**UNITED
      STATES**


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


**Washington,
      D.C. 20549**





**FORM
      10-QSB/A**


**(Amendment
      No. 1)**  ****





x
            **QUARTERLY****REPORT****UNDER****SECTION
                13 OR 15(****d****)
                OF THE SECURITIES EXCHANGE ACT OF 1934**
              
              **FOR
                THE QUARTERLY PERIOD****E****E****NDED
                MARCH 31, 2007**





o
            **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**





C
      heck
      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 r egistrant was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days.


Yes x No o





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





The
      number of outstanding shares of the issuer’s common stock as of May 18, 2007 was
      40,315,705.





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










**EXPLANATORY
      NOTE**




This
      Amendment No. 1 to the Quarterly Report on Form 10-QSB of Eugene Science,
      Inc. (“we,” “our,” “us,” or the “Company”) for the quarterly period ended March
      31, 2007, which was originally filed with the Securities and Exchange Commission
      on May 21, 2007, is being filed solely (i) to revise and add disclosures to
      the financial statements and notes to the financial statements in Item 1, (ii)
      to revise the disclosures in Item 2 to reflect revisions made and disclosures
      added to the financial statements and (iii) to revise the responses to Item
      3. This Amendment No. 1 does not reflect events occurring after May 21,
      2007, the date of the filing of our original Form 10-QSB, or modify or update
      those disclosures that may have been affected by subsequent events.




1


**PART
      I—FINANCIAL INFORMATION**




**ITEM
      1**.**FINANCIAL
      STATEMENTS**


**EUGENE
        SCIENCE, INC.**
 **AND
        SUBSIDIARIES**
  CONSOLIDATED
        FINANCIAL STATEMENTS
 (Unaudited)
  MARCH
        31,
        2007 AND
        2006
  F-1
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
  CONSOLIDATED
        FINANCIAL STATEMENTS
 (Unaudited)
  MARCH
        31,
        2007 AND
        2006
 **CONTENTS**
                
                **PAGE****FINANCIAL
                    STATEMENTS**Consolidated
                    Balance Sheets
                
                F-3Consolidated
                    Statements of Operations and Comprehensive Loss
                
                F-5Consolidated
                    Statements of Stockholders’ Deficit
                
                F-6Consolidated
                    Statements of Cash Flows
                
                F-7Notes
                    to Consolidated Financial Statements
                
                F-8
                    - 19
  F-2
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
            Balance Sheets
 March
            31,
            2007 and 2006
 **2007**
                
                **2006****ASSETS**Current
                    assets:Cash
                    and cash equivalents (Note 2)
                
                $
                19,915
                
                $
                13,551Restricted
                    cash (Note 3)
                
                
                9,177
                
                
                10,283Accounts
                    receivable (Notes 2 and17)
                
                
                69,738
                
                
                45,544Inventories
                    (Note 2)
                
                
                15,175
                
                
                111,365Due
                    from related parties (Note 4)
                
                
                —
                
                
                1,179,189Receivable
                    from unsettled contract(Note
                    6)
                
                
                771,149
                
                
                —Prepaid
                    expenses and other current assets(Note
                    7)
                
                
                108,829
                
                
                108,734Total
                    current assets
                
                
                993,983
                
                
                1,468,666Property
                    and equipment (Note 5)
                
                
                1,130,434
                
                
                9,499,945Other
                    assets:Investments(Note
                    8)
                
                
                405
                
                
                441,381Intangible
                    assets (Note 2)
                
                
                176,059
                
                
                183,271Deposits
                
                
                85,434
                
                
                102,825Total
                    other assets
                
                
                261,898
                
                
                727,477Total
                    assets
                
                $
                2,386,315
                
                $
                11,696,088
  F-3
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
            Balance Sheets
 March
            31,
            2007 and 2006
 
 **2007**
                
                **2006****LIABILITIES
                    AND STOCKHOLDER'S DEFICIENCY**Current
                    liabilities:Accounts
                    payable and accrued expenses (Note 4)
                
                $
                7,974,479
                
                $
                9,274,128Rental
                    deposits(Note
                    9)
                
                
                63,755
                
                
                164,520Loan
                    payable, current portion(Note
                    10)
                
                
                7,112,750
                
                
                10,976,109Due
                    to related company
                
                
                —
                
                
                19,228Due
                    to shareholders and officers(Note
                    11)
                
                
                706,875
                
                
                518,664Total
                    current liabilities
                
                
                15,857,859
                
                
                20,952,649Long-term
                    liabilities:Accrued
                    pension payable and other liabilities(Note
                    12)
                
                
                679,912
                
                
                573,918Deposits
                    from customers
                
                
                145,251
                
                
                1,504,844Long-term
                    debt, net of current portion(Note
                    10)
                
                
                22,440
                
                
                41,644Long-term
                    liabilities
                
                
                847,603
                
                
                2,120,406Total
                    liabilities
                
                
                16,705,462
                
                
                23,073,055Stockholders'
                    deficiency:Common
                    stock(Note
                    13)
                
                
                40,316
                
                
                31,166Additional
                    paid-in-capital
                
                
                16,579,251
                
                
                16,418,734Accumulated
                    other comprehensive loss
                
                
                (2,128,228
                )
                
                (2,255,671
                )Accumulated
                    deficit
                
                
                (28,810,486
                )
                
                (25,571,196
                )Total
                    stockholders' deficiency
                
                
                (14,319,147
                )
                
                (11,376,967
                )Total
                    liabilities and stockholders' deficiency
                
                $
                2,386,315
                
                $
                11,696,088
 
 F-4
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
            Statements of Operations and Comprehensive Loss
 For
            The
            Three Months Ended March
            31,
            2007 and 2006
 **2007**
                
                **2006**Net
                    sales(Note
                    15)
                
                $
                154,767
                
                $
                122,443Cost
                    of goods sold(Note
                    15)
                
                
                37,740
                
                
                83,500Gross
                    profits
                
                
                117,027
                
                
                38,943Operating
                    expenses
                
                
                408,754
                
                
                679,363Operating
                    loss
                
                
                (291,727
                )
                
                (640,420
                )Other
                    income (expenses):Loss
                    from sale of assets
                
                
                (275
                )
                
                —Net
                    rental income (expense)
                
                
                (7,120
                )
                
                36,964Miscellaneous
                    expense
                
                
                (2,982
                )
                
                —Net
                    interest expense
                
                
                (295,375
                )
                
                (486,144
                )Loss
                    from sale of investment securities(Note
                    8)
                
                
                (476,914
                )
                
                —Allowance
                    for related party loans (Note 4)
                
                
                (1,356,179
                )
                
                (108,894
                )Net
                    other expenses
                
                
                (2,138,845
                )
                
                (558,074
                )Loss
                    before income taxes
                
                
                (2,430,572
                )
                
                (1,198,494
                )Income
                    taxes (Note 14)
                
                
                —
                
                
                —Net
                    loss
                
                
                (2,430,572
                )
                
                (1,198,494
                )Comprehensive
                    income (loss):Unrealized
                    loss on investment
                
                
                —
                
                
                (107,113
                )Foreign
                    currency translation
                
                
                1,090,237
                
                
                (370,692
                )1,090,237
                
                
                (477,805
                )Comprehensive
                    loss
                
                $
                (1,340,335
                )
                $
                (1,676,299
                )Basic
                    and diluted (loss) per share
                
                $
                (0.06
                )
                $
                (0.04
                )Weighted
                    average number of shares outstandingduring
                    the periods - basic and diluted (Note 13)
                
                
                40,315,705
                
                
                31,165,975
 
 F-5
 **EUGENE
            SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
            Statements of Stockholders’ Deficit
 For
            The
            Three Months Ended March
            31,
            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
                    13)
                
                
                31,165,975
                
                $
                31,166
                
                $
                16,418,734
                
                $
                (1,777,866
                )
                $
                (24,372,702
                )
                $
                (9,700,668
                )Unrealized
                    loss on availablefor
                    sale securities
                
                
                —
                
                
                —
                
                
                —
                
                
                (107,113
                )
                
                —
                
                
                (107,113
                )Foreign
                    currencytranslation
                    adjustment
                
                
                —
                
                
                —
                
                
                —
                
                
                (370,692
                )
                
                —
                
                
                (370,692
                )Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,198,494
                )
                
                (1,198,494
                )Balance,March
                    31, 2006
                
                
                31,165,975
                
                $
                31,166
                
                $
                16,418,734
                
                $
                (2,255,671
                )
                $
                (25,571,196
                )
                $
                (11,376,967
                )Balance,
                    January 1,2007(Note 13)
                
                
                40,315,705
                
                $
                40,316
                
                $
                16,579,251
                
                $
                (3,218,465
                )
                $
                (26,379,914
                )
                $
                (12,978,812
                )Foreign
                    currencytranslation
                    adjustment
                
                
                —
                
                
                —
                
                
                —
                
                
                1,090,237
                
                
                —
                
                
                1,090,237Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (2,430,572
                )
                
                (2,430,572
                )Balance,March
                    31, 2007
                
                
                40,315,705
                
                $
                40,316
                
                $
                16,579,251
                
                $
                (2,128,228
                )
                $
                (28,810,486
                )
                $
                (14,319,147
                )
 
 F-6
  **EUGENE
          SCIENCE, INC.** **AND SUBSIDIARIES**
 Consolidated
          Statements of Cash Flows
 For
          The
          Three Months Ended March
          31,
          2007 and 2006
  **2007**
                
                **2006**Cash
                    flows from operating activities:Net
                    loss
                
                $
                (2,430,572
                )
                $
                (1,198,494
                )Adjustments
                    to reconcile net income to net cashprovided
                    by operating activities:Depreciation
                    and amortization
                
                
                28,668
                
                
                167,932Provision
                    for loss on uncollectable related party loans
                
                
                1,356,179
                
                
                108,894Loss
                    on investment
                
                
                476,914
                
                
                —(Increase)
                    decrease in assets:Restricted
                    cash
                
                
                (3,359
                )
                
                (393
                )Accounts
                    receivable
                
                
                7,326
                
                
                49,425Inventory
                
                
                18,924
                
                
                (50,779
                )Prepaid
                    expenses and other assets
                
                
                73,080
                
                
                (29,545
                )Increase
                    (decrease) in liabilities:Accounts
                    payable
                
                
                (176,969
                )
                
                769,437Accrued
                    pension payable
                
                
                86,931
                
                
                96,484Rental
                    deposits
                
                
                —
                
                
                6,280Cash
                    used in operating activities
                
                
                (562,878
                )
                
                (80,759
                )Cash
                    flows from investing activities:Investment
                    in securities
                
                
                (133,803
                )
                
                —Deposits
                
                
                (3,000
                )
                
                —Intangible
                    assets
                
                
                12,122
                
                
                (3,942
                )Cash
                    used in investing activities
                
                
                (124,681
                )
                
                (3,942
                )Cash
                    flows from financing activities:Net
                    advances from (to) shareholder and officers
                
                
                (199,080
                )
                
                159,109Net
                    advance to related party
                
                
                (105,968
                )
                
                (296,849
                )Net
                    deposits from (to) customers
                
                
                (172,247
                )
                
                57,442Proceeds
                    receivable from sale of assets
                
                
                1,261,433
                
                
                —Loans
                    payable
                
                
                (86,036
                )
                
                164,139Cash
                    provided by financing activities
                
                
                698,102
                
                
                83,841Foreign
                    exchange on cash and cash equivalents
                
                
                341
                
                
                945Net
                    increase in cash and cash equivalents
                
                
                10,884
                
                
                85Cash
                    and cash equivalent - beginning of period
                
                
                9,031
                
                
                13,466Cash
                    and cash Equivalent - end of period
                
                $
                19,915
                
                $
                13,551Supplemental
                    Information:Cash
                    paid during the year for:Interest
                    paid
                
                $
                —
                
                $
                87,262
 
 F-7
 EUGENE
              SCIENCE, INC.AND
              SUBSIDIARIES
 Notes
              to
              Consolidated Financial Statements
 March
              31,
              2007 and 2006
 **Note
          1 - Nature of Business and Going Concern**
  ***(a)***  ***Description
          of Business***
  Eugene
          Science Inc. (“the Company”) was incorporated in August 1998 under the laws of
          state of Delaware, and owns 89.5% of Eugene Science, Inc. in Korea (“the Korean
          subsidiary”) which manufactures certain cholesterol lowering food ingredients.
          The Company currently has no other business.
  Initially
          registered as Orcas, Ltd, the Company has had a number of name changes;
          it
          changed the 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. The Company’s net losses were
          $ 2,430,572 and
          $ 1,198,494 for the
          years ended March
          31,
          2007 and
          2006 ,
          respectively, and working capital deficiency were $14,863,876 and $19,254,357,
          as of March
          31,
          2007 and
          2006 ,
          respectively. These factors raise substantial doubt as to 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-8
 EUGENE
                    SCIENCE, INC.AND
                    SUBSIDIARIES
 Notes
                    to
                    Consolidated Financial Statements
 March
                    31,
                    2007 and 2006
 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 ex tent
          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.
  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.
 F-9
 EUGENE
                  SCIENCE, INC.AND
                  SUBSIDIARIES
 Notes
                  to
                  Consolidated Financial Statements
 March
                  31,
                  2007 and 2006
 ***(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 $ 66,984 and
              $ 26,503 as of March
              31,
              2007 and
              2006 ,
              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:
 Buildings
                      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-10
 EUGENE
                    SCIENCE, INC.AND
                    SUBSIDIARIES
 Notes
                    to
                    Consolidated Financial Statements
 March
                    31,
                    2007 and 2006
 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 March
              31,
              2007 and
              2006 were as
              follows:
 
 **2007**
                    
                    **2006**Raw
                        materials
                    
                    $
                    —
                    
                    $
                    42,738Finished
                        goods
                    
                    
                    15,175
                    
                    
                    68,627Total
                    
                    $
                    15,175
                    
                    $
                    111,365
  ***(******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-11
 EUGENE
                  SCIENCE, INC.AND
                  SUBSIDIARIES
 Notes
                  to
                  Consolidated Financial Statements
 March
                  31,
                  2007 and 2006
 **Note
              3 - Restricted Cash**
  The
              Company had restricted cash of $ 9,177 and
              $ 10,283 as of March
              31,
              2007 and
              2006 respectively, which were 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
              $ - and
              $ 1,179,189 as of March
              31,
              2007 and
              2006 ,
              respectively. These loans are pledged by marketable securities, and
              bear
              interest at 9% and are due on demand. As of March
              31,
              2007 ,
              the
              Company determined that the collectability of these loans is remote
              due to the
              leveraged financial condition of the affiliate and increased a loss
              reserve by
              the entire loan amount.
  **Note
              5 - Properties and Equipment**
  Properties
              and equipment co nsisted
              of the following at March 31:
 
 **2007**
                    
                    **2006**Land
                    
                    $
                    —
                    
                    $
                    4,640,855Buildings
                    
                    
                    896,837
                    
                    
                    3,554,256Equipment
                        and vehicles
                    
                    
                    772,519
                    
                    
                    4,242,042Furniture
                        and fixtures
                    
                    
                    1,078,559
                    
                    
                    1,000,0492,747,915
                    
                    
                    13,437,202Less:
                        accumulated depreciation
                    
                    
                    (1,617,481
                    )
                    
                    (3,937,257
                    )Net
                        property and equipment
                    
                    $
                    1,130,434
                    
                    $
                    9,499,945
  On
              March
              3, 2006, the Company cancelled a sales agreement entered into in January
              2004 to
              sell the land and buildings. In return, the Company
              paid the purchaser approximately $2,100,000 representing return of
              the deposit
              and a cancellation fee. On the same date, the Company signed a new
              agreement to
              sell the land and building to a third party at approximately $11,700,000.
              The
              title of the property transferred on April 27, 2006. The gain realized
              on the
              sale was 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 years ended March
              31,
              2007 and
              2006 were
              $ 28,668 and
              $61,577, respectively.
  **Note
              6 - Receivable from Unsettled Contracts**
 
 As
              of
              March 31, 2007, the Company had outstanding proceeds receivable of
              $771,149 from
              the sale of real property and machinery and equipment.
  F-12
 EUGENE
                  SCIENCE, INC.AND
                  SUBSIDIARIES
 Notes
                  to
                  Consolidated Financial Statements
 March
                  31,
                  2007 and 2006
 **Note
              7 - Prepaid Expenses and Other Current Assets**
  Prepaid
              expenses and other current assets consisted of the following at March
              31:
 
 **2007**
                    
                    **2006**Prepaid
                        fees for certain patent registration and related legal costs
                        under
                        application process
                    
                    $
                    65,583
                    
                    $
                    -Advance
                        payment to vendors
                    
                    
                    43,246
                    
                    
                    54,463Total
                    
                    $
                    108,829
                    
                    $
                    54,463
  **Note
              8 - Investments**
  The
              following is a summary of investments at March 31:
 
 **2007**
                    
                    **2006**7.50%
                        equity of a unlisted company
                    
                    $
                    —
                    
                    $
                    440,9894.58%
                        equity in a unlisted company
                    
                    
                    —
                    
                    
                    1Other
                        marketable securities
                    
                    
                    405
                    
                    
                    391Total
                    
                    $
                    405
                    
                    $
                    441,381
  During
              the three months ended March 31, 2007, the Company sold the investments
              in the
              equity securities and recognized a loss of $ 479,345 .
  **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 $ 63,755 as of March
              31,
              2007 .
  **Note
              10 - Loans Payable**
 
 Loans
                        payable consisted of the following at March
                        31:
 
 **2007**
                    
                    **2006**Loanpayable
                        to Korea Trade Bank with interest at 4.5% to 18%, due on
                        demand,
                        guaranteed by Korea Technology Credit Guarantee Fund and
                        chief executive
                        officer. Principal reduced by $4,000,000 in April 2006.
                    
                    $
                    3,458,891
                    
                    $
                    6,114,757Loan
                        payable to a bank with interest at 4.5% to 18% per annum,
                        paid off in June
                        30, 2006.
                    
                    
                    —
                    
                    
                    2,052,181Note
                        payable to Kook Min Bank with interest at 19% to 21%, due
                        on demand,
                        guaranteed by Korea Technology Credit Guarantee Fund and
                        chief executive
                        officer. This loan is in default.
                    
                    
                    1,330,097
                    
                    
                    2,056,500Note
                        payable to a customer with interest at 3% due on demand.
                        The note is in
                        default.
                    
                    
                    2,001,455
                    
                    
                    —Note
                        payable to Shin Han Bank with interest at 18% due on demand.
                        The note is
                        in default.
                    
                    
                    302,437
                    
                    
                    —Various
                        notes payable to related party with interest at 9% to 10%,
                        unsecured, and
                        due on demand.
                    
                    
                    —
                    
                    
                    429,962Government
                        loan, non-interest bearing, unsecured, payable on demand.
                    
                    
                    42,310
                    
                    
                    364,353Total
                        notes payable
                    
                    
                    7,135,190
                    
                    
                    11,017,753Less:
                        current portion
                    
                    
                    (7,112,750
                    )
                    
                    (10,976,109
                    )Total
                        long-term debt
                    
                    $
                    22,440
                    
                    $
                    41,644
 
 F-13
 EUGENE
                    SCIENCE, INC.AND
                    SUBSIDIARIES
 Notes
                    to
                    Consolidated Financial Statements
 March
                    31,
                    2007 and 2006
 **Note
              11 - Due to Shareholders and Officers**
  Due
                to
                shareholders and officer consisted
                of the following at March 31:
 **2007**
                    
                    **2006**Unsecured
                        short term advance payable to shareholder with interest at
                        9% per annum,
                        due on demand.
                    
                    $
                    47,817
                    
                    $
                    —Unsecured
                        short-term advances payable to corporate officer with interest
                        at 9% per
                        annum, due on demand.
                    
                    
                    659,058
                    
                    
                    518,664Total
                    
                    $
                    708,882
                    
                    $
                    518,664
 
 **Note
              12 - Accrued Pension Payable**
 
 The
              Company has an unfunded non-contributory, defined contribution pension
              plan that
              covers substantially all of its employees which is mandated by the
              government.
              The plans provide defined benefits based on years of service and final
              average
              salary. The plan provides that about 8% of each participant’s total compensation
              will be contributed to the plan. The Company is required to make contributions
              to the plan equal to the amounts accrued for pension expense. The unfunded
              accrued pension payables were $ 610,844 and
              $ 573,918 at March
              31, 2007 and 2006, respectively.
 
 Total
                        pension expenses for the three months endedMarch
                        31, 2007and 2006were $26,081and $119,240, respectively.
  F-14
 EUGENE
                  SCIENCE, INC.AND
                  SUBSIDIARIES
 Notes
                  to
                  Consolidated Financial Statements
 March
                  31,
                  2007 and 2006
 **Note
                    13 - 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
                              stockMarch
                              31, 2007
                          
                          
                          40,315,705
                          
                          $
                          40,316March
                              31, 2006
                          
                          
                          31,165,975
                          
                          $
                          31,166Preferred
                              stock - none issued and outstanding
                          
                          
                          —
                          
                          $
                          —
  On
                    March
                    3, 2005, the Korean subsidiary issued 2,500,000 shares of common
                    stock,
                    representing 8% ownership, for $993,000 to an investor.
  On
                    September 30, 2005, in accordance with a Share Exchange Agreement
                    dated
                    September 1, 2005, the Company entered into a reverse-takeover
                    transaction with
                    Eugene Science, Inc. in Korea, whereby 89.5% of the outstanding
                    shares of the
                    Korean subsidiary were exchanged for 304,882,998 shares of the
                    Company. As a
                    result of the transaction, the shareholders of Eugene Science,
                    Inc. in Korea
                    acquired 88.5% of the Company’s voting stock. While the Company is the legal
                    parent, Eugene Science, Inc. in Korea, as a result of the reverse-takeover,
                    became the parent company for accounting purposes.
  The
                    financial statements have been retroactively adjusted to reflect
                    the
                    reverse-takeover transaction.
  On
                    October 12, 2005, the Company issued 3,500,000 common shares
                    for
                    $350,000.
  On
                    January 13, 2006, the company had a reverse stock split whereby
                    one new common
                    share was exchanged for ten common shares. The financial statements
                    have been
                    retroactively restated to reflect the reverse split.
  On
                    February 21, 2006, the company issued 1,000,000 shares of common
                    stock for
                    $83,000.
  On
                    September 19, 2006, the company issued 390,000 shares of common
                    stock for
                    consulting services provided.
  On
                    October 1, 2006, the company issued 1,200,000 shares of common
                    stock for various
                    consulting services provided.
  On
                    October 1, 2006, in accordance of 2006 Stock Incentive Plan,
                    the company issued
                    3,350,000 shares of common stock to employees and directors.
  **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:
  F-15
  EUGENE
                      SCIENCE, INC.AND
                      SUBSIDIARIES
 Notes
                      to
                      Consolidated Financial Statements
 March
                      31,
                      2007 and 2006
 
 **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.
 
 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 December
                    31, 2006 .
  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 March
                    31,
                    2007 and for
                    disclosure requirements set forth above under Statement 123,
                    during the period
                    ended March
                    31,
                    2007 ,
                    the
                    Company recognized no additional stock-based compensation for
                    options vested.
  F-16
  EUGENE
                      SCIENCE, INC.AND
                      SUBSIDIARIES
 Notes
                      to
                      Consolidated Financial Statements
 March
                      31,
                      2007 and 2006
 
 **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 March 31,****2007**
                          
                          **2006**Dividend
                              yield
                          
                          
                          0.0
                          %
                          
                          0.00
                          %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.
  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.
  F-17
  EUGENE
                      SCIENCE, INC.AND
                      SUBSIDIARIES
 Notes
                      to
                      Consolidated Financial Statements
 March
                      31,
                      2007 and 2006
  The
                      following table summarizes the stock option activity during
                      the periods ended
                      March 31:
  **2007**
                            
                            **2006****Shares**
                            
                            **Weighted-Average
                                Excise Price**
                            
                            **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
                      14 - Income Taxes**
 The
                        Company accounts for income taxes pursuant to SFAS No. 109,
                        "Accounting for
                        Income Taxes". This Standard prescribes the use of the liability
                        method whereby
                        deferred tax asset and liability account balances are determined
                        based on
                        differences between financial reporting and tax bases of
                        assets and liabilities
                        and are measured using the enacted tax rates. The effects
                        of future changes in
                        tax laws or rates are not anticipated. Corporate income tax
                        rates applicable to
                        the Company in 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 $20,561,000 of
                        taxable losses, which
                        can be used to offset future taxable income. The utilization
                        of the losses
                        expires in years 2007 through 2010.
  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 amortizedover
                                  5 years for tax purposes
                              
                              $
                              150,722
                              
                              $
                              207,040Other
                                  timing differences
                              
                              
                              2,876
                              
                              
                              10,397Net
                                  operating loss carryforwards
                              
                              
                              3,392,570
                              
                              
                              2,633,1293,546,168
                              
                              
                              2,850,566Valuation
                                  allowance fordeferred
                                  income tax assets
                              
                              
                              (3,546,168
                              )
                              
                              (2,850,566
                              )$
                              —
                              
                              $
                              —
  The
                        Company provided a valuation allowance equal to the deferred
                        income tax assets
                        because it is not presently more likely than not that they
                        will be
                        realized.
 
 F-18
 EUGENE
                            SCIENCE, INC.AND
                            SUBSIDIARIES
 Notes
                            to
                            Consolidated Financial Statements
 March
                            31,
                            2007 and 2006
 **Note
                        15 - Business Segment Information**
  Sales
                                  and cost of goods sold of the Company’s segments for the periods endedMarch
                                  31, 2007and 2006were as follows:
 
 **2007**
                              
                              **2006**Sales:Manufacturing
                              
                              $
                              57,941
                              
                              $
                              102,458Merchandise
                              
                              
                              96,826
                              
                              
                              19,985$
                              154,767
                              
                              $
                              122,443Cost
                                  of Sales:Manufacturing
                              
                              $
                              18,638
                              
                              $
                              67,564Merchandise
                              
                              
                              19,102
                              
                              
                              15,936$
                              37,740
                              
                              $
                              83,500
  **Note
                        16 - Major Customers**
  In 2007 ,
                        the
                        Company had two major customers which accounted for 96% of
                        the total revenue, of
                        which one single customer accounted for 60%. In 2006 ,
                        sales
                        to three major customers accounted for 85% of the total revenue.
  **Note
                        17 - Related Party Transactions**
 
 Significant
                                  transactions with companies related or affiliates
                                  by common control for
                                  the periods ended and as ofMarch
                                  31, 2007and 2006are summarized as follows:
 
 Sales
                              
                              Net
                                  rental/
                                Interest
                                  income
                              
                              Purchases
                              
                              Accounts
                                  Receivable
                              
                              Prepaid
                                Assets
                              
                              Accounts
                                Payable
                              
                              Rental
                                DepositCompany
                                  related by common control2007
                              
                              $
                              49,085
                              
                              $
                              —
                              
                              $
                              —
                              
                              $
                              —
                              
                              $
                              —
                              
                              $
                              247,417
                              
                              $
                              63,7552006
                              
                              $
                              6,067
                              
                              $
                              93,056
                              
                              $
                              15,890
                              
                              $
                              —
                              
                              $
                              74,019
                              
                              $
                              301,302
                              
                              $
                              102,825Companies
                                  affiliated by common control2007
                              
                              $
                              201
                              
                              $
                              1,582
                              
                              $
                              —
                              
                              $
                              4,542
                              
                              $
                              —
                              
                              $
                              73,179
                              
                              $
                              —2006
                              
                              $
                              655
                              
                              $
                              461
                              
                              $
                              20,800
                              
                              $
                              679
                              
                              $
                              —
                              
                              $
                              107,888
                              
                              $
                              —
  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.




**Results
      of Operations**




**Revenue**




*Comparison
      of the Three Months Ended March 31, 2007 and 2006*




Our
      total
      revenue increased 26%, or $32,324, to $154,767 for the three months ended March
      31, 2007 as compared to $122,443 for the three months ended March 31, 2006.
      The
      increase in total revenue for the three months ended March 31, 2007 was
      primarily attributable to an increase in sales of our cooking oil products
      to
      Amway Korea.




We
      anticipate that sales of our products during our 2007 fiscal year will continue
      to increase as a result of our ability to make health claims with respect to
      our
      CZ-series additives and CholZero-branded products in South Korea and as a result
      of the United States Food and Drug Administration’s, or FDA’s, approval of our
      "Generally Recognized as Safe" application for our CZ-S additive on January
      13,
      2006. We engaged Archer Daniels Midland Company, or ADM, as our exclusive
      distributor of CZ-series additives in North America and Europe and authorized
      ADM to manage our FDA approval process in the United States. Following the
      approval of our GRAS application, ADM ordered one ton of our CZ-S additive
      for
      testing and marketing. We are currently producing the required quantities of
      our
      CZ-S additive at our laboratory facility in Seoul, Korea.




2




*Comparison
      of the Three Months Ended March 31, 2006 and 2005*




Our
      total
      revenue decreased 240%, or $293,789, to $122,443 for the three months ended
      March 31, 2006 as compared to $416,232 for the three months ended March 31,
      2005. The decrease in total revenue for the three months ended March 31, 2006
      was primarily attributable to poor progress in our sales and delays in the
      launch of our products.




**Cost
      of Sales**




*Comparison
      of the Three Months Ended March 31, 2007 and 2006*




Cost
      of
      sales decreased 55%, or $45,760, to $37,740 for the three months ended March
      31,
      2007 as compared to $83,500 for the three months ended March 31, 2006. The
      decrease in cost of sales was primarily attributable to sales of products
      produced during prior fiscal years. Our gross margin for the three months ended
      March 31, 2007 was approximately 75% of our revenue as compared to a gross
      margin of approximately 32% of our revenue for the three months ended March
      31,
      2006. The change in our gross margin for the three months ended March 31, 2007
      was primarily attributable to an increase in sales of our cooking oil products
      to Amway Korea.




*Comparison
      of the Three Months Ended March 31, 2006 and 2005*




Cost
      of
      sales decreased 346%, or $289,083, to $83,500 for the three months ended March
      31, 2006 as compared to $372,593 for the three months ended March 31, 2005.
      Our
      gross margin for the three months ended March 31, 2006 was approximately 32%
      of
      our revenue as compared to a gross margin of approximately 10% of our revenue
      for the three months ended March 31, 2005. The change in our gross margin for
      the three months ended March 31, 2006 was primarily attributable to increased
      sales of our CholZero capsules.




**Operating
      Expenses**




*Comparison
      of the Three Months Ended March 31, 2007 and 2006*




Our
      operating expenses decreased 40%, or $270,609, to $408,754 for the three months
      ended March 31, 2007 as compared to $679,363 for the three months ended March
      31, 2006. Our operating expenses decreased for the three months ended March
      31,
      2007 due primarily to a reduction in depreciation and retirement allowances
      and
      the sale of equipment and property.




*Comparison
      of the Three Months Ended March 31, 2006 and 2005*




Our
      operating expenses decreased 5%, or $31,407, to $679,363 for the three months
      ended March 31, 2006 as compared to $710,770 for the three months ended March
      31, 2005. Our operating expenses decreased for the three months ended March
      31,
      2006 due to decreases in our research and development and travel
      expenses.




**Other
      Income (Expense)**




*Comparison
      of the Three Months Ended March 31, 2007 and 2006*




Other
      income (expense) primarily represents an allowance for related party loans,
      loss
      from sale of investment securities and interest expense. Other expense increased
      283%, or $1,580,771, to $2,138,845 for the three months ended March 31, 2007
      as
      compared to other expense of $558,074 for the three months ended March 31,
      2006.
      The increase in other expense for the three months ended March 31, 2007 was
      primarily attributable to an increase in the loss reserve for loans to a related
      party resulting from a determination that the collectability of these loans
      is
      remote due to the leveraged financial condition of the related party and to
      a
      loss from the sale of investment securities. All of our bank loans were in
      default as of March 31, 2007. The interest rate on such loans ranges from 15%
      to
      18%. We are currently in negotiations with our lenders to settle our outstanding
      debts, and we intend to enter into settlement agreements with such lenders
      during the second quarter of our 2007 fiscal year.




*Comparison
      of the Three Months Ended March 31, 2006 and 2005*




Other
      expense increased 100%, or $279,056, to $558,074 for the three months ended
      March 31, 2007 as compared to other expense of $279,018 for the three months
      ended March 31, 2006. The increase in other expense for the three months ended
      March 31, 2007 was primarily attributable to an increase in interest due on
      loans in default.




3




**Liquidity
      and Capital Resources**




*Comparison
      of the Three Months Ended March 31, 2007 and 2006*




As
      of
      March 31, 2007, we had cash and cash equivalents of approximately $19,915 and
      negative working capital of approximately $14,863,876. As of March 31, 2006,
      we
      had cash and cash equivalents of approximately $13,551 and negative working
      capital of approximately $19,483,983. The increase in our cash and working
      capital during the three months ended March 31, 2007 was primarily attributable
      to our partial repayment of outstanding loans from the Industrial Bank of Korea,
      or IBK, and Wando Fisheries Co. Ltd.




We
      currently satisfy our working capital requirements primarily through cash flows
      generated from operations, bank loans and sales of equity and debt securities.
      For the three months ended March 31, 2007, we had a net increase in cash and
      cash equivalents of approximately $10,884 as compared with a net increase in
      cash and cash equivalents of approximately $85 for the three months ended March
      31, 2006.




**Cash
      Used In Operating Activities**




Cash
      used
      in operating activities increased $482,119 to $562,878 for the three months
      ended March 31, 2007 as compared to $80,759 for the three months ended March
      31,
      2006. The increase in cash used in operating activities for the three months
      ended March 31, 2007 was primarily attributable to an increase in the provision
      for loss on uncollectible loans to a related party and a loss sustained on
      the
      sale of investment securities as well as a decrease in accounts
      payable.





**Cash
      Used In Investing Activities**




Cash
      used
      in investing activities increased $120,739 to $124,681 for the three months
      ended March 31, 2007 as compared to $3,942 for the three months ended March
      31,
      2006. The increase in cash used in investing activities for the three months
      ended March 31, 2007 was primarily attributable to a loss sustained on the
      sale
      of investment securities.




**Cash
      Provided by Financing Activities**




Cash
      provided by financing activities increased $614,261 to $698,102 for the three
      months ended March 31, 2007 as compared to $83,841 for the three months ended
      March 31, 2006. The increase in cash provided by financing activities for the
      three months ended March 31, 2007 was primarily attributable to proceeds
      receivable from the sale of property and equipment.




*Comparison
      of the Three Months Ended March 31, 2006 and 2005*




As
      of
      March 31, 2006, we had cash and cash equivalents of approximately $13,551 and
      negative working capital of approximately $19,483,983. As of March 31, 2005,
      we
      had cash and cash equivalents of approximately $36,681 and negative working
      capital of approximately $12,515,851. The decrease in our cash and working
      capital during the three months ended March 31, 2006 was due primarily to poor
      progress in our sales activities and an accompanying decrease in our total
      sales.




We
      currently satisfy our working capital requirements primarily through cash flows
      generated from operations, bank loans and sales of equity and debt securities.
      For the three months ended March 31, 2006, we had a net increase in cash and
      cash equivalents of approximately $85, as compared with a net increase in cash
      and cash equivalents of approximately $36,681 for the three months ended March
      31, 2005.




**Cash
      Used In Operating Activities**




Cash
      used
      in operating activities decreased $50,750 to $80,759 for the three months ended
      March 31, 2006 as compared to $131,509 for the three months ended March 31,
      2005. The decrease in cash used in financing activities for the three months
      ended March 31, 2006 resulted primarily from an increase in accounts payable,
      due to a related decrease in accounts receivable from our related companies,
      and
      an aggravation of our cash flow.




**Cash
      Used in Investing Activities**




Cash
      used
      in investing activities increased $3,942 to $3,942 for the three months ended
      March 31, 2006 as compared to zero dollars for the three months ended March
      31,
      2006. The increase in cash used in investing activities for the three months
      ended March 31, 2007 was primarily attributable to an increase in intangible
      assets.




4




**Cash
      Provided By Financing Activities**




Cash
      provided by financing activities decreased $64,091 to $83,841 for the three
      months ended March 31, 2006 as compared to $147,932 for the three months ended
      March 31, 2005. The decrease in cash provided by financing activities for the
      three months ended March 31, 2006 was primarily attributable to a decrease
      in
      advances from a related party and an issuance of common stock in the quarter
      ended March 31, 2005 which did not occur in the quarter ended March 31,
      2006.




**Bank
      Loans**




Since
      1999, we have borrowed an aggregate principal amount of $3,889,259 from 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. During the second half of the
      2006 fiscal year, we did not pay IBK any accrued and unpaid interest owed under
      these loans. At March 31, 2007, the accrued and unpaid interest owed by us
      to
      IBK under these loans was approximately $1,136,526.




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 March 31, 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 $1,367,529.




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 March
      31,
      2007, the aggregate principal balance and accrued and unpaid interest on such
      loan was approximately $423,720. 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 March 31, 2007, the aggregate principal balance and accrued and unpaid
      interest on such loans was approximately $2,019,572.




**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
      March
      31, 2007, the outstanding balance of this note was $3,225,517.




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. The outstanding balance
      of
      this note was $51,256 at March 31, 2007.




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. The outstanding balance of this note was $20,522 at March 31,
      2007.




**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 March 31, 2007,
      we
      were $59,624 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 March 31, 2007, we were $42,310 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.




5




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.




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 $66,984
      and $26,503 as of March 31, 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.




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.




6




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.




***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
      three months ended March 31, 2007, sales to two major customers accounted for
      98% 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.




7




***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.




***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.




8




***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.




***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*** .




9




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
      controls over financial reporting and include an assertion in our annual report
      as to the effectiveness of our controls. Beginning with our Annual Report on
      Form 10-KSB for the fiscal year ending December 31, 2007, unless otherwise
      amended by the Securities and Exchange Commission, or the SEC, 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 controls over financial
      reporting as of December 31, 2007. 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 we are required to report
      on
      our internal controls and provide our auditor's 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.




**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;




10




·
            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.




***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 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*** .




11




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 SEC 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.





In
      addition, the SEC 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 SEC, 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
      March 31, 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.





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 first
      fiscal quarter ended March 31, 2007, that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




12




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 May 31, 2008, 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 May 31, 2009. 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.





**PART
      II-OTHER INFORMATION**





**Item
      6. Exhibits and Reports on Form 8-K.**




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





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




13




**SIGNATURES**





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




EUGENE
                SCIENCE, INC.Date: October
                26, 2007
            By:
            /s/ SEUNG
                KWON NOHSeung
                Kwon Noh
              President,
                  Chief Executive Officer and Director(Principal
                Executive Officer)




14




**Exhibit
      Index**




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




15