**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**  ****


**Washington,
      D.C. 20549**





**FORM
      10-QSB**








x
            **QUARTERLY****REPORT
                UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**
              **FOR
                THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
                2007**





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





**Commission
      file number 000-50601**





**EUGENE
      SCIENCE, INC.**


**(Name
      of small business issuer 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)**





**Issuer’s
      telephone number: 82-2-338-6284**





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  ̈





The
      number of outstanding shares of the issuer’s common stock as of November 15,
      2007 was 40,315,705





Transitional
      Small Business Disclosure Format (Check one): Yes  ̈ No x









**Item
      1. Financial Statements.**




**EUGENE
        SCIENCE, INC. AND SUBSIDI** **ARIES**
 
  CONSOLIDATED
        INTERIM FINANCIAL STATEMENTS
  SEPTEMBER
        30, 2007 AND 2006
 
 (UNAUDITED)
   1
   **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
  CONSOLIDATED INTERIM
        FINANCIAL STATEMENTS
  SEPTEMBER
        30, 2007 AND 2006
  (Unaudited)
  **CONTENTS**
                **PAGE****FINANCIAL
                    STATEMENTS**ConsolidatedInterim
                    Balance Sheets
                F-1Consolidated
                    Interim Statements of Operations and Comprehensive Loss
                F-3ConsolidatedInterim
                    Statements of Stockholders’ Deficit
                F-5ConsolidatedInterim
                    Statements of Cash Flows
                F-6Notes
                    to ConsolidatedInterim
                    Financial Statements
                F-7
                    – F-19
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated Interim
            Balance Sheets
 September
            30, 2007 and 2006
 (Unaudited)
 **ASSETS****2007**
              
              **2006**Current
                  assets:Cash
                  and cash equivalents (Note 2)
              
              $
              552,469
              
              $
              17,408Restricted
                  cash (Note 3)
              
              
              -
              
              
              10,788Accounts
                  receivable (Notes 2 and 18)
              
              
              315,439
              
              
              810,769Inventories
                  (Note 2)
              
              
              37,650
              
              
              24,149Due
                  from related parties (Note 4)
              
              
              -
              
              
              1,417,023Sales
                  proceed receivable (Note 6)
              
              
              689,924
              
              
              -Prepaid
                  expenses and other current assets (Note 7)
              
              
              189,277
              
              
              276,217Total
                  current assets
              
              
              1,784,759
              
              
              2,556,354Property
                  and equipment (Note 5)
              
              
              1,187,782
              
              
              2,758,529Other
                  assets:Investments
                  (Note 8)
              
              
              417
              
              
              588,817Intangible
                  assets (Note 2)
              
              
              181,729
              
              
              172,982Deposits
              
              
              88,005
              
              
              -Total
                  other assets
              
              
              270,151
              
              
              761,799Total
                  assets
              
              $
              3,242,692
              
              $
              6,076,682
  The
          accompanying notes an integral part of these consolidated financial
          statements
 F-1
 **EUGENE
          SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated Interim
          Balance Sheets
 September
          30, 2007 and 2006
 (Unaudited)
  **LIABILITIES
                  AND STOCKHOLDER’S DEFICIT****2007**
              
              **2006**Current
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              8,537,948
              
              $
              9,432,723Deposit
                  from customers
              
              
              136,821
              
              
              169,133Loan
                  payable, current portion (Note 10)
              
              
              5,230,106
              
              
              5,744,708Convertible
                  debenture (Note 11)
              
              
              2,250,000
              
              
              -Due
                  to shareholders and officers (Note 12)
              
              
              260,343
              
              
              657,009Total
                  current liabilities
              
              
              16,415,218
              
              
              16,003,573Long-term
                  liabilities:Accrued
                  severance benefits (Note 13)
              
              
              398,298
              
              
              655,784Rental
                  deposits (Notes 9)
              
              
              179,176
              
              
              68,710Long-term
                  debt, net of current portion (Note 10)
              
              
              2,112,520
              
              
              22,324Long-term
                  liabilities
              
              
              2,689,994
              
              
              746,818Total
                  liabilities
              
              
              19,105,212
              
              
              16,750,391Stockholders’
                  deficit:Common
                  stock (Note 14)
              
              
              40,316
              
              
              35,765Additional
                  paid-in-capital
              
              
              16,579,251
              
              
              16,500,344Accumulated
                  other comprehensive loss
              
              
              (2,181,039
              )
              
              (2,111,980
              )Accumulated
                  deficit
              
              
              (30,301,048
              )
              
              (25,097,838
              )Total
                  stockholders’ deficit
              
              
              (15,862,520
              )
              
              (10,673,709
              )Total
                  liabilities and stockholders’ deficit
              
              $
              3,242,692
              
              $
              6,076,682
 The
            accompanying notes an integral part of these consolidated financial
            statements
 F-2
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
            Interim Statements of Operations and Comprehensive Loss
 Nine
            Months Ended September
            30, 2007 and 2006
 (Unaudited)
 **2007**
              
              **2006**Net
                  sales (Note 16)
              
              $
              626,036
              
              $
              657,566Cost
                  of goods sold (Note 16)
              
              
              485,698
              
              
              429,541Gross
                  profits
              
              
              140,338
              
              
              228,025Operating
                  expenses
              
              
              1,136,193
              
              
              1,970,715Operating
                  loss
              
              
              (995,855
              )
              
              (1,742,690
              )Other
                  income (expenses):Gain
                  from sale of property (Note 5)
              
              
              -
              
              
              5,504,264Net
                  rental income
              
              
              -
              
              
              164,827Miscellaneous
                  income
              
              
              115,967
              
              
              897Net
                  interest expense
              
              
              (628,967
              )
              
              -Loss
                  on currency transaction
              
              
              (5,037
              )
              
              (1,671,194
              )Loss
                  from sale of investment securities (Note 8)
              
              
              (480,661
              )
              
              -Bad
                  debt allowance for related party loans (Note 4)
              
              
              (1,926,581
              )
              
              (2,981,240
              )Net
                  other income (expenses)
              
              
              (2,925,279
              )
              
              1,017,554Loss
                  before income taxes
              
              
              (3,921,134
              )
              
              (725,136
              )Income
                  taxes (Note 15)
              
              
              -
              
              
              -Net
                  loss
              
              
              (3,921,134
              )
              
              (725,136
              )Comprehensive
                  income (loss):Unrealized
                  loss on investment
              
              
              -
              
              
              (71,707
              )Foreign
                  currency translation adjustment
              
              
              1,037,426
              
              
              (259,198
              )1,037,426
              
              
              (330,905
              )Comprehensive
                  loss
              
              $
              (2,883,708
              )
              $
              (1,056,041
              )Basic
                  and diluted earnings (loss) per share
              
              $
              (0.10
              )
              $
              (0.02
              )Weighted
                  average number of shares outstanding
                during
                  the periods - basic and diluted (Note 14)
              
              
              37,703,364
              
              
              35,091,023
  The
          accompanying notes an integral part of these consolidated financial
          statements
 F-3
 **EUGENE
            SCIENCE, INC. AND SUBSIDIARIES**
 Consolidated
            Interim Statements of Operations and Comprehensive Loss
 Three
            Months Ended September
            30, 2007 and 2006
 **2007**
              
              **2006**Net
                  sales
              
              $
              316,461
              
              $
              314,726Cost
                  of goods sold
              
              
              324,827
              
              
              264,471Gross
                  profits (loss)
              
              
              (8,366
              )
              
              50,255Operating
                  expenses
              
              
              397,265
              
              
              560,055Operating
                  loss
              
              
              (405,631
              )
              
              (509,800
              )Other
                  income (expenses):Gain
                  from sale of property
              
              
              277
              
              
              13,717Net
                  rental income
              
              
              -
              
              
              85,574Miscellaneous
                  income
              
              
              4,286
              
              
              897Net
                  interest expense
              
              
              (38,926
              )
              
              (493,973
              )Loss
                  on currency transaction
              
              
              (4,575
              )
              
              -Loss
                  from sale of investments
              
              
              (1,149
              )
              
              -Bad
                  debt allowance for related party loans
              
              
              (4,608
              )
              
              (63,166
              )Net
                  other expenses
              
              
              (44,695
              )
              
              (456,951
              )Loss
                  before income taxes
              
              
              (450,326
              )
              
              (966,751
              )Income
                  taxes
              
              
              -
              
              
              -Net
                  loss
              
              
              (450,326
              )
              
              (966,751
              )Comprehensive
                  income (loss):Foreign
                  currency translation adjustments
              
              
              (147,813
              )
              
              382,153Comprehensive
                  loss
              
              $
              (598,139
              )
              $
              (584,598
              )Basic
                  and diluted loss per share
              
              $
              (0.01
              )
              $
              (0.03
              )Weighted
                  average number of shares outstanding
                during
                  the periods –
                  basic and
                  diluted
              
              
              37,703,364
              
              
              35,091,023
  The
          accompanying notes an integral part of these consolidated financial
          statements
 F-4
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated Interim
            Statements of Stockholders’ Deficit
 Nine Months
            Ended September
            30, 2007 and 2006
 
 **Paid
                  in**
              
              **Accumulated****Capital
                  in**
              
              **Other****Common
                  Stock**
              
              **Excess
                  of**
              
              **Comprehensive**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Par
                  value**
              
              **Income
                  (loss)**
              
              **Deficit**
              
              **Total**Balance,
                  January 1,
                2006
                  (Note 14)
              
              
              34,375,180
              
              $
              34,375
              
              $
              16,418,734
              
              $
              (1,781,075
              )
              $
              (24,372,702
              )
              $
              (9,700,668
              )Unrealized
                  loss on available
                for
                  sale securities
              
              
              -
              
              
              -
              
              
              -
              
              
              (71,707
              )
              
              -
              
              
              (71,707
              )Issuance
                  of shares for
                consulting
                  services (Note 14)
              
              
              1,390,000
              
              
              1,390
              
              
              81,610
              
              
              -
              
              
              -
              
              
              83,000Foreign
                  currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              (259,198
              )
              
              -
              
              
              (259,198
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (725,136
              )
              
              (725,136
              )Balance,September
                  30, 2006
              
              
              35,765,180
              
              $
              35,765
              
              $
              16,500,344
              
              $
              (2,111,980
              )
              $
              (25,097,838
              )
              $
              (10,673,709
              )Balance,
                  January 1,
                2007
                  (Note 14)
              
              
              40,315,705
              
              $
              40,316
              
              $
              16,579,251
              
              $
              (3,218,465
              )
              $
              (26,379,914
              )
              $
              (12,978,812
              )Foreign
                  currency
                translation
                  adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              1,037,426
              
              
              -
              
              
              1,037,426Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,921,134
              )
              
              (3,921,134
              )Balance,September
                  30, 2007
              
              
              40,315,705
              
              $
              40,316
              
              $
              16,579,251
              
              $
              (2,181,039
              )
              $
              (30,301,048
              )
              $
              (15,862,520
              )
 The
            accompanying notes an integral part of these consolidated financial
            statements
 F-5
 **EUGENE
              SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
              Interim Statements of Cash Flows
 Nine
              Months Ended September
              30, 2007 and 2006
 (Unaudited)
 **2007**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (
                  3,921,134
              )
              $
              (725,136
              )Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              57,758
              
              
              258,891Provision
                  for loss on uncollectible related party loans
              
              
              1,926,581
              
              
              2,981,240Loss
                  on Investment/Gain on sale of property
              
              
              480,661
              
              
              (5,504,264
              )(Increase)
                  decrease in assets:Restricted
                  cash
              
              
              -
              
              
              (10,788
              )Accounts
                  receivable
              
              
              (238,375
              )
              
              (715,800
              )Inventory
              
              
              (3,551
              )
              
              36,437Prepaid
                  expenses and other assets
              
              
              (7,368
              )
              
              (94,203
              )Increase
                  (decrease) in liabilities:Accounts
                  payable
              
              
              386,500
              
              
              1,293,008Accrued
                  severance
              
              
              (194,683
              )
              
              201,106Rental
                  deposits
              
              
              -
              
              
              10,893Cash
                  used in operating activities
              
              
              (1,513,611
              )
              
              (2,268,616
              )Cash
                  flows from investing activities:Investment
              
              
              (147,227
              )
              
              -Deposits
              
              
              109,850
              
              
              -Property
                  & Equipment
              
              
              175,989
              
              
              -Intangible
                  assets
              
              
              6,452
              
              
              (60,919
              )Cash
                  used in investing activities
              
              
              145,064
              
              
              (60,919
              )Cash
                  flows from financing activities:Proceeds
                  from sale of property
              
              
              -
              
              
              11,784,939Issuance
                  of stock
              
              
              -
              
              
              83,000Net
                  advance from (to) related party
              
              
              365,437
              
              
              (3,149,241
              )Net
                  advance to customers
              
              
              (180,677
              )
              
              (1,378,692
              )Repayment
                  on loans
              
              
              1,725,788
              
              
              (5,017,689
              )Cash
                  provided by financing activities
              
              
              1,910,548
              
              
              2,322,317Net
                  increase in cash and cash equivalents
              
              
              542,001
              
              
              (7,218
              )Foreign
                  currency translation adjustment
              
              
              (4,381
              )
              
              1,270Cash
                  and cash equivalent - beginning of period
              
              
              14,849
              
              
              23,356Cash
                  and cash equivalent - end of period
              
              $
              552,469
              
              $
              17,408Supplemental
                  Information:Cash
                  paid during the year for: Interest paid
              
              $
              31,133
              
              $
              -
 The
            accompanying notes an integral part of these consolidated financial
            statements
 F-6
 **EUGENE
              SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
              to
              Consolidated Interim Financial Statements
 September
              30, 2007 and 2006
 (Unaudited)
 
  **Note
        1 – Nature of Business and Going Concern**
  ***(a)***
                ***Description
                    of Businessn***
  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.
  ***(b)***
              ***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
        $3,921,100 for the nine months ended September
        30, 2007 and its
        working capital deficiency was $16,699,400 as of September
        30, 2007 .
        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 oversea s
        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.
 F-7
 **EUGENE
              SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
              to
              Consolidated Interim Financial Statements
 September
              30, 2007 and 2006
 (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.
  ***(a)***
              ***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.
  ***(b)***
              ***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.
                  The intention of the management of Eugene Science Inc. in Korea
                  was to
                  acquire the Company as a shell company listed on a stock 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.
 ***(c)***
              ***Unit
                  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.
 ***(d)***
              ***Revenue
                  Recognition***
 The
                      Company generates revenues from sales of manufactured goods
                      and
                      merchandise, as well as 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”), 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, 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.
 F-8
 **EUGENE
                        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                        to
                        Consolidated Interim Financial Statements
 September
                        30, 2007 and 2006
 (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.
 
 ***(e)***
              ***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.
 ***(f)***
              ***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.
  ***(g)***
              ***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.
 ***(h)***
            ***Allowance
                for Doubtful Accounts*** An
                    allowance for doubtful accounts is computed based on the Company’s
                    historical experience and management’s analysis of possible bad debts.
                    Accounts receivable are shown net of allowance for doubtful accounts
                    of $
                    - and $54,625 at September
                    30, 2007and2006,
                    respectively.
 ***(******i)***
              ***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
  ***(******j)***
              ***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.
 ***(******k)***
              ***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.
 F-9
 **EUGENE
                  SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                  to
                  Consolidated Interim Financial Statements
 September
                  30, 2007 and 2006
 (Unaudited)
 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 inventory at September
                      30, 2007and2006were as follows:
 **2007**
              
              **2006**Raw
                  materials
              
              $
              20,851
              
              $
              17,452Finished
                  goods
              
              
              16,799
              
              
              6,554Merchandise
              
              
              -
              
              
              143Total
              
              $
              37,650
              
              $
              24,149
 
  ***(******l)***
              ***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.
 ***(******m)***
              ***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.
 ***(******n)***
              ***Recent
                  Accounting
                  Pronouncements***
 In
                      May 2005, the FASB issued SFAS No. 154, “Accounting
                      Changes and Error Corrections” (“SFAS 154”), which replaces Accounting
                      Principles Board (“APB”) Opinion No. 20, “Accounting Changes”, and SFAS
                      No. 3, “Reporting Accounting Changes in Interim Financial Statements.
                      An
                      Amendment of APB Opinion No. 28”, SFAS No. 154 provides guidance on the
                      accounting for and reporting of changes in accounting principles
                      and error
                      corrections. SFAS No. 154 requires retrospective application
                      to prior
                      period financial statements of voluntary changes in accounting
                      principle
                      and changes required by new accounting standards when the standard
                      does
                      not include specific transition provisions, unless it is impracticable
                      to
                      do so. SFAS No. 154 also requires certain disclosures for restatements
                      due
                      to correction of an error. SFAS No. 154 is effective for accounting
                      changes and corrections of errors made in fiscal years beginning
                      after
                      December 15, 2005, and is required to be adopted by the Company
                      as of
                      January 1, 2006. The impact that the adoption of SFAS No. 154
                      will have on
                      the Company’s results of operations and financial condition will depend
                      on
                      the nature of future accounting changes adopted by the Company
                      and the
                      nature of transitional guidance provided in future accounting
                      pronouncements.
 F-10
 **EUGENE
                    SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                    to
                    Consolidated Interim Financial Statements
 September
                    30, 2007 and 2006
 (Unaudited)
 **Note
        3 – Restricted Cash**
  The
        Company had a restricted cash of $10,788 at September 30, 2006, 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 were carried at
        $1,417,023 as of September 30, 2006. These loans are pledged by marketable
        securities, and bear interest at 9% and are due on demand. As of September
        30, 2007 ,
        the
        Company determined that the collectability of these loans is remote due to
        the
        leveraged financial condition of the affiliate and provided a loss reserve
        in an
        amount matching the entire loan amount.
  **Note
        5 – Properties and Equipment**
  Properties
        and equipment co nsisted
        of the following at September 30 :
 
 **2007**
              
              **2006**Buildings
              
              $
              889,002
              
              $
              838,363Equipment
                  and vehicles
              
              
              795,769
              
              
              4,454,370Furniture
                  and fixtures
              
              
              1,111,534
              
              
              1,071,380Construction
                  in progress
              
              
              87,068
              
              
              -2,883,373
              
              
              6,364,113Less:accumulated
                  depreciation
              
              
              1,695,591
              
              
              3,605,584Net
                  property and equipment
              
              $
              1,187,782
              
              $
              2,758,529
  On
        March
        3, 2006, the Company cancelled a sales agreement into
        which the Company entered in January 2004 to sell the land and buildings.
        In
        cancelling, the Company paid the buyer approximately $2,100,000 representing
        return of the deposit and a cancellation fee. On the April 27, 2006, the
        Company
        sold the land and building to a third party at approximately $11,700,000,
        realizing a gain of approximately $5,504,000. The proceeds from the sale
        were
        used to reduce a portion of the loans from Korea Trade Bank.
 
 On
        August
        11, 2006, the Company sold certain machinery and equipment located in the
        Bucheon facilities for about $1,021,500 realizing a loss of about $189,300.
 
 Depreciation
        expenses for the nine months ended September
        30, 2007 and 2006 were
        $57,758 and $258,891, respectively.
  **Note
        6 – Receivables from Sale of Assets**
 
 As
            of September
            30, 2007 ,
            the
            Company had outstanding proceeds receivable of $689,924 from the sales
            of real
            property and machinery and equipment further explained in Note
            5.
 F-11
 **EUGENE
              SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
              to
              Consolidated Interim Financial Statements
 September
              30, 2007 and 2006
 (Unaudited)
 **Note
        7 – Prepaid Expenses and Other Current Assets**
  Prepaid
        expenses and other current assets consisted of the following at September
        30:
 
 **2007**
              
              **2006**Prepaid
                  fees for certain patent registration and
                related
                  legal costs under application process
              
              $
              67,557
              
              $
              76,175Advance
                  payment to vendors
              
              
              121,720
              
              
              60,469Interest
                  receivable from related party loans
              
              
              -
              
              
              139,573Total
              
              $
              189,277
              
              $
              276,217
  **Note
        8 – Investments**
  The
        following is a summary of investments at September 30:
 
 **2007**
              
              **2006**7.50%
                  equity of a unlisted company
              
              $
              -
              
              $
              588,414Other
                  marketable securities
              
              
              417
              
              
              403Total
              
              $
              417
              
              $
              588,817
  During
        the nine months ended September
        30, 2007 ,
        the
        Company sold the investments in the equity securities and recognized a loss
        of
        $480,661.
  **Note** **9 –
        Rental Deposits**
  In
        January 2007, the Company began to occupy an office space that was previously
        leased to an unrelated party and has an outstanding rental
        deposit of $179,176 and $68,710 as of September
        30, 2007 and
        2006, respectively.
  F-12
 **EUGENE
                SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                to
                Consolidated Interim Financial Statements
 September
                30, 2007 and 2006
 (Unaudited)
 **Note** **10
        – Loans Payable**
 
 Loans
            payable consisted of the following at September 30 :
 
 **2007**
              
              **2006**Notes
                  payable to Kookmin Bank with interest at 18% to 21%, unsecured,
                  due on
                  demand, and guaranteed by chief executive officer. These loans
                  are in
                  default.
              
              $
              1,370,128
              
              $
              1,396,146Note
                  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)**
              
              
              2,112,520
              
              
              2,114,160Notepayable
                  toNational
                  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.
              
              
              1,373,851
              
              
              1,323,200Note
                  payable to Shinhan Bank with interest at 18% due on demand. The
                  loan is in
                  default.
              
              
              311,540
              
              
              300,869Note
                  payable to a customer with interest at 3%, unsecured, and due on
                  demand.
                  The note is in default.
              
              
              2,061,691
              
              
              -Notes
                  payable to employees with interest at 9% to 10%, unsecured, and
                  due on
                  demand.
              
              
              92,428
              
              
              590,566Government
                  loan,
                  non-interest bearing, unsecured, payable on demand.
              
              
              20,468
              
              
              42,091Total
                  notes payable
              
              
              7,342,626
              
              
              5,767,032Less:
                  current portion
              
              
              5,230,106
              
              
              5,744,708Total
                  long-term debt
              
              $
              2,112,520
              
              $
              22,324
  **(A)
        Debt Restructure**
  In
        July
        2007, the Company completed a Debt Rescheduling Agreement with KOTEC, in
        which
        KOTEC has agreed to term out the remaining balance of the loan into a long
        term
        debt to
        be
        repaid in monthly installations of $18,527
        (KRW 17,093,620) over
        a
        10-year period beginning in 2010, commencing after a 3-year grace period.
 
 Following
        is a summary of principal maturities of notes payable over the next five
        years :
 
 Yearsending
                  December 31,
              
              Amount2008
              
              $
              5,230,1062009
              
              
              -2010
              
              
              92,6352011
              
              
              222,3242012
                  and thereafter
              
              
              1,797,561Total
              
              $
              7,342,626
  F-13
 **EUGENE
                  SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                  to
                  Consolidated Interim Financial Statements
 September
                  30, 2007 and 2006
 (Unaudited)
 **Note
        11 – Convertible Notes**
 
 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 a rate of 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.
  **Note
        12 – Due to Shareholders and Officers**
 
 Due
          to
          shareholders and officer consisted
          of the following at September 30 :
  **2007**
              
              **2006**Unsecured
                  short term advance payable to shareholder with interest at 9% per
                  annum,
                  due on demand.
              
              $
              -
              
              $
              70,470Unsecured
                  short-term advances payable to corporate officer with interest
                  at 9% per
                  annum, due on demand.
              
              
              260,343
              
              
              586,539Total
              
              $
              260,343
              
              $
              657,009
  **Note
        13 – 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 at September
        30, 2007 and 2006 ,
        were
        $398,298 and $655,784, respectively.
  **Note
        14 – Capital Stock**
 
 Total
                  shares authorized:480,000,000 shares of Common Stock, par value $0.00120,000,000 shares of Preferred Stock, par value $0.001Shares
                  issued and outstanding:
              
              **Shares**
              
              **Amount**Common
                  stockSeptember
                  30, 2007
              
              
              40,315,705
              
              $
              40,316September
                  30, 2006
              
              
              35,765,180
              
              $
              35,765Preferred
                  stock-
                  none issued and outstanding
              
              
              -
              
              $
              -
  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.
 F-14
 **EUGENE
                    SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                    to
                    Consolidated Interim Financial Statements
 September
                    30, 2007 and 2006
 (Unaudited)
 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.
  **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:
 
 **2007**Dividend
                  yield
              
              
              0.00
              %Expected
                  volatility
              
              
              80
              %Risk-free
                  interest rate
              
              
              4.3
              %Expected
                  life of the option term (in years)
              
              
              10Forfeiture
                  rate
              
              
              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 276%.
 
 Risk-Free
        Interest Rate – This
        is the U.S.
        Treasury rate for the week of each stock option grant 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.
 F-15
 **EUGENE
                    SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                    to
                    Consolidated Interim Financial Statements
 September
                    30, 2007 and 2006
 (Unaudited)
 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 September
        30, 2007 .
  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 September
        30, 2007 and for
        disclosure requirements set forth above under Statement 123, during the period
        ended September
        30, 2007 ,
        the
        Company recognized no additional stock-based compensation for options vested.
  **Stock
        Options of the Korean Subsidiary**
  The
        following weighted-average assumptions were used in the valuation model for
        the
        stock option of the subsidiary:
 
 **Period
                  ended September****30****,****2007**
              
              **2006**Dividend
                  yield
              
              
              0
              %
              
              0
              %Expected
                  volatility
              
              
              80
              %
              
              80
              %Risk-free
                  interest rate
              
              
              4.3
              %
              
              7.7
              %Expected
                  life of the option term (in years)
              
              
              3
              
              
              4
  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.
 F-16
 **EUGENE
                    SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                    to
                    Consolidated Interim Financial Statements
 September
                    30, 2007 and 2006
 (Unaudited)
 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.
 
 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
        September 30:
  **2007**
              
              **2006****Shares**
              
              **Weighted-AverageExcisePrice**
              
              **Shares**
              
              **Weighted-**
                **Average**
                **Excise**
                **Price**Outstanding,
                  beginning of period
              
              
              1,456,246
              
              $
              1.88
              
              
              1,456,246
              
              $
              1.12Granted
              
              
              --
              
              
              --
              
              
              --
              
              
              --Exercised
              
              
              --
              
              
              --
              
              
              --
              
              
              --Cancelled
              
              
              --
              
              
              --
              
              
              --
              
              
              --Outstanding,
                  end of period
              
              
              1,456,246
              
              $
              1.88
              
              
              1,456,246
              
              $
              1.88Weighted
                  average remaining contractual life of common stock options
              
              
              3
                  years
              
              
              
              
              
              4
                  years
  **Note
        15 - 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 2007 and 2006 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 years.
        The company has accumulated approximately $22,831,600 of taxable losses which
        can be used to offset future taxable income. The utilization of the losses
        expires in years 2007 through 2010.
 F-17
 **EUGENE
                    SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                    to
                    Consolidated Interim Financial Statements
 September
                    30, 2007 and 2006
 (Unaudited)
 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 arising from research and development
        expenses. For accounting purposes, these amounts are expenses when incurred.
        Under Korean tax laws, these amounts are deferred and amortized on a
        straight-line basis over 5 years.
  The
        Company has deferred income tax assets as follows:
 
 **2007**
              
              **2006**Deferred
                  income tax assets:Research
                  and development expenses amortized
                over
                  5 years for tax purposes
              
              $
              150,722
              
              $
              207,040Other
                  timing differences
              
              
              -
              
              
              10,397Net
                  operating loss carryforwards
              
              
              3,876,960
              
              
              2,857,3004,027,682
              
              
              3,074,737Valuation
                  allowance for
                deferred
                  income tax assets
              
              
              (4,027,682
              )
              
              (3,074,737
              )$
              -
              
              $
              -
  The
        Company provided a valuation allowance equal to the deferred income tax assets
        because it is presently considered that they will not be realized.
  **Note
        16 – Business Segment Information**
  Sales
            and
            cost of goods sold of the Company’s segments for the periods ended September
            30, 2007 and 2006 were as
            follows:
 
 **2007**
              
              **2006**Sales:Manufacturing
              
              $
              528,449
              
              $
              309,236Merchandise
              
              
              97,587
              
              
              348,330$
              626,036
              
              $
              657,566Cost
                  of Sales:Manufacturing
              
              $
              419,233
              
              $
              196,762Merchandise
              
              
              66,465
              
              
              232,779$
              485,698
              
              $
              429,541
  **Note
        17 - Major Customers**
  For
        the
        nine months ended September
        30, 2007 and 2006 ,
        sales
        to the major three customers accounted for 98% and 93%, respectively, of
        the
        Company’s total revenue.
  F-18
 **EUGENE
                      SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
                      to
                      Consolidated Interim Financial Statements
 September
                      30, 2007 and 2006
 (Unaudited)
 **Note
        18 - Related Party Transactions**
 
 Significant
            transactions with companies related or affiliates by common control for
            the
            periods ended and as of September
            30, 2007 and 2006 are
            summarized as follows:
 
 Sales
              
              Net
                  rental/
                Interest
                  income
              
              Purchases
              
              Accounts
                Receivable
              
              Accounts
                Payable
              
              Rental
                DepositCompany
                  related by common control2007
              
              $
              97,354
              
              $
              -
              
              $
              66,306
              
              $
              -
              
              $
              247,417
              
              $
              65,6742006
              
              $
              136,559
              
              $
              238,160
              
              $
              232,726
              
              $
              -
              
              $
              246,134
              
              $
              105,708Companies
                  affiliated by common control2007
              
              $
              201
              
              $
              1,582
              
              $
              -
              
              $
              4,542
              
              $
              73,179
              
              $
              -2006
              
              $
              196
              
              $
              -
              
              $
              43,716
              
              $
              3,982
              
              $
              114,727
              
              $
              -
  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.
  F-19




**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation.**




*This
      Quarterly Report on Form 10-QSB 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-QSB. 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-QSB, 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-QSB. 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,
      2006.*




**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, 2006, 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.




2


**Results
      of Operations**




**Revenue**




*Comparison
      of the Three Months Ended September 30, 2007 and 2006*




Our
      total
      revenue increased 0.6%, or $1,735, to $316,461 for the three months ended
      September 30, 2007 as compared to $314,726 for the three months ended September
      30, 2006. The increase in total revenue for the three months ended September
      30,
      2007 was primarily attributable to a substantial increase in sales to Archer
      Daniels Midland Company, or ADM. During the three months ended September 30,
      2007, we shipped an aggregate amount of seven and one-half tons of our CholZero
      plant sterols, or CZ-STM, to ADM, which markets CZ-S as CardioAidTM CZ. ADM
      distributes CZ-S in North America and Europe and holds exclusive marketing
      rights to CZ-S as a beverage additive in those regions. An ADM customer has
      launched our CZ-S additive in a food or beverage product. Due to confidentiality
      agreements, we cannot disclose the name of the food or beverage product.
      Subsequent to the closing of the three months ended September 30, 2007, we
      received additional orders from ADM for another six tons of CZ-S, which we
      expect to ship and recognize in the fourth quarter of 2007.




*Comparison
      of the Nine Months Ended September 30, 2007 and 2006*




Our
      total
      revenue decreased 4.8%, or $31,530, to $626,036 for the nine months ended
      September 30, 2007 as compared to $657,566 for the nine months ended September
      30, 2006. The decrease in total revenue for the nine months ended September
      30,
      2007 was primarily attributable to a decrease in cooking oil sales to Amway
      as
      compared with the prior year period.




**Cost
      of Goods Sold**




*Comparison
      of the Three Months Ended September 30, 2007 and 2006*




Cost
      of
      goods sold increased 22.8%, or $60,356, to $324,827 for the three months ended
      September 30, 2007 as compared to $264,471 for the three months ended September
      30, 2006. The increase in cost of sales for the three months ended September
      30,
      2007 was primarily attributable to increased costs resulting from outsourced
      manufacturing fees incurred to manufacture CZ-S for ADM during the three-month
      period. We outsourced production of CZ-S during the three months ended September
      30, 2007 because we were transitioning into our new production facility and
      certain sensitive manufacturing equipment needed to be dismantled and
      reassembled, which took several weeks to complete. Therefore, we had to
      outsource certain production of CZ-S in order to meet our deadline to ship
      the
      product to ADM, resulting in higher than normal manufacturing costs. Our gross
      margin for the three months ended September 30, 2007 was approximately (2.6)%
      of
      our revenue as compared to a gross margin of approximately 15.9% of our revenue
      for the three months ended September 30, 2006. The change in our gross margin
      for the three months ended September 30, 2007 was primarily attributable to
      an
      increase in cost of goods sold for products manufactured for ADM. However,
      with
      the completion of our new production facility, which we expect to be completed
      and fully operational by December 1, 2007, the gross margin on all subsequent
      orders should be significantly higher than that of previous periods. We expect
      that margins will increase upon completion of the new facility because we will
      be able to produce our products and fill orders more quickly, resulting in
      potentially higher levels of sales, direct and indirect, as well as
      manufacturing efficiencies gained in the new production facility.




*Comparison
      of the Nine Months Ended September 30, 2007 and 2006*




Cost
      of
      sales increased 13.1%, or $56,157, to $485,698 for the nine months ended
      September 30, 2007 as compared to $429,541 for the nine months ended September
      30, 2006. The increase in cost of sales for the nine months ended September
      30,
      2007 was primarily attributable to a decrease in sales of our higher margin
      products, such as our cooking oil, as compared to the prior year period. In
      addition, our cost of sales increased as a result of additional fees we incurred
      to manufacture and fill the ADM orders in a timely manner. Our gross margin
      for
      the nine months ended September 30, 2007 was approximately 22.4% of our revenue
      as compared to a gross margin of approximately 34.6% of our revenue for the
      nine
      months ended September 30, 2006. The change in our gross margin for the nine
      months ended September 30, 2007 was primarily attributable to the decrease
      in
      sales of our high margin health functional food products, such as cooking oil.




3


**Operating
      Expenses**




*Comparison
      of the Three Months Ended September 30, 2007 and 2006*




Our
      operating expenses decreased 29.1%, or $162,790, to $397,265 for the three
      months ended September 30, 2007 as compared to $560,055 for the three months
      ended September 30, 2006. Our operating expenses decreased for the three months
      ended September 30, 2007 due primarily to a reduction of labor costs resulting
      from the transition into our new production facility. With certain production
      temporarily outsourced during the transition into the new production facility
      during the three months ended September 30, 2007, our labor expenses were
      temporarily reduced.




*Comparison
      of the Nine Months Ended September 30, 2007 and 2006*




Our
      operating expenses decreased 42.3%, or $834,522, to $1,136,193 for the nine
      months ended September 30, 2007 as compared to $1,970,715 for the nine months
      ended September 30, 2006. Our operating expenses decreased for the nine months
      ended September 30, 2007 due primarily to a reduction in our research and
      development expenses, as many of our products have been developed and are ready
      to go to market, and our legal and professional expenses.




**Other
      Income (Expense)**




*Comparison
      of the Three Months Ended September 30, 2007 and 2006*




Other
      expense primarily represents a bad debt allowance for related party loans,
      loss
      from sale of investment securities and net interest expense. Other expense
      decreased 90.2%, or $412,256, to $44,695 for the three months ended September
      30, 2007 as compared to other expense of $456,951 for the three months ended
      September 30, 2006. The decrease in other expense for the three months ended
      September 30, 2007 was primarily attributable to a decrease in net interest
      expense. As a result of the sale of our real property, we paid off a significant
      amount of our debt which decreased interest payments. All of our bank loans
      were
      in default as of September 30, 2007. The interest rate on such loans ranges
      from
      15% to 18%.




*Comparison
      of the Nine Months Ended September 30, 2007 and 2006*




Other
      expense increased 387.5%, or $3,942,833, to $2,925,279 for the nine months
      ended
      September 30, 2007 as compared to other income of $1,017,554 for the nine months
      ended September 30, 2006. The increase in other expense for the nine months
      ended September 30, 2007 was primarily attributable to a gain on the sale of
      our
      real property that we recognized during the nine months ended September 30,
      2006
      that offset our bad debt allowance and loss on a currency transaction during
      such period. We did not recognize such offset for the nine months ended
      September 30, 2007. In addition, our net interest expense and loss from sale
      of
      investment securities increased during the nine months ended September 30,
      2007.




**Liquidity
      and Capital Resources**




At
      September 30, 2007, we had cash and cash equivalents of $552,469 and negative
      working capital of approximately $(14,630,459). At September 30, 2006, we had
      cash and cash equivalents of $17,408 and negative working capital of
      approximately $(13,447,219). The increase in our cash and cash equivalents
      at
      September 30, 2007 was primarily attributable to the proceeds from an offering
      of convertible debentures. The decrease in our working capital at September
      30,
      2007 was primarily attributable to our inability to generate sufficient
      operating profit and an increase in short-term debt resulting from our offering
      of convertible debentures.




4


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 nine months ended September 30, 2007, we had a net increase in cash
      and
      cash equivalents of approximately $542,001 as compared with a net decrease
      in
      cash and cash equivalents of approximately $(7,218) for the nine months ended
      September 30, 2006.




**Cash
      Used In Operating Activities**




Cash
      used
      in operating activities decreased 33.3%, or $755,005, to $1,513,611 for the
      nine
      months ended September 30, 2007 as compared to $2,268,616 for the nine months
      ended September 30, 2006. The decrease in cash used in operating activities
      for
      the nine months ended September 30, 2007 was primarily attributable to more
      efficient controls of our cash resulting in slower cash usage as compared to
      the
      prior year period.




**Cash
      Provided By Investing Activities**




Cash
      provided by investing activities increased 338.1%, or $205,983, to $145,064
      for
      the nine months ended September 30, 2007 as compared to cash used in investing
      activities of $60,919 for the nine months ended September 30, 2006. The increase
      in cash provided by investing activities for the nine months ended September
      30,
      2007 was primarily attributable to an increase in deposits and proceeds received
      from the sale of property and equipment.




**Cash
      Provided By Financing Activities**




Cash
      provided by financing activities decreased 17.7%, or $411,769, to $1,910,548
      for
      the nine months ended September 30, 2007 as compared to $2,322,317 for the
      nine
      months ended September 30, 2006. The decrease in cash provided by financing
      activities for the nine months ended September 30, 2007 was primarily
      attributable to our difficult raising additional funding due to the lack of
      sources to repay our existing debts.




**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
      September 30, 2007, the accrued and unpaid interest owed by us to IBK under
      these loans was approximately $1,103,320.




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 has an interest rate of 4.6% per annum and was due on December 22, 2005.
      This loan is guaranteed by KOTEC. At September 30, 2007, the loan had not been
      repaid to NACF and the aggregate outstanding principal balance and accrued
      and
      unpaid interest on such loan was approximately $1,419,562.




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 September
      30, 2007, the aggregate principal balance and accrued and unpaid interest on
      such loan was approximately $438,718. 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 September 30, 2007, the aggregate principal balance and accrued and
      unpaid interest on such loans was approximately $2,037,725.




5


On
      July
      12, 2007, we entered into a debt restructuring agreement with KOTEC pursuant
      to
      which we paid approximately USD$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 fourth quarter of 2007 and first half of 2008 in
      order to further strengthen our balance sheet.




**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
      September 30, 2007, the outstanding balance of this note was
      $1,874,009.




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 September 30, 2007,
      the
      outstanding balance of this note was $47,729.




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 September 30, 2007, the outstanding balance of this note was
      $20,757.




**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 September 30, 2007,
      we were $57,881 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 September 30, 2007, we were $38,587 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.




6


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 zero
      dollars and $54,625 as of September 30, 2007 and 2006,
      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.




7


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.




**Recent
      Accounting Pronouncements**




In
      May
      2005, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards, “Accounting Changes and Error Corrections,” or SFAS 154,
      which replaces Accounting Principles Board, or APB, Opinion No. 20, “Accounting
      Changes”, and Statement of Financial Accounting Standards No. 3, “Reporting
      Accounting Changes in Interim Financial Statements An Amendment of APB Opinion
      No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of
      changes in accounting principles and error corrections. SFAS No. 154 requires
      retrospective application to prior period financial statements of voluntary
      changes in accounting principle and changes required by new accounting standards
      when the standard does not include specific transition provisions, unless it
      is
      impracticable to do so. SFAS No. 154 also requires certain disclosures for
      restatements due to correction of an error. SFAS No. 154 is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005 and was required to be adopted by us as of January
      1,
      2006. The impact that the adoption of SFAS No. 154 will have on our results
      of
      operations and financial condition will depend on the nature of future
      accounting changes adopted by us and the nature of transitional guidance
      provided in future accounting pronouncements.




**Risk
      Factors**




*The
      following risks could affect our business, financial results and results of
      operations. These risk factors should be considered in connection with
      evaluating the forward-looking statements contained in this Quarterly Report
      on
      Form 10-QSB because these factors could cause actual results and conditions
      to
      differ materially from those projected in the forward-looking
      statements* .




**Risks
      Related to Our Company**




***Our
      independent registered public accounting firm has a going concern qualification
      in their opinion contained in our audited financial statements which raises
      substantial doubt about our ability to continue as a going
      concern*** .




As
      a
      result of our substantial historical operating losses, limited revenues and
      working capital and our capital needs, our auditors added a going concern
      qualification in their report contained in our audited consolidated financial
      statements for the fiscal year ended December 31, 2006 which raises substantial
      doubt about our ability to continue as a going concern. While we have relied
      principally in the past on external financing to provide liquidity and capital
      resources for our operations, we can provide no assurance that cash generated
      from our operations together with cash received in the future from external
      financing will be sufficient to enable us to continue as a going
      concern.




***We
      will need to raise additional capital and it may not be available to us on
      favorable terms or at all. Our inability to obtain any needed additional capital
      on favorable terms could adversely affect our business, results of operations
      and financial condition*** .




We
      will
      need to raise additional capital over the next twelve months to support our
      operations, meet competitive pressures and respond to unanticipated requirements
      during and beyond that period. While there are no definitive arrangements with
      respect to sources of additional financing, management is optimistic that these
      funds can be raised through debt and/or equity offerings. However, our inability
      to obtain additional financing, when needed or on favorable terms, could
      materially adversely affect our business, results of operations and financial
      condition and could cause us to curtail or cease operations.




8


***If
      our creditors are unwilling or unable to restructure our existing debt, our
      efforts to restructure our debt and strengthen our balance sheet could be
      delayed or substantially impaired*** .




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 fourth quarter of 2007 and the first half of 2008 in order
      to
      further strengthen our balance sheet. There is no assurance that we will be
      able
      to implement those restructuring or workout agreements or that those agreements
      will be continue to be available to us in the future.  If
      our
      creditors are unwilling or unable to implement those agreements, our efforts
      to
      restructure our debt and strengthen our balance sheet could be delayed or
      substantially impaired.




***We
      may fail to establish or cultivate strategic relationships to expand our
      business*** .




We
      intend
      to develop our business model and build our business initially through strategic
      relationships with large manufacturers. We may not be able successfully to
      form
      or manage such relationships, and if not, our ability to execute our business
      plan will be at risk. Further, if these partnerships are formed but are not
      successful in their execution, further revenue derived from sales of patented
      products may not materialize.




***Because
      we rely on a limited number of customers, any reduction in orders from any
      single customer would harm our business*** .




In
      the
      nine months ended September 30, 2007, sales to three major customers accounted
      for 67.4% of our total revenue. We may fail to capture a share of the market
      for
      such products. Because we are dependent on a limited number of customers, any
      decrease or elimination of such customers’ purchases could materially harm our
      business.




***If
      we are not able to attract and retain key management and scientific personnel,
      our efforts to develop our products and achieve our other business objectives
      could be delayed or substantially impaired*** .




We
      are
      highly dependent on key marketing, research and development and management
      personnel, particularly Seung Kwon Noh, our president and chief executive
      officer; Jae Hong Yoo, our chief financial officer; Tae Hwan Lee, our vice
      president, domestic marketing; Se Cheon Ahn, our vice president, research and
      development; Jang Hyun Cho, our chief research scientist; and Chang Gon Kim,
      our
      principal research scientist. Although we do not have any reason to believe
      that
      we may lose the services of any of these persons in the foreseeable future,
      the
      loss of the services of any of these persons might impede the achievement of
      our
      research, development and commercialization objectives. Recruiting and retaining
      qualified scientific and business personnel will also be critical to our
      success. We may not be able to attract and retain these personnel on acceptable
      terms given the competition among numerous nutraceutical and biotechnology
      companies, academic institutions, government entities and other research
      organizations for similar personnel.




***Our
      competitors may develop products that are more effective and less
      costly*** .




The
      market for nutraceutical products is highly competitive. Many of our
      competitors, such as Venecol and Unilever, have substantially greater capital
      resources, research and development capabilities, and manufacturing and
      marketing resources, capabilities and experience than we do. Our competitors
      may
      succeed in developing products that are more effective or less costly than
      any
      products developed by us.




9


***Adverse
      publicity may affect our ability to attract and retain distributors for our
      products*** .




Our
      products are formulated with vitamins, minerals and other ingredients that
      we
      regard as safe when taken as recommended by us and that scientific studies
      have
      suggested may involve health benefits. While we conduct quality control testing
      on our products, we generally do not conduct or sponsor clinical studies
      relating to the benefits of our products. We are dependent upon consumer
      perceptions of the safety and quality of our products and similar products
      distributed by our competitors that may not adhere to the same quality standards
      as we do. We could be adversely affected if any of our products, or any similar
      products distributed by our competitors, should prove harmful or be asserted
      to
      be harmful to consumers, or should scientific studies provide unfavorable
      findings regarding the effectiveness of such products. Our ability to attract
      and retain distributors for our products could be adversely affected by negative
      publicity relating to us or by the announcement by any government entity of
      investigatory proceedings regarding our business practices or our
      products.




***We
      face product liability risks and may not be able to obtain adequate insurance
      to
      protect ourselves against losses*** .




We
      maintain liability insurance with policy limits generally of $100,000 per
      occurrence and $100,000 per year. Our insurance coverage includes property,
      casualty, comprehensive general liability, and products liability insurance.
      We
      believe that our insurance coverage is adequate. The testing, marketing, and
      sale of health care products, however, entail an inherent risk of product
      liability. We cannot assure you that product liability claims relating to
      dietary supplement products will not be asserted against us, our licensees,
      or
      third parties with whom we operate. Many claims related to dietary supplements
      have already been brought against businesses in our industry. Further, we cannot
      assure you that such insurance will provide adequate coverage against any
      potential claims. A product liability claim or product recall could have a
      material adverse effect on our business, financial condition, or results of
      operations.




***We
      may experience difficulty in entering international
      markets***.




The
      creation of strategic customer relationships and the marketing and sale of
      our
      functional nutrition technology and products could experience difficulty
      entering both the United States and additional international markets due to
      greater regulatory barriers, the necessity of adapting to new regulatory systems
      and problems related to entering new markets with different cultural bases
      and
      political systems. Operating in international markets exposes us to certain
      risks, including, among other things: changes in or interpretations of foreign
      regulations that may limit our ability to sell certain products; exposure to
      currency fluctuations; the potential imposition of trade or foreign exchange
      restrictions or increased tariffs; and political instability. In addition,
      there
      can be no assurance that we will be able to enter into agreements with
      additional international marketing partners and thereby would limit the
      expansion of our revenue base.




***We
      rely on patents, licenses and intellectual property rights to protect our
      proprietary interests*** .




Our
      success depends in part on our ability to obtain patents, licenses and other
      intellectual property rights covering our products. There can be no assurance
      that our licenses, patents and patent applications are sufficiently
      comprehensive to protect our products. The process of seeking further patent
      protection can be long and expensive, and there can be no assurance that we
      will
      have sufficient capital reserves to cover the expense of patent prosecution
      for
      their application or that all or even any patents will issue from currently
      pending or any future patent applications or that any of the patents when issued
      will be of sufficient scope or strength to provide meaningful protection or
      any
      commercial advantage to us. While we believe the bases on which patent
      applications were filed correspond to the patents that have been issued for
      composition and method of production and use and are reasonable given the
      issuance of the latter patents, there can be no assurance that the patents
      for
      which we have applied will be issued. We may be subject to or may be required
      to
      initiate interference proceedings with international patent and trademark
      authorities. Such proceedings could demand significant financial and management
      resources. We may receive communications alleging possible infringement of
      patents or other intellectual property rights of others. We believe that in
      most
      cases we could obtain necessary licenses or other rights on commercially
      reasonable terms, but we may be unable to do so. In addition, litigation could
      ensue or damages for any past infringements could be assessed. Litigation,
      which
      could result in substantial cost to and diversion of efforts by our management,
      may be necessary to enforce patents or our other intellectual property rights
      or
      to defend against claimed infringement of the rights of others. The failure
      to
      obtain necessary licenses or other rights or litigation arising out of
      infringement claims could have a material adverse effect on us.




10


***Our
      success depends in part on our successful development and sale of products
      currently in the research and development stage*** .




Many
      of
      our product candidates are still in the research and development stage. The
      successful development of new products is uncertain and subject to a number
      of
      significant risks. Potential products that appear to be promising at early
      states of development may not reach the market for a number of reasons,
      including, but not limited to, the cost and time of development. Potential
      products may be found to be ineffective or cause harmful side effects, fail
      to
      receive necessary regulatory approvals, be difficult to manufacture on a large
      scale or be uneconomical or fail to achieve market acceptance. Additionally,
      our
      proprietary products may not be commercially available for a number of years,
      if
      at all.




There
      can
      be no assurance that any of our products in development will be successfully
      developed or that we will achieve significant revenues from such products even
      if they are successfully developed. Our success is dependent upon our ability
      to
      develop and market our products on a timely basis. There can be no assurance
      that we will be successful in developing or marketing such products, or taking
      advantage of the perceived demand for such products. In addition, there can
      be
      no assurance that products or technologies developed by others will not render
      our products or technologies non-competitive or obsolete.




***We
      will rely in part on international sales, which are subject to additional
      risks*** .




International
      sales may account for a significant portion of our revenues. International
      sales
      can be subject to many inherent risks that are difficult or impossible for
      us to
      predict or control, including:




·
            expected
                changes in regulatory requirements and tariffs;·
            difficulties
                and costs associated with staffing and managing foreign operations,
                including foreign distributor relationships;·
            longer
                accounts receivable collection cycles in certain foreign
                countries;·
            adverse
                economic or political changes;·
            unexpected
                changes in regulatory requirements;·
            more
                limited protection for intellectual property in some
                countries;·
            changes
                in our international distribution network and direct sales
                force;·
            potential
                trade restrictions, exchange controls and import and export licensing
                requirements;·
            potentially
                adverse tax consequences of overlapping tax structure;
                and·
            foreign
                currency fluctuations.




***Failure
      to adequately expand to address expanding market opportunities could have a
      material adverse effect on our business and results of
      operations*** .




We
      anticipate that a significant expansion of operations will be required to
      address potential market opportunities. There can be no assurances that we
      will
      expand our operations in a timely or sufficiently large manner to capitalize
      on
      these market opportunities. The anticipated substantial growth is expected
      to
      place a significant strain on our managerial, operational and financial
      resources and systems. While management believes it must implement, improve
      and
      effectively use our operational, management, research and development,
      marketing, financial and employee training systems to manage anticipated
      substantial growth, there can be no assurances that these practices will be
      successful.




11


***We
      do not have a separate standing audit committee, compensation committee or
      nominating and corporate governance committee, so the duties customarily
      delegated to those committees are performed by the board of directors as a
      whole, and no director is an “audit committee financial expert” as defined by
      the rules and regulations of the Securities and Exchange
      Commission*** .




Our
      board
      of directors consists of four members. Our board of directors as a whole
      performs the functions of an audit committee, compensation committee and
      nominating and corporate governance committee. None of our directors is
      considered “independent” under Rule 4200(a)(15) of the Nasdaq Marketplace Rules,
      and none qualifies as an “audit committee financial expert” as defined in Item
      401 of Regulation S-B. Accordingly, we will not be able to list our common
      stock
      with a nationally recognized exchange until we recruit independent directors
      to
      our board and restructure our board to comply with various requirements
      currently in place by those self-regulating organizations, and as a result,
      it
      may be difficult for you to sell our common stock.




***Our
      business is subject to the potential adverse consequences of exchange rate
      fluctuations*** .




We
      expect
      to conduct business in various foreign currencies and will be exposed to market
      risk from changes in foreign currency exchange rates and interest rates.
      Fluctuations in exchange rates between the United States Dollar and such foreign
      currencies may have a material adverse effect on our business, results of
      operations, and financial condition and could specifically result in foreign
      exchange gains and losses. The impact of future exchange rate fluctuations
      on
      our operations cannot be accurately predicted. To the extent that the percentage
      of our non-United States Dollar revenue derived from international sales
      increases in the future, our exposure to risks associated with fluctuations
      in
      foreign exchange rates will increase further. Moreover, as a result of operating
      a manufacturing facility in Korea, a substantial portion of our costs are and
      will continue to be denominated in the Korean Won. Adverse changes in the
      exchange rates of the Korean Won to the United States Dollar will affect our
      costs of goods sold and operating margins and could result in exchange
      losses.




***The
      requirements of the Sarbanes-Oxley Act, including Section 404, are burdensome,
      and our failure to comply with them could have a material adverse affect on
      our
      business and stock price*** .




Except
      with respect to the adoption of our Code of Conduct and Ethics and our
      compliance with certain requirements specifically applicable to our Annual
      Report on Form 10-KSB and our other periodic reports, our management has not
      commenced any specific procedures to comply with the requirements of the
      Sarbanes Oxley Act of 2002, including, specifically, the process necessary
      to
      implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
      which requires our management to assess the effectiveness of our internal
      control over financial reporting and include an assertion in our annual report
      as to the effectiveness of our internal control over financial reporting
      beginning with our Annual Report on Form 10-KSB for the fiscal year ending
      December 31, 2007. Beginning with our Annual Report on Form 10-KSB for the
      fiscal year ending December 31, 2008, unless otherwise amended by the Securities
      and Exchange Commission, or the Commission, our independent registered
      accounting firm will be required to attest to whether our assessment of the
      effectiveness of our internal control over financial reporting is fairly stated
      in all material respects and separately report on whether it believes we
      maintained, in all material respects, effective internal control over financial
      reporting as of December 31, 2008. Because of our management’s lack of
      resources, and our limited operations, we have not commenced the process of
      preparing the system and process documentation, performing an evaluation of
      our
      internal controls required for our management to make this assessment and for
      the auditors to provide their attestation report, and accordingly, have not
      begun testing the effectiveness of these internal controls. We expect that
      this
      process will require significant amounts of our management’s time and resources,
      as well as higher expenses in the form of higher audit and review fees, higher
      legal fees and higher internal costs to document, test and potentially remediate
      internal controls. Accordingly, with respect to Section 404 in particular,
      there
      exists a significant risk that we will not be able to meet all the requirements
      of Section 404 by the end of fiscal year 2007, when our management is required
      assess the effectiveness of our internal control over financial reporting,
      or by
      the end of fiscal year 2008, when our auditor’s must provide an opinion thereon.
      Additionally, even in the event we attempt to comply with Section 404, in the
      course of evaluation and testing, management may identify deficiencies that
      will
      need to be addressed and remediated, which could potentially have a material
      adverse effect on our stock price and could result in significant additional
      expenditures.




12


**Risks
      Related to Our Industry**




***Our
      failure to comply with current or future governmental regulations could
      adversely affect our business*** .




The
      formulation, manufacturing, packaging, labeling, advertising, distribution,
      and
      sale of functional foods and food additives, such as those sold by us, are
      subject to regulation by a number of federal, state and local agencies,
      including the United States Food and Drug Administration, or the FDA, and the
      United States Federal Trade Commission, or the FTC, as well as government
      agencies in other countries where we may operate. Among other matters, this
      regulation is concerned with product safety and claims made with respect to
      a
      product’s ability to provide health-related benefits. These agencies have a
      variety of procedures and enforcement remedies available to them, including
      the
      following:




·
            
            initiating
                investigations;·
            
            issuing
                warning letters and cease and desist orders;·
            
            requiring
                corrective labeling or advertising;·
            
            requiring
                consumer redress, such as requiring that we offer to repurchase products
                previously sold to consumers;·
            
            seeking
                injunctive relief or product seizures; and·
            
            imposing
                civil penalties or commencing criminal
                prosecution.




United
      States federal and state agencies have in the past used these remedies in
      regulating participants in the dietary supplements industry, including the
      imposition by federal agencies of civil penalties in the millions of dollars
      against a few industry participants. In addition, publicity related to dietary
      supplements may result in increased regulatory scrutiny of the nutritional
      supplements industry.




Our
      failure to comply with applicable laws could subject us to severe legal
      sanctions, which could have a material adverse effect on our business and
      results of operations. We cannot assure you that the regulatory environment
      in
      which we operate will not change or that such regulatory environment, or any
      specific action taken against us, will not result in a material adverse effect
      on our business and operations. We cannot assure you that a state will not
      interpret claims presumptively valid under federal law as illegal under that
      state’s regulations, or that future FDA regulations or FTC decisions will not
      restrict the permissible scope of such claims. Additionally, we cannot assure
      you that such proceedings or investigations or any future proceedings or
      investigations will not have a material adverse effect on our business or
      operations.




***We
      may be unable to compete effectively with competitors of perceived competing
      technologies or direct competitors that may enter our market with new
      technologies*** .




The
      market for our products is relatively new. Our ability to increase revenues
      and
      generate profitability is directly related to our ability to maintain a
      competitive advantage. We face potential direct competition from companies
      that
      may enter this market with new competing technologies and with greater
      financial, marketing and distribution resources than us. These greater resources
      could permit our competitors to introduce new products and implement extensive
      advertising and promotional programs, with which we may not be able to compete.
      As a result, we can provide no assurances that we will be able to compete
      effectively in the future.




13


***If
      our industry receives unfavorable publicity, our business could be
      harmed*** .




We
      believe that the nutraceutical market is affected by media attention regarding
      the consumption of dietary supplements and functional goods. Future scientific
      research or publicity could be unfavorable to the functional nutrition market
      or
      any particular product, or inconsistent with earlier favorable research or
      publicity. Future reports of research that are perceived as less favorable
      or
      that question such earlier research could hurt our business. Because of our
      dependence upon consumer perceptions, adverse publicity associated with adverse
      effects resulting from the consumption of our products or any similar products
      distributed by other companies could also hurt our business. Such adverse
      publicity could arise even if the adverse effects associated with such products
      resulted from consumers’ failure to consume such products as directed. In
      addition, we may not be able to counter the effects of negative publicity
      concerning the efficacy of our products.




**Risks
      Related to Our Common Stock**




***We
      have a limited trading volume and shares eligible for future sale by our current
      stockholders may adversely affect our stock price*** .




To
      date,
      we have had a very limited trading volume in our common stock. As long as this
      condition continues, the sale of a significant number of shares of common stock
      at any particular time could be difficult to achieve at the market prices
      prevailing immediately before such shares are offered. In addition, sales of
      substantial amounts of common stock, including shares issued upon the exercise
      of outstanding options and warrants, pursuant to Rule 144 under the Securities
      Act of 1933, as amended, or the Securities Act, or otherwise, could adversely
      affect the prevailing market price of our common stock and could impair our
      ability to raise capital at that time through the sale of our
      securities.




***Our
      common stock price is highly volatile*** .




The
      market price of our common stock is likely to be highly volatile as the stock
      market in general has been highly volatile.




Factors
      that could cause such volatility in our common stock may include, among other
      things:




·
            
            actual
                or anticipated fluctuations in our quarterly operating
                results;·
            
            announcements
                of technological innovations;·
            
            conditions
                or trends in our industry; and·
            
            changes
                in the market valuations of other comparable
                companies.




***The
      sale of our common stock on the over-the-counter bulletin board and the
      potential designation of our common stock as a “penny stock” could impact the
      trading market for our common stock*** .




Our
      securities, as traded on the National Association of Securities Dealers, Inc.’s
      Over-the-Counter Bulletin Board, are subject to rules adopted by the Commission
      that impose special sales practice requirements upon broker-dealers who sell
      such securities to persons other than established customers or accredited
      investors. For purposes of the rule, the phrase “accredited investors” means, in
      general terms, institutions with assets in excess of $5,000,000, or individuals
      having a net worth in excess of $1,000,000 or having an annual income that
      exceeds $200,000 (or that, when combined with a spouse’s income, exceeds
      $300,000). For transactions covered by the rule, the broker-dealer must make
      a
      special suitability determination for the purchaser and receive the purchaser’s
      written agreement to the transaction prior to the sale. Consequently, the rule
      may affect the ability of broker-dealers to sell our securities and also may
      affect the ability of purchasers to sell their securities in any market that
      might develop therefor.




14


In
      addition, the Commission has adopted a number of rules to regulate “penny
      stock.” Because our securities may constitute “penny stock” within the meaning
      of the rules, the rules would apply to us and to our securities. The rules
      may
      further affect the ability of owners of our common stock to sell our securities
      in any market that might develop for them.




Stockholders
      should be aware that, according to the Commission, the market for penny stocks
      has suffered in recent years from patterns of fraud and abuse. Such patterns
      include (i) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (ii)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (iii) “boiler room” practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
      by selling broker-dealers; and (v) the wholesale dumping of the same securities
      by promoters and broker-dealers after prices have been manipulated to a desired
      level, resulting in investor losses.




Our
      management is aware of the abuses that have occurred historically in the penny
      stock market. Although we do not expect to be in  a position to dictate the
      behavior of the market or of broker-dealers who participate in the market,
      management will strive within the confines of practical limitations to prevent
      the described patterns from being established with respect to our
      securities.




***We
      do not foresee paying dividends in the near future*** .




We
      have
      not paid dividends on our common stock and do not anticipate paying such
      dividends in the foreseeable future.




***Our
      executive officers and directors own a significant portion of our common stock,
      which could limit our stockholders’ ability to influence the outcome of key
      transactions*** .




As
      of September 30, 2007, our executive officers and directors and their affiliates
      owned approximately 34.99% of our outstanding voting shares. As a result, our
      executive officers and directors are able to exert considerable influence over
      the outcome of any matters submitted to a vote of the holders of our common
      stock, including the election of our board of directors. The voting power of
      these stockholders could also discourage others from seeking to acquire control
      of us through the purchase of our common stock, which might depress the price
      of
      our common stock.




**Item
      3. Controls and Procedures.**




We
      maintain disclosure controls and procedures (as defined in Rules 13a-15(e)
      and
      15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the
      Exchange Act) that are designed to ensure that the information required to
      be
      disclosed by us in reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the Commission’s rules and forms, and to ensure that the information required
      to be disclosed by us in reports that we file or submit under the Exchange
      Act
      is accumulated and communicated to our management, including our chief executive
      officer and chief financial officer, as appropriate, to allow timely decisions
      regarding required disclosure.




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our chief executive officer and chief financial
      officer, of the effectiveness of our disclosure controls and procedures as
      of
      the end of the period covered by this Quarterly Report on Form 10-QSB, pursuant
      to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on that
      evaluation, our chief executive officer and chief financial officer have
      concluded that our disclosure controls and procedures, as of the end of the
      period covered by this Quarterly Report on Form 10-QSB, were effective to ensure
      that the information required to be disclosed by us in reports that we file
      or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the Commission’s rules and forms, and to
      ensure that the information required to be disclosed by us in reports that
      we
      file or submit under the Exchange Act is accumulated and communicated to our
      management, including our chief executive officer and chief financial officer,
      as appropriate, to allow timely decisions regarding required
      disclosure.




15


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 third
      fiscal quarter ended September 30, 2007, that have materially affected, or
      are
      reasonably likely to materially affect, our internal control over financial
      reporting.




Section
      404 of the Sarbanes-Oxley Act of 2002 requires management’s review and
      evaluation of our internal control over financial reporting beginning with
      our
      Annual Report on Form 10-KSB for the fiscal year ending December 31, 2007,
      and
      an attestation of the effectiveness of these controls by our independent
      registered public accounting firm beginning with our Annual Report on Form
      10-KSB for the fiscal year ending December 31, 2008. We plan to dedicate
      significant resources, including management time and effort, and to incur
      substantial costs in connection with our Section 404 assessment. We will
      continue to work to improve our controls and procedures, and to educate and
      train our employees on our existing controls and procedures in connection with
      our efforts to maintain an effective controls infrastructure.




16


**PART
      II-OTHER INFORMATION**




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




On
      July
      2, 2007, we entered into a note and warrant purchase agreement with an
      accredited investor, whereby we sold and issued, and the investor purchased,
      a
      senior secured promissory note in the aggregate principal amount of $750,000
      and
      warrants to purchase 2,050,000 shares of the Company’s 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 our
      common stock during the first six months following the issue date of the note
      at
      a conversion price of $0.65. The warrants will be exercisable for shares of
      our
      common stock at any time on or after July 2, 2007 and at or before 5:00 p.m.,
      Pacific time, on July 2, 2010. On August 24, 2007, we entered into a joinder
      to
      the note and warrant purchase agreement with three accredited investors, whereby
      we sold and issued, and the investors purchased, senior secured promissory
      notes
      in the aggregate principal amount of $250,000 and warrants to purchase 650,000
      shares of the Company’s common stock at an exercise price of $0.25 per share.
      The notes and warrants were issued to the additional investors on the same
      terms
      and subject to the same conditions as the notes and warrants issued on July
      2,
      2007.




On
      August
      24, 2007, we entered into a note and warrant purchase agreement with two
      institutional accredited investors, whereby we sold and issued, and the
      investors purchased, senior secured promissory notes in the aggregate principal
      amount of $1,250,000 and warrants to purchase 2,000,000 shares of our common
      stock at an exercise price of $0.25 per share. The notes bear interest at a
      rate
      of 10% per annum and, at the option of the investors, are 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. The warrants will be exercisable
      for shares of our common stock at any time on or after August 24, 2007 and
      at or
      before 5:00 p.m., Pacific time, on August 24, 2010.




In
      connection with the above-referenced offerings, we paid the finders a fee equal
      to $172,500 and issued the finders warrants to purchase an aggregate of
      2,050,000 shares of our common stock at an exercise price of $0.25.




The
      notes, the warrants and the shares of our common stock issuable upon conversion
      of the notes or exercise of the warrants have not been registered under the
      Securities Act, and the foregoing may not be offered or sold in the United
      States absent registration or availability of an applicable exemption from
      registration. The notes and warrants, and the shares of our common stock
      issuable upon conversion of the notes or exercise of the warrants, were offered
      and sold in reliance upon exemptions from registration pursuant to
      Section 4(2) under the Securities Act. The purchase agreements contain
      representations to support our reasonable belief that the investors had access
      to information concerning our operations and financial condition, that the
      investors acquired the notes and warrants for their own account and not with
      a
      view to the distribution thereof, and that the investors were “accredited
      investors” as defined by Rule 501 promulgated under the Securities Act.




17


**Item
      6. Exhibits**




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




**Exhibit****Number**
            
            **Description**10.1
            
            Form
                of Note and Warrant Purchase Agreement, dated as of July 2, 2007,
                by and
                between Eugene Science, Inc. and the investor named therein (incorporated
                by reference to Exhibit 10.1 to Amendment No. 1 to the Current Report
                on
                Form 8-K filed with the Commission on November 16,
                2007)10.2
            
            Form
                of Secured Senior Promissory Note issued pursuant to the Note and
                Warrant
                Purchase Agreement dated as of July 2, 2007 (incorporated by reference
                to
                Exhibit 10.2 to Amendment No. 1 to the Current Report on Form 8-K
                filed
                with the Commission on November 16, 2007).10.3
            
            Form
                of Common Stock Purchase Warrant issued pursuant to the Note and
                Warrant
                Purchase Agreement dated as of July 2, 2007 (incorporated by reference
                to
                Exhibit 10.3 to Amendment No. 1 to the Current Report on Form 8-K
                filed
                with the Commission on November 16, 2007).10.4
            
            Form
                of Note and Warrant Purchase Agreement, dated as of August 24, 2007,
                by
                and between Eugene Science, Inc. and the investors named therein
                (incorporated by reference to Exhibit 10.1 to the Current Report
                on Form
                8-K filed with the Commission on August 30, 2007, as amended November
                16,
                2007).10.5
            
            Form
                of Secured Senior Promissory Note issued pursuant to the Note and
                Warrant
                Purchase Agreement dated as of August 24, 2007 (incorporated by reference
                to Exhibit 10.2 to the Current Report on Form 8-K filed with the
                Commission on August 30, 2007, as amended November 16,
                2007).10.6
            
            Form
                of Common Stock Purchase Warrant issued pursuant to the Note and
                Warrant
                Purchase Agreement dated as of August 24, 2007 (incorporated by reference
                to Exhibit 10.3 to the Current Report on Form 8-K filed with the
                Commission on August 30, 2007, as amended November 16,
                2007).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.




18


**SIGNATURES**





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




EUGENE
                SCIENCE, INC.Date:
                November 19, 2007
            By:
            /s/
                Seung Kwon NohSeung
                Kwon NohPresident,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)




19


**Exhibit
      Index**




**Exhibit****Number**
              
              **Description**10.1
              
              Form
                  of Note and Warrant Purchase Agreement, dated as of July 2, 2007,
                  by and
                  between Eugene Science, Inc. and the investor named therein (incorporated
                  by reference to Exhibit 10.1 to Amendment No. 1 to the Current
                  Report on
                  Form 8-K filed with the Commission on November 16,
                  2007)10.2
              
              Form
                  of Secured Senior Promissory Note issued pursuant to the Note and
                  Warrant
                  Purchase Agreement dated as of July 2, 2007 (incorporated by reference
                  to
                  Exhibit 10.2 to Amendment No. 1 to the Current Report on Form 8-K
                  filed
                  with the Commission on November 16, 2007).10.3
              
              Form
                  of Common Stock Purchase Warrant issued pursuant to the Note and
                  Warrant
                  Purchase Agreement dated as of July 2, 2007 (incorporated by reference
                  to
                  Exhibit 10.3 to Amendment No. 1 to the Current Report on Form 8-K
                  filed
                  with the Commission on November 16, 2007).10.4
              
              Form
                  of Note and Warrant Purchase Agreement, dated as of August 24,
                  2007, by
                  and between Eugene Science, Inc. and the investors named therein
                  (incorporated by reference to Exhibit 10.1 to the Current Report
                  on Form
                  8-K filed with the Commission on August 30, 2007, as amended November
                  16,
                  2007).10.5
              
              Form
                  of Secured Senior Promissory Note issued pursuant to the Note and
                  Warrant
                  Purchase Agreement dated as of August 24, 2007 (incorporated by
                  reference
                  to Exhibit 10.2 to the Current Report on Form 8-K filed with the
                  Commission on August 30, 2007, as amended November 16,
                  2007).10.6
              
              Form
                  of Common Stock Purchase Warrant issued pursuant to the Note and
                  Warrant
                  Purchase Agreement dated as of August 24, 2007 (incorporated by
                  reference
                  to Exhibit 10.3 to the Current Report on Form 8-K filed with the
                  Commission on August 30, 2007, as amended November 16,
                  2007).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.




20