during the first six months following the issue date of the notes at
        a
        conversion price of $0.65. The Note matures on May 27, 2008, subject to one
        6
        months extension. The Company intends to use the proceeds to restructure
        bank
        debt, advance its patented production process toward commercialization, and
        general corporate purposes. ****
 
 **Note
        11 – Due to Related Parties**
 
 Due
        to
        shareholders and officer consisted of the following at:
  June 30, 2008
              
              Dec. 31, 2007Unsecured
                  short term advance payable to shareholders with interest at 9%
                  per annum,
                  due on demand.
              
              $
              46,802
              
              $
              52,353Unsecured
                  short-term advances payable to corporate officers and employees
                  with
                  interest at 9% per annum, due on demand.
              
              
              120,408
              
              
              12,712Total
              
              $
              167,210
              
              $
              65,065
  17
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        12 – Accrued Severance Benefits**
 
 Employees
        and directors with one year or more of service are entitled to receive a
        lump-sum payment upon termination of their employment based on their length
        of
        service and rate of pay at the time of termination. Accrued severance benefits
        represent the amount which would be payable assuming all eligible employees
        and
        directors are to terminate their employment as of the balance sheet date.
        The
        accrued severance benefits payable at June 30, 2008 and December 31, 2007,
        were
        $19,965 and $316,232, respectively.
  Severance
        benefit expenses incurred for the six months ended June 30, 2008 and 2007
        were
        $99,928 and $26,223, respectively.
 
 **Note
        13 - Capital Stock**
 
 Total
        shares authorized:
 480,000,000
        shares of Common Stock, par value $0.001
 20,000,000
        shares of Preferred Stock, par value $0.001
 
 Shares
                  issued and outstanding:
              
              Shares
              
              AmountCommon
                  stock at,June
                  30, 2008
              
              
              41,115,705
              
              $
              41,116December
                  31, 2007
              
              
              41,115,705
              
              $
              41,116
  On
        January 13, 2006, the Company had a reverse stock split whereby one new common
        share was exchanged for ten common shares. The financial statements have
        been
        retroactively restated to reflect the reverse split.
  On
        February 21, 2006, the Company issued 1,000,000 shares of common stock for
        $83,000.
  On
        September 19, 2006, the Company issued 390,000 shares of common stock for
        consulting services provided.
  On
        October 1, 2006, the Company issued 1,200,000 shares of common stock for
        various
        consulting services provided.
  On
        October 1, 2006, in accordance of 2006 Stock Incentive Plan, the Company
        issued
        3,350,000 shares of common stock to employees and directors.
 
 On
        October 25, 2007, the Company issued 800,000 shares of common stock for various
        consulting services provided.
 
 **Stock
        Compensation Plan**
 
 The
        Company has accounted for its stock options and warrants in accordance with
        SFAS
        123(R) "Accounting for Stock Based Compensation" and SFAS 148 "Accounting
        for
        Stock Based compensation - Transition and Disclosure." Value of options granted
        has been estimated by the Black Scholes option pricing model. The assumptions
        are evaluated annually and revised as necessary to reflect market conditions
        and
        additional experience. The following weighted-average assumptions were used
        and
        a discussion of our methodology for developing each of the assumptions used
        in
        the valuation model follows:
  18
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 Period ended June 30,2008
              
              2007Dividend
                  yield
              
              
              0.0
              %
              
              0.0
              %Expected
                  volatility
              
              
              80
              %
              
              80
              %Risk-free
                  interest rate
              
              
              4.3
              %
              
              4.3
              %Expected
                  life of the option term (in years)
              
              
              10
              
              
              10Forfeiture
                  rate
              
              
              7.0
              %
              
              7.0
              %
 
 Dividend
        Yield – The Company has not declared or paid dividends in the past and has no
        plan for dividend payments in the future.
 
 Expected
        Volatility – Volatility is a measure of the amount by which a financial variable
        such as a share price has fluctuated (historical volatility) or is expected
        to
        fluctuate (expected volatility) during a period. The Company uses the historical
        volatility since its expected volatility because the current business strategy,
        which is not expected to change materially, is fundamentally consistent with
        past strategy. The volatility has averaged at 80%.
 
 Risk-Free
        Interest Rate – This is the U.S. Treasury rate for the week of each stock option
        granted during the quarter having a term that most closely resembles the
        expected life of the stock option.
 
 Expected
        Life of the Stock Option Term – This is the period of time that the stock
        options granted are expected to remain unexercised. Stock options granted
        during
        the fiscal year have a maximum term of ten years. The Company estimates the
        expected life of the stock option term using a lattice model with inputs
        regarding estimated exercise behavior that are consistent with actual past
        behavior for similar stock options.
 
 Forfeiture
        Rate – This is the estimated percentage of the stock options granted and
        expected to be forfeited or canceled on an annual basis before becoming fully
        vested. The Company estimates the forfeiture rate based on past turnover
        data
        ranging anywhere from one to three years with further consideration given
        to the
        class of employees to whom the options were granted.
 
 In
        February 2006, the Board of Directors of the Company adopted 2006 Stock
        Incentive Plan (the “2006 Plan”). Under this Plan, employees and directors of
        the Company and affiliated company may receive options to purchase common
        stock.
        A maximum of 4,000,000 shares have been authorized to be granted under the
        2006
        Plan.
 
 In
        May
        2006, the Plan granted 3,600,000 stock options for common stock having a
        $0.01
        nominal par value each and exercise price of $0.50 to $1.36. In October 2006,
        3,350,000 stock options were exercised, 250,000 options were canceled and
        no
        option is outstanding as of June 30, 2008.
  The
        Company issued 300,000 stock options to a non-employee during the year ended
        December 31, 2006. These stock options had a vesting period of 12 months.
        The
        fair value of these stock options was recorded as deferred compensation and
        was
        amortized over the performance period. Under variable plan accounting, the
        value
        of the unvested stock options was re-measured and recognized in operations
        at
        each period reporting date until fully vested.
 
 No
        option
        is outstanding as of June 30, 2008 and for disclosure requirements set forth
        above under SFAS No 123(R), during the period ended June 30, 2008, the Company
        recognized no additional stock-based compensation for options vested.
  19
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Stock
        Options of the Subsidiary in Korea**
  The
        following weighted-average assumptions were used in the valuation model for
        the
        stock option of the subsidiary:
 
 Period ended June 30,2008
              
              2007Dividend
                  yield
              
              
              0
              %
              
              0
              %Expected
                  volatility
              
              
              80
              %
              
              80
              %Risk-free
                  interest rate
              
              
              4.3
              %
              
              7.7
              %Expected
                  life of the option term (in years)
              
              
              2
              
              
              3
 
 In
        1999
        the Board of Directors of the Korea subsidiary adopted an option plan to
        allow
        employees to purchase common stock of the Company.
  In
        October 1999, the share option plan granted 928,350 options for the common
        stock
        having a $0.0869 nominal par value each and an exercise price of $0.12. In
        2000,
        236,240 options were cancelled. In 2005, the balance of the 692,110 options
        was
        exercised.
  In
        December 1999, 659,169 options were granted having a $0.0869 nominal par
        value
        each and an exercise price of $0.26. In 2005, the balance of the 659,169
        options
        was exercised.
  In
        October 2000, 971,999 options were granted having a $0.0869 nominal par value
        each and an exercise price of $1.93. 5,087, 162,848, 40,712, 244,272 options
        were cancelled in 2000, 2001, 2002 and 2003, respectively. As of December
        31,
        2006, 519,080 options are still outstanding.
  In
        May
        2001, 71,246 options were granted having a $0.0869 nominal par value each
        and an
        exercise price of $1.93. In 2002, 20,356 options were cancelled. As of December
        31, 2006, 50,890 options are still outstanding.
  In
        March
        2002, 1,000,000 options were granted having a $0.0869 nominal par value each
        and
        exercise price of $1.96. 330,000, 110,000, 100,000 options were cancelled
        in
        2002, 2003, and 2005, respectively. In addition, 31,190 options were granted
        in
        2005. There was also a change in the exercise price to $1.84. As of December
        31,
        2006, 491,190 options are still outstanding.
  In
        September 2002, 220,000 options were granted having a $0.0869 nominal par
        value
        each and an exercise price of $1.96. During 2005, 14,916 options were granted.
        In addition, the exercise price of the options was reduced to
        $1.84.
  In
        March
        2003, 350,000 options were granted having a $0.0869 nominal par value each
        and
        an exercise price of $1.96. In 2003 and 2004, 180,000 and 20,000 stock options
        were cancelled respectively. During 2005, 10,170 options were granted and
        the
        exercise price was reduced to $1.84. As of December 31, 2006, 160,170 stock
        options are still outstanding.
  The
        options vest gradually over a period of 2 to 3 years from the date of grant.
        The
        term of each option does not exceed 7 years from the date of grant. 285,806
        and
        651,360 options have vested in 2004 and 2005 respectively. However, as the
        exercise price of the options was substantially higher than the fair market
        value, the options have no value and no benefits have been recorded since
        inception of the 2000 plan.
  20
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 The
        stock
        options have not been included in the calculation of the diluted earnings
        per
        share as their inclusion would be anti-dilutive.
 
 The
        following table summarizes the stock option activity during the periods ended
        June 30:
  2008
              
              2007Shares
              
              Weighted-
                Average
                Excise
                Price
              
              Shares
              
              Weighted-
                Average
                Excise
                PriceOutstanding,
                  beginning of period
              
              
              1,456,246
              
              $
              1.88
              
              
              1,456,246
              
              $
              1.88Granted
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding,
                  end of period
              
              
              1,456,246
              
              $
              1.88
              
              
              1,456,246
              
              $
              1.88Weighted
                  average remaining contractual life of common stock options
              
              
              2
                  years
              
              
              
              
              
              3
                  years
 
 **Note
        14 - Income Taxes**
  The
        Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
        Income Taxes". This Standard prescribes the use of the liability method whereby
        deferred tax asset and liability account balances are determined based on
        differences between financial reporting and tax bases of assets and liabilities
        and are measured using the enacted tax rates. The effects of future changes
        in
        tax laws or rates are not anticipated. Corporate income tax rates applicable
        to
        the Company in 2008 and 2007 were 16.5% of the first 100 million Korean Won
        ($84,000) of taxable income and 29.7% on the excess. For the United States
        operation, the corporate tax rate is approximately 34%. Tax losses from the
        Korean subsidiary can be carried forward for five years. The U.S. tax losses
        can
        be carried forward for fifteen to twenty years. The company has accumulated
        approximately $24,686,000 of taxable losses which can be used to offset future
        taxable income. The utilization of the losses expires in years 2008 through
        2027.
 
 Under
        SFAS No. 109 income taxes are recognized for the following: a) amount of
        tax
        payable for the current year, and b) deferred tax liabilities and assets
        for
        future tax consequences of events that have been recognized differently in
        the
        financial statements than for tax purposes.
 
 The
        Company has deferred income tax assets as follows at:
 
 June 30, 2008
              
              Dec. 31, 2007Deferred
                  income tax assets:Research
                  and development expenses amortized over 5 years for tax
                  purposes
              
              $
              -
              
              $
              150,722Net
                  operating loss carryforwards
              
              
              4,073,190
              
              
              4,002,9004,073,190
              
              
              4,153,622Valuation
                  allowance for deferred income tax assets
              
              
              (4,073,190
              )
              
              (4,153,622
              )$
              -
              
              $
              -
  The
        Company provided a valuation allowance equal to the deferred income tax assets
        because it is presently considered that they will not be
        realized.
  21
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        15 – Business Segment Information**
 Sales
        and
        cost of goods sold of the Company’s segments for the six months ended June 30,
        2008 and 2007 were as follows:
 
 2008
              
              2007Sales:Manufacturing
              
              $
              327,657
              
              $
              212,221Merchandise
              
              
              -
              
              
              97,354$
              327,657
              
              $
              309,575Cost
                  of Sales:Manufacturing
              
              $
              129,621
              
              $
              94,565Merchandise
              
              
              -
              
              
              66,306$
              129,621
              
              $
              160,871
  **Note
        16 - Major Customers**
  Sales
        to
        two major customers accounted for all of the Company’s total revenue for the
        period ended June 30, 2008.
 
 **Note
        17 - Related Party Transactions**
 
 Significant
        transactions with companies related or affiliates by common control for the
        periods ended and as of June 30, 2008 and 2007 are summarized as
        follows:
  Sales
              
              Net
                  rental/
                Interest
                income
              
              Purchases
              
              Accounts
                  Receivable
              
              Accounts
                Payable
              
              Rental
                DepositCompany
                  related by common control2008
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -2007
              
              $
              97,354
              
              $
              -
              
              $
              66,306
              
              $
              -
              
              $
              247,417
              
              $
              65,033Companies
                  affiliated by common control2008
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -2007
              
              $
              201
              
              $
              1,582
              
              $
              -
              
              $
              4,542
              
              $
              73,179
              
              $
              -
 
 These
        transactions were in the normal course of business and recorded at an exchange
        value established and agreed upon by the above mentioned parties, which
        approximates fair market value.
  22
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008**
 **(UNAUDITED)**
 
 **Note
        18 -** **Restatement
        of the 2007 Comparative Consolidated Financial Statements**
  On
        further consideration, the Company decided to revise, add or expand certain
        notes to the financial statements to provide more accurate and complete
        disclosures pertaining to the account balances and transactions presented
        in the
        accompanying consolidated financial statements for the interim periods ended
        June 30, 2007. These changes were made to the notes to the financial statements
        and there was no effect to the Company’s net income, earning (loss) per share or
        net equity on the consolidated financial statements as of and for the interim
        periods ended June 30, 2007.
  23




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




*This
      Quarterly Report on Form 10-Q contains forward-looking statements within
      the meaning of Section 27A of the Securities Act of 1933, as amended, and
      Section 21E of the Securities Exchange Act of 1934, as amended, that
      concern matters that involve risks and uncertainties that could cause actual
      results to differ materially from those projected in the forward-looking
      statements. Discussions containing forward-looking statements may be found
      in
      the material set forth under “Management’s Discussion and Analysis or Plan of
      Operation” and in other sections of this Quarterly Report on Form 10-Q.
      Words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential” or “continue” or similar words are
      intended to identify forward-looking statements, although not all
      forward-looking statements contain these words. Although we believe that our
      opinions and expectations reflected in the forward-looking statements are
      reasonable as of the date of this Quarterly Report on Form 10-Q, we cannot
      guarantee future results, levels of activity, performance or achievements,
      and
      our actual results may differ substantially from the views and expectations
      set
      forth in this Quarterly Report on Form 10-Q. We expressly disclaim any
      intent or obligation to update any forward-looking statements after the date
      hereof to conform such statements to actual results or to changes in our
      opinions or expectations. Readers are urged to carefully review and consider
      the
      various disclosures made by us which attempt to advise interested parties of
      the
      factors which affect our business, including, without limitation, the audited
      financial statements and the notes thereto and disclosures made under the
      captions “Management’s Discussion and Analysis or Plan of Operation,”
“Consolidated Financial Statements” and “Notes to Consolidated Financial
      Statements” included in our Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 2007.*




**Overview**




We
      were
      incorporated on August 26, 1998 as Orcas Ltd. under the laws of the State
      of Delaware. As Orcas Ltd., we were in the business of building and promoting
      arcade video games and vending machines. We underwent a reverse merger and
      abandoned this enterprise to develop a loyalty reward program based in Taipei,
      Taiwan, at which time we changed our name to Ezcomm, Inc. to reflect this change
      in our business model. We were unable to raise enough capital to finance the
      research and development of our proposed consumer incentive and loyalty program
      in Asia and, therefore, we abandoned all efforts to develop such business in
      January 2001. We remained inactive until July 2004, at which time we changed
      our
      name to Ezcomm Enterprises, Inc. and began to consider and investigate potential
      business opportunities, including an acquisition or merger. On
      September 30, 2005, we acquired Eugene Science, Inc. pursuant to the terms
      of an exchange agreement. The exchange transaction was accounted for as a
      reverse merger (recapitalization) with Eugene Science deemed to be the acquirer
      for accounting purposes. Accordingly, the historical financial information
      presented in our financial statements is that of Eugene Science as adjusted
      to
      give effect to any difference between the par value of our capital stock and
      Eugene Science capital stock with an offset to capital in excess of par value.
      The basis of the assets, liabilities and retained earnings of Eugene Science,
      the accounting acquirer, were carried over in the recapitalization. Upon the
      closing of the exchange transaction, we became a global biotechnology company
      that develops, manufactures and markets nutraceuticals, functional foods that
      offer health-promoting advantages beyond that of nutrition. Our primary products
      are our plant sterol products, including our CZ TM - Series
      of food additives, and our CholZero TM -
      branded beverages and capsules. On January 13, 2006, we changed our name
      from Ezcomm Enterprises to Eugene Science.




**Going
      Concern**




Our
      independent registered public accounting firm has expressed substantial doubt
      as
      to our ability to continue as a going concern, in its report for the fiscal
      year
      ended December 31, 2007, based on significant operating losses that we
      incurred and the fact that we do not have adequate working capital to finance
      our day-to-day operations. Our continued existence depends upon the success
      of
      our efforts to raise additional capital necessary to meet our obligations as
      they become due and to obtain sufficient capital to execute our business plan.
      We intend to obtain capital primarily through issuances of debt or equity.
      There
      can be no degree of assurance that we will be successful in completing
      additional financing transactions.




If
      we
      cannot obtain adequate funding or achieve revenues from the sale of our
      products, we may be required to significantly curtail or even shut down our
      operations.


24


**Results
      of Operations**




**Revenue**




*Comparison
      of the Three Months Ended June 30, 2008 and 2007*




Our
      total
      revenue increased 32%, or $49,429, to $204,237 for the three months ended June
      30, 2008 as compared to $154,808 for the three months ended June 30, 2007.
      The
      increase in total revenue for the three months ended June 30, 2008 was primarily
      attributable to sales of raw material to Korea Tobacco & Ginseng
      Corporation.




**Cost
      of Goods Sold**




*Comparison
      of the Three Months Ended June 30, 2008 and 2007*




Cost
      of
      goods sold decreased 61%, or $74,837, to $48.294 for the three months ended
      June
      30, 2008 as compared to $123,131 for the three months ended June 30, 2007.
      The
      decrease in cost of sales for the three months ended June 30, 2008 was primarily
      attributable to decreases in the cost of raw materials for the products which
      we
      produce for Korea Tobacco & Ginseng Corporation.




**Operating
      Expenses**




*Comparison
      of the Three Months Ended June 30, 2008 and 2007*




Our
      operating expenses increased 9%, or $30,299, to $360,473 for the three months
      ended June 30, 2008 as compared to $408,754 for the three months ended June
      30,
      2007. Our operating expenses increased for the three months ended June 30,
      2008
      due primarily to an increase in travel expenses incurred by our principal
      executive officers.




**Other
      Income (Expense)**




*Comparison
      of the Three Months Ended June 30, 2008 and 2007*




Other
      expense primarily represents interest on indebtedness and loss of equipment
      sales. Other expense decreased 34%, or $250,582, to $491,157 for the three
      months ended June 30, 2008 as compared to $741,739 for the three months ended
      June 30, 2007. The decrease in other expense for the three months ended June
      30,
      2008 was primarily attributable to a decrease in net interest expenses resulting
      from our debt restructuring arrangements. All of our bank loans were in default
      as of June 30, 2008. The interest rate on such loans ranges from 15% to
      18%.




**Liquidity
      and Capital Resources**




At
      June
      30, 2008, we had cash and cash equivalents of $7,319 and negative working
      capital of approximately $(15,152,854). At June 30, 2007, we had cash and cash
      equivalents of $32,342 and negative working capital of approximately
      $(15,753,267). The decrease in our cash and cash equivalents at June 30, 2008
      was primarily attributable to an increase in the cost of our business
      operations. The increase in our working capital at June 30, 2008 was primarily
      attributable to the payment of accrued wages to retirees.




We
      currently satisfy our working capital requirements primarily through cash flows
      generated from operations, bank loans and sales of equity and debt securities.
      For the three months ended June 30, 2008, we had a net decrease in cash and
      cash
      equivalents of approximately $360,000 as compared with a net decrease in cash
      and cash equivalents of approximately $562,000 for the three months ended June
      30, 2007.




**Cash
      Used In Operating Activities**




Cash
      used
      in operating activities increased 118%, or $596,975, to $1,102,334 for the
      three
      months ended June 30, 2008 as compared to cash used in operating activities
      of
      $505,359 for the three months ended June 30, 2007. The increase in cash used
      in
      operating activities for the three months ended June 30, 2008 was primarily
      attributable to a decrease in our net losses.


25


**Cash
      Provided By Investing Activities**




Cash
      provided by investing activities decreased 205%, or $316,473, to $162,429 for
      the three months ended June 30, 2008 as compared to cash provided by investing
      activities of $154,044 for the three months ended June 30, 2007. The decrease
      in
      cash provided by investing activities for the three months ended June 30, 2008
      was primarily attributable to the acquisition of equipment and decrease in
      actual investment.




**Cash
      Provided By Financing Activities**




Cash
      provided by financing activities decreased 198%, or $1,302,086, to $644,017
      for
      the three months ended June 30, 2008 as compared to cash provided by financing
      activities of $658,069 for the three months ended June 30, 2007. The decrease
      in
      cash provided by financing activities for the three months ended June 30, 2008
      was primarily attributable to the increase in amounts owed for
      indebtedness.




**Bank
      Loans**




Since
      1999, we have borrowed an aggregate principal amount of $3,889,259 from the
      Industrial Bank of Korea, or IBK. These loans bear interest at rates of 4.5%
      to
      18% per annum and are due and payable on demand. A portion of these loans was
      secured by our real property located in Bucheon, Korea. Loans in the aggregate
      principal amount of $1,301,919 were guaranteed by the Korea Technology Credit
      Guarantee Fund, or KOTEC, a fund operated by the Korean government. During
      the
      first half of the 2006 fiscal year, we used the proceeds from the sale of our
      real property in Bucheon, Korea to repay all of the outstanding principal and
      a
      portion of the accrued and unpaid interest owed under the loans from IBK. At
      June 30, 2008, the accrued and unpaid interest owed by us to IBK under these
      loans was approximately $1,290,507.




In
      December 2004, we obtained a short-term loan from the National Agricultural
      Cooperative Federation, or the NACF, in the principal amount of $1,946,105.
      This
      loan bears interest at a rate of 4.6% per annum and was due on December 22,
      2005. This loan is guaranteed by KOTEC. At June 30, 2008, the loan had not
      been
      repaid to NACF and the aggregate outstanding principal balance and accrued
      and
      unpaid interest on such loan was approximately $1,451,788.




In
      September 2002, we obtained a short-term loan from ChoHeung Bank in the
      principal amount of $278,805. This loan has an interest rate of 9.5%, was due
      on
      August 1, 2004 and is personally guaranteed by Mr. Noh, our president, chief
      executive officer, chairman of the board and principal stockholder. At December
      31, 2007, the aggregate principal balance and accrued and unpaid interest on
      such loan was approximately $304,148. In each of July 2001 and December 2002,
      we
      entered into loan arrangements with Kookmin Bank. Each loan has a principal
      amount of $1,000,000, is unsecured and bears interest at the rate of 6.22%
      or
      11.22% per annum, respectively. Both loans were due and payable on November
      15,
      2004. At June 30, 2008, the aggregate principal balance and accrued and unpaid
      interest on such loans was approximately $2,494,286.




On
      July
      12, 2007, we entered into a debt restructuring agreement with KOTEC pursuant
      to
      which we paid approximately $82,000, or 75,000,000 Korean Won, in principal
      on
      debt of approximately $3,300,000 in exchange for which KOTEC agreed to
      extinguish $1,200,000 in debt. The remaining $2,110,000 will be paid, interest
      free, and following a three-year grace period, over a ten-year period beginning
      in 2010.




Additionally,
      we held advanced discussions and reached preliminary restructuring or workout
      agreements with creditors holding approximately $12,000,000 in debt which we
      intend to implement in the third quarter of 2008 in order to further strengthen
      our balance sheet.


26


**Notes**




On
      October 9, 2004, we issued KOTEC a note in connection with its payout as
      guarantor of a convertible debenture issued by us. The note bears interest
      at a
      rate of 21% per annum, is guaranteed by Mr. Noh, our president, chief executive
      officer, chairman of the board and principal stockholder, and is due and payable
      on demand. To date, KOTEC has made no demands for payment of this note. At
      June
      30, 2008, the outstanding balance of this note was $2,191,949.




In
      October 2003, we issued a note in the principal amount of $47,772, bearing
      interest at a rate of 9% per annum, to Jae Ho Lee, the president of UcoleBio
      Corp., an entity in which Eugene Science Korea, our subsidiary, has a 73%
      ownership interest. The note is due and payable on demand and, to date, Mr.
      Lee
      has made no demands to us for payment of this note. At June 30, 2008, the
      outstanding balance of this note was $57,064.




In
      February 2002, we issued a note in the principal amount of $100,000, bearing
      interest at a rate of 8% per annum, to Kyungioils Co., Ltd. The note is due
      and
      payable on demand and, to date, no demands have been made to us for payment
      of
      this note. At June 30, 2008, the outstanding balance of this note was
      $24,741.




In
      July
      and August 2007, we issued $2,250,000 in secured convertible notes to several
      accredited investors along with warrants to purchase 3,200,000 shares of our
      common stock at an exercise price of $0.25 per share. The notes bear interest
      at
      10% per annum, and, at the option of the investors, were convertible into shares
      of our common stock during the first six months following the issue date of
      the
      notes at a conversion price of $0.65. None of the investors converted the notes
      into shares of our common stock during such six-month period.




On
      November 27, 2007, we issued a senior secured promissory note in the aggregate
      principal amount of $600,000 to an accredited investor and warrants to purchase
      1,560,000 shares of our common stock at an exercise price of $0.25 per share.
      The note bears interest at a rate of 10% per annum and, at the option of the
      investor, is convertible into shares of the Company’s common stock during the
      first six months following the issue date of the note at a conversion price
      of
      $0.65. The investor did not convert the note into shares of our common stock
      during such six-month period.




**Government
      Loans**




On
      March
      2, 2003, we received a non-interest bearing, unsecured loan from the Korean
      government in the principal amount of $61,779. Pursuant to its terms, the loan
      was to be repaid in three annual installments of $20,593, beginning February
      26,
      2004. The loan matured in its entirety in February 2006. At June 30, 2008,
      we
      were $67,702 in arrears under this loan.




We
      received a $316,181 loan from the Korean government in connection with certain
      of our research and development projects over the period from 1999 to 2002.
      These research and development projects were not successful and, as a result,
      we
      are obligated to repay the principal amount of the loan to the Korean
      government. We repaid $21,034 of the amount due under this loan in our 2004
      fiscal year. At June 30, 2008, we were $45,134 in arrears under this loan
      arrangement.




**Critical
      Accounting Policies**




Our
      financial position, results of operations and cash flows are impacted by the
      accounting policies we have adopted. In order to get a full understanding of
      our
      financial statements, one must have a clear understanding of the accounting
      policies employed. A summary of our critical accounting policies
      follows:




BASIS
      OF
      PRESENTATION. These financial statements have been prepared with the assumption
      that we will be able to realize our assets and discharge our liabilities in
      the
      normal course of business.




BASIS
      OF
      CONSOLIDATION. The reverse-takeover transaction between us and Eugene Science
      Korea, our Korean subsidiary, has been recorded as our recapitalization, with
      our net assets brought forward at their historical basis. The intention of
      Eugene Science Korea’s management was to acquire us as a shell company listed on
      a stock market. As such, accounting for the reverse-takeover as our
      recapitalization is deemed appropriate. The consolidated financial statements
      included the accounts of us (formerly, Ezcomm Enterprises) in the United States,
      Eugene Science Korea, our Korean subsidiary, in Korea, and Ucolebio, Inc.,
      a
      subsidiary of Eugene Science Korea, in Korea. Significant inter company
      transactions, if any, have been eliminated in consolidation. Minority interests
      are recorded to the extent of their equity. Losses in excess of minority
      interest equity capital are charged against the majority interest and will
      be
      reversed when the losses reverse.


27


UNIT
      OF
      ESTIMATES. The preparation of financial statements in accordance with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements and related notes to financial statements. These estimates are based
      on our management’s best knowledge of current events and actions that we may
      undertake in the future. Actual results may ultimately differ from estimates,
      although our management does not believe such changes will materially affect
      the
      financial statements in any individual year.




REVENUE
      RECOGNITION. We generate revenue from sales of manufactured goods and
      merchandise, as well as the rental of our buildings. Revenue from our product
      sales are recognized in accordance with Staff Accounting Bulletin No. 101,
“Revenue Recognition in Financial Statements,” when delivery has occurred,
      provided there is persuasive evidence of an agreement, the fee is fixed or
      determinable and collection of the related receivable is probable. For
      manufactured finished goods, we recognize revenue when there is a definitive
      sales agreement, and upon shipment of products, when title is passed and the
      amount collectible can reasonably be determined. For merchandise sales, we
      recognize revenue upon shipment of products, when title is passed and the amount
      collectible can reasonably be determined. For rental income, we retain
      substantially all of the benefits and risks of ownership of our income
      properties and therefore recognize revenue upon receipt of monthly
      rent.




GOVERNMENT
      GRANTS. Government grants are recognized as income over the periods necessary
      to
      match them with the related costs that they are intended to
      compensate.




CURRENCY
      TRANSLATION. Our functional currency is the Korean Won. Adjustments to translate
      those statements into United States dollars at the balance sheet date are
      recorded in other comprehensive income. Foreign currency transactions of our
      Korean operation have been translated to Korean Won at the rate prevailing
      at
      the time of the transaction. Realized foreign exchange gains and losses were
      charged to income in the year.




CASH
      AND
      EQUIVALENTS. Highly liquid investments with maturities of three months or less
      when purchased are considered cash equivalents and recorded at cost, which
      approximates fair value.




ALLOWANCE
      FOR DOUBTFUL ACCOUNTS. An allowance for doubtful accounts is computed based
      on
      our historical experience and our management’s analysis of possible bad debts.
      Accounts receivable are shown net of allowance for doubtful accounts of $0
      and
      $0 as of June 30, 2008 and 2007, respectively.




PROPERTIES
      AND EQUIPMENT. Properties and equipment are stated at cost. Major renewals
      and
      betterments are capitalized and expenditures for repairs and maintenance are
      charges to expense as incurred. Depreciation is computed using the straight
      line
      method over the following periods:




Building
            20-40
                yearsMachinery
            10
                yearsVehicles
            5
                yearsFurniture
                and equipment
            3-5
                years





INTANGIBLE
      ASSETS. Intangible assets such as cost of obtaining industrial rights and
      patents are stated at cost, net of depreciation computed using the straight-line
      method over five to ten years.




INVENTORIES.
      Inventories are stated at the lower of cost or net realizable value. Net
      realizable value is determined by deducting selling expenses from selling price.
      The cost of inventories is determined on the first-in first-out method, except
      for materials-in-transit for which the specific identification method is
      used.




INVESTMENTS.
      Investments in available-for-sale securities are being recorded in accordance
      with FAS-115, “Accounting for Certain Investments in Debt and Equity
      Securities.” Equity securities that are not held principally for the purpose of
      selling in the near term are reported at fair market value with unrealized
      holding gains and losses excluded from earnings and reported as a separate
      component of stockholders’ equity.


28


FINANCIAL
      INSTRUMENTS. Fair values of cash equivalents, short-term and long-term
      investments and short-term debt approximate their costs. The estimated fair
      values of other financial instruments, including debt, equity and risk
      management instruments, have been determined using market information and
      valuation methodologies, primarily discounted cash flow analysis. These
      estimates require considerable judgment in interpreting market data, and changes
      in assumptions or estimation methods could significantly affect the fair value
      estimates.




**Recent
      Accounting Pronouncements**




In
      June
      2006, the Financial Accounting Standard Board, or the FASB, issued
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN 48.
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in
      our financial statements in accordance with Statement of Financial Accounting
      Standards, or SFAS, No. 109. FIN 48 prescribes a recognition threshold and
      measurement attributes for the financial statement recognition and measurement
      of a tax position taken or expected to be taken in a tax return. The provisions
      of FIN 48 are effective for the fiscal years beginning after December 15, 2006.
      We do not expect that the adoption of FIN 48 will have a significant effect
      on
      our financial statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements,” or SAB No 108. SAB No. 108 provides
      interpretive guidance on how the effects of the carryover or reversal of prior
      year misstatements should be considered in quantifying a current year
      misstatement. Under SAB No. 108, we should quantify errors using both a balance
      sheet and income statement approach and evaluate whether either approach results
      in a misstatement that is material when all relevant quantitative and
      qualitative factors are considered. The adoption of SAB 108 did not have any
      impact on our financial statements.




In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities," or SFAS No. 159, which permits
      entities to measure financial instruments and certain other items at fair value
      that are not currently required to be measured at fair value. An entity would
      report unrealized gains and losses on items for which the fair value option
      has
      been elected in earnings at each subsequent reporting date. The objective is
      to
      improve financial reporting by providing entities with the opportunity to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. The decision about whether to elect the fair value option is applied
      instrument by instrument, with a few exceptions. The decision is irrevocable
      and
      it is applied only to entire instruments and not to portions of instruments.
      SFAS No. 159 requires disclosures that facilitate comparisons (a) between
      entities that choose different measurement attributes for similar assets and
      liabilities and (b) between assets and liabilities in the financial statements
      of an entity that selects different measurement attributes for similar assets
      and liabilities. SFAS No. 159 is effective for financial statements issued
      for
      fiscal years beginning after November 15, 2007. Early adoption is permitted
      as
      of the beginning of a fiscal year provided the entity also elects to apply
      the
      provisions of SFAS No. 157, "Fair Value Measurements.” Upon implementation, an
      entity shall report the effect of the first remeasurement to fair value as
      a
      cumulative-effect adjustment to the opening balance of retained earnings. Since
      the provisions of SFAS No. 159 are applied prospectively, any potential impact
      will depend on the instruments selected for fair value measurement at the time
      of implementation. We are currently evaluating the impact, if any, that the
      adoption of SFAS No. 159 will have on our financial statements.




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




We
      do not
      currently have any exposure to market risk with respect to our currency, cash
      and cash equivalents or investment securities.




**Item
      4. Controls and Procedures.**




**Disclosure
      Controls and Procedures**


29




The
      Company’s management, with the participation of the Company’s chief executive
      officer and chief financial officer, evaluated the effectiveness of the
      Company’s disclosure controls and procedures as of the end of the period covered
      by this report. The term “disclosure controls and procedures,” as defined in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
      procedures of a company that are designed to ensure that information required
      to
      be disclosed by a company in the reports that it files or submits under the
      Exchange Act is recorded, processed, summarized and reported, within the time
      periods specified in the Securities and Exchange Commission’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed by
      a
      company in the reports that it files or submits under the Exchange Act is
      accumulated and communicated to the company’s management, including its
      principal executive and principal financial officers, as appropriate to allow
      timely decisions regarding required disclosure. Management recognizes that
      any
      controls and procedures, no matter how well designed and operated, can provide
      only reasonable assurance of achieving their objectives and management
      necessarily applies its judgment in evaluating the cost-benefit relationship
      of
      possible controls and procedures. Based on the evaluation of the Company’s
      disclosure controls and procedures as of the end of the period covered by this
      report, the Company’s chief executive officer and chief financial officer
      concluded that, as of such date, the Company’s disclosure controls and
      procedures were not effective for the reasons disclosed below.





The
      Company has limited revenue and only six employees. One employee, the internal
      controller, is responsible for daily financial bookkeeping responsibilities.
      The
      internal controller reports directly to the Company’s chief financial officer.
      The chief financial officer prepares a monthly report for the chief executive
      officer and the board of directors of the Company to review. The board of
      directors consists of three members and holds a minimum of one meeting per
      month. The financial state of the company is discussed in depth by the board
      of
      directors, which includes review of the monthly report. After each quarter,
      the
      board of directors reviews a combined quarterly report and signs off based
      on
      its evaluation that the financial statements are accurate. The CFO will then
      provide the approved quarterly financial report to the Company’s auditors for
      their review.





The
      Company has previously identified certain internal control deficiencies that
      we
      consider to be material weaknesses, including: (1) the Company’s operations are
      primarily located in South Korea and the initial bookkeeping is prepared
      according to Korean GAAP and then converted to U.S. GAAP which often leads
      to
      discrepancies; (2) due to having minimal employees, there are only two levels
      of
      control from the internal controller to the chief financial officer and thus,
      minimal levels of checks and balances; and (3) the staff of the Company is
      somewhat inexperienced with the regulatory requirements of a public company
      in
      the United States.





The
      internal controller and the chief financial officer are working together to
      keep
      each other appraised of items which may require disclosure and to see that
      proper level of disclosure is made.





**Changes
      In Internal Control Over Financial Reporting**




There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the second
      quarter ended June 30, 2008, that have materially affected, or are reasonably
      likely to materially affect, our internal control over financial
      reporting.




**Item
      4T. Controls and Procedures**




**Management’s
      Report on Internal Control over Financial Reporting**




Management
      of the Company is responsible for establishing and maintaining adequate internal
      control of over financial reporting as defined in Rule 13a-15(f) under the
      Securities Exchange Act of 1934. We have assessed the effectiveness of those
      internal controls as of December 31, 2007, using the Committee of Sponsoring
      Organizations of the Treadway Commission (“COSO”) *Internal
      Control - Integrated Framework* as a
      basis for our assessment.


30


Because
      of inherent limitations, internal control over financial reporting may not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies and procedures may deteriorate. All internal control systems, no matter
      how well designed, have inherent limitations Therefore, even those systems
      determined to be effective can provide only reasonable assurance with respect
      to
      financial statement preparation and presentation. 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.




A
      material weakness in internal controls is a deficiency in internal control,
      or
      combination of control deficiencies, that adversely affects the Company’s
      ability to initiate, authorize, record, process or report external financial
      data reliably in accordance with accounting principles generally accepted in
      the
      United States of America such that there is more than a remote likelihood that
      a
      material misstatement of the Company’s annual or interim financial statements
      that is more than inconsequential will not be prevented or detected. In the
      course of making our assessment of the effectiveness of internal controls over
      financial reporting, we identified a material weakness in our internal control
      over financial reporting. This material weakness consisted of inadequate
      staffing and supervision within the accounting operations of our company. The
      relatively small number of employees who have bookkeeping and accounting
      functions prevents us from segregating duties within our internal control
      system. The inadequate separation of duties is a weakness because it could
      lead
      to the untimely identification and resolution of accounting and disclosure
      matters or could lead to a failure to perform timely and effective reviews.
      However, we have determined that the addition of personnel to our bookkeeping
      and accounting operations is not an efficient use of our resources at this
      time.




Because
      of the above condition, the Company’s internal controls over financial reporting
      were not effective as of June 30, 2008.




This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this annual report.


31




**PART
      II—OTHER INFORMATION**




**Item
      6. Exhibits**




The
      exhibits set forth below are filed as part of this Quarterly Report on
      Form 10-Q:




**Exhibit**
              **Number**
            
            **Description**31.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under the Securities Exchange Act of 1934.31.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under the Securities Exchange Act of 1934.32.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under the Securities Exchange Act of 1934 and 18 U.S.C.
                Section 1350.32.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under the Securities Exchange Act of 1934 and 18 U.S.C.
                Section 1350.




32




**SIGNATURES**




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




EUGENE
                SCIENCE, INC.Date:
                August 18, 2008
            By:
            /s/
                Christopher CraneyChristopher
                CraneyChief
                Executive Officer(Principal
                Executive Officer)





Date:
                August 18, 2008
            By:
            /s/
                Byung Ho HoangByung
                Ho HoangChief
                Financial Officer(Principal
                Financial Officer)




33


**Exhibit
      Index**




**Exhibit**
              **Number**
            
            **Description**31.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under the Securities Exchange Act of 1934.31.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under the Securities Exchange Act of 1934.32.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under the Securities Exchange Act of 1934 and 18 U.S.C.
                Section 1350.32.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under the Securities Exchange Act of 1934 and 18 U.S.C.
                Section 1350.




34