**UNITED
      STATES**


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


**Washington,
      D.C. 20549**





**FORM
      10-Q** **(** **SB** **)** ****





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  ̈





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














**PART
      I—FINANCIAL INFORMATION**




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




**EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
  CONSOLIDATED
        FINANCIAL STATEMENTS
 (Unaudited)
  MARCH
        31,
        2007 AND
        2006
  CONTENTS
                
                
                PAGEFINANCIAL
                  STATEMENTSConsolidated
                    Balance Sheets
                
                
                3Consolidated
                    Statements of Operations
                
                
                5Consolidated
                    Statements of Stockholders’ Deficit
                
                
                6Consolidated
                    Statements of Cash Flows
                
                
                7Notes
                    to Consolidated Financial Statements
                
                
                8
                    - 19
  2
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 Consolidated
          Balance Sheets
 March
          31,
          2007 and 2006
  **2007**
              
              **2006****ASSETS**Current
                  assets:Cash
                  and cash equivalents (Note 3)
              
              $
              29,092
              
              $
              23,834Accounts
                  receivable (Notes 2 and 14)
              
              
              69,738
              
              
              45,544Inventories
                  (Note 2)
              
              
              15,175
              
              
              111,365Due
                  from related parties (Note 4)
              
              
              —
              
              
              1,179,189Receivable
                  from unsettled contract
              
              
              771,149
              
              
              —Prepaid
                  expenses and other current assets
              
              
              108,829
              
              
              108,734Total
                  current assets
              
              
              993,983
              
              
              1,468,666Property
                  and equipment (Note 5)
              
              
              1,130,434
              
              
              9,499,945Other
                  assets:Investments
                  (Note 6)
              
              
              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
  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 7)
              
              
              63,755
              
              
              164,520Loan
                  payable, current portion (Note 8)
              
              
              7,112,750
              
              
              10,976,109Due
                  to related company
              
              
              —
              
              
              19,228Due
                  to shareholders and officers (Note 9)
              
              
              706,875
              
              
              518,664Total
                  current liabilities
              
              
              15,857,859
              
              
              20,952,649Long-term
                  liabilities:Accrued
                  pension payable and other liabilities
              
              
              679,912
              
              
              573,918Deposits
                  from customers
              
              
              145,251
              
              
              1,504,844Long-term
                  debt, net of current portion (Note 8)
              
              
              22,440
              
              
              41,644Long-term
                  liabilities
              
              
              847,603
              
              
              2,120,406Total
                  liabilities
              
              
              16,705,462
              
              
              23,073,055Stockholders’
                  deficiency:Common
                  stock (Note 10)
              
              
              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
 
 4
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 Consolidated
        Statements of Operations
 For
        The
        Three Months Ended March 31, 2007 and 2006
 
 **2007**
              
              **2006**Net
                  sales (Note 12)
              
              $
              154,767
              
              $
              122,443Cost
                  of goods sold (Note 12)
              
              
              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 6)
              
              
              (476,914
              )
              
              —Allowance
                  for related party loans (Note 4)
              
              
              (1,356,179
              )
              
              (108,894
              )Net
                  other expenses
              
              
              (2,138,845
              )
              
              (558,074
              )Net
                  loss
              
              $
              (2,430,572
              )
              $
              (1,198,494
              )Basic
                  loss per share
              
              $
              (0.06
              )
              $
              (0.04
              )Weighted
                  average number of shares (Note 10)
              
              
              40,315,705
              
              
              31,165,975
  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 10)
              
              
              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 10)
              
              
              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
              )
  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: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
              
              
              (559,519
              )
              
              (80,366
              )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
              
              
              14,243
              
              
              478Cash
                  and cash equivalent - beginning of period
              
              
              14,849
              
              
              23,356Cash
                  and cash Equivalent - end of period
              
              $
              29,092
              
              $
              23,834Supplemental
                  Information:Cash
                  paid during the year for:Interest
                  paid
              
              $
              —
              
              $
              87,262
  7
 EUGENE
          SCIENCE, INC. AND SUBSIDIARIES
 Consolidated
          Statements of Cash Flows
 For
          The
          Three Months Ended 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.
  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.
  The
        Company retains substantially all of the benefits and risks of ownership
        of its
        income properties and therefore accounts for leases with its tenants as
        operating leases.
  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.
  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.
 
 11
 
 EUGENE
        SCIENCE, INC. AND SUBSIDIARIES
 Notes
        to
        Consolidated Financial Statements
 March
        31,
        2007 and 2006
  **Note
        3 - Cash and Cash Equivalents**
  Cash
        and
        cash equivalents included a restricted cash of $ 9,177 and
        $ 10,283 as of March
        31,
        2007 and
        2006 respectively, which was pledged as security for future purchases from a vendor.
  **Note
        4 - Due from Related Party**
  Loans
        receivable from an affiliate by virtue of common ownership were carried at
        $ - 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.
  12
  EUGENE
          SCIENCE, INC. AND SUBSIDIARIES
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
  **Note
          6 - 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
        7 - 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
        8 - 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.
              
              
              —
              
              
              429,962
  13
 EUGENE
          SCIENCE, INC. AND SUBSIDIARIES
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
 **Note
        8 - Loans Payable, Continued**
 
 Government
                  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
  **Note
        9 - 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
        10 - 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.
  14
  EUGENE
          SCIENCE, INC. AND SUBSIDIARIES
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
  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:
 
 **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.
  15
  **EUGENE
          SCIENCE, INC. AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
  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.
  **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.
  16
  **EUGENE
        SCIENCE, INC. AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
  In
        March
        2002, 1,000,000 options were granted having a $0.0869 nominal par value each
        and
        exercise price of $1.96. 330,000, 110,000, 100,000 options were cancelled
        in
        2002, 2003, and 2005, respectively. In addition, 31,190 options were granted
        in
        2005. There was also a change in the exercise price to $1.84. As of December
        31,
        2006, 491,190 options are still outstanding.
  In
        September 2002, 220,000 options were granted having a $0.0869 nominal par
        value
        each and an exercise price of $1.96. During 2005, 14,916 options were granted.
        In addition, the exercise price of the options was reduced to
        $1.84.
  In
        March
        2003, 350,000 options were granted having a $0.0869 nominal par value each
        and
        an exercise price of $1.96. In 2003 and 2004, 180,000 and 20,000 stock options
        were cancelled respectively. During 2005, 10,170 options were granted and
        the
        exercise price was reduced to $1.84. As of December 31, 2006, 160,170 stock
        options are still outstanding.
  The
        options vest gradually over a period of 2 to 3 years from the date of grant.
        The
        term of each option does not exceed 7 years from the date of grant. 285,806
        and
        651,360 options have vested in 2004 and 2005 respectively. However, as the
        exercise price of the options was substantially higher than the fair market
        value, the options have no value and no benefits have been recorded since
        inception of the 2000 plan.
 
 The
        stock
        options have not been included in the calculation of the diluted earnings
        per
        share as their inclusion would be anti-dilutive.
  The
        following table summarizes the stock option activity during the periods ended
        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
        11 - 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.
  17
  **EUGENE
          SCIENCE, INC. AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
  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.
  **Note
        12 - 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
        13 - 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.
  18
 EUGENE
          SCIENCE, INC. AND SUBSIDIARIES
 Notes
          to
          Consolidated Financial Statements
 March
          31,
          2007 and 2006
 
 **Note
        14 - Related Party Transactions**
 Significant
          transactions with companies related or affiliates by common control for
          the
          periods ended and as of March 31, 2007 and 2006 are 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.
 
 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, 2005, 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.
  20
  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.
  *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.
  21
  **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.
  **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 $29,092
        and
        negative working capital of approximately $15,828,767. As of March 31, 2006,
        we
        had cash and cash equivalents of approximately $23,834 and negative working
        capital of approximately $19,381,158. 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
        of
        approximately $14,243 as compared with a net increase in cash of approximately
        $478 for the three months ended March 31, 2006.
  **Cash
        Used In Operating Activities**
  Cash
        used
        in operating activities increased $479,153 to $559,519 for the three months
        ended March 31, 2007 as compared to $80,366 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.
  22
  **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 $641,261 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 $23,834
        and
        negative working capital of approximately $19,381,158. 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
        of
        approximately $478, as compared with a net increase in cash of approximately
        $36,681 for the three months ended March 31, 2005.
  **Cash
        Used In Operating Activities**
  Cash
        used
        in operating activities decreased $51,143 to $80,366 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.
  **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.
  23
  **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.
  24
  **Critical
        Accounting Policies**
  Our
        financial position, results of operations and cash flows are impacted by
        the
        accounting policies we have adopted. In order to get a full understanding
        of our
        financial statements, one must have a clear understanding of the accounting
        policies employed. A summary of our critical accounting policies
        follows:
  BASIS
        OF
        PRESENTATION. These financial statements have been prepared with the assumption
        that we will be able to realize our assets and discharge our liabilities
        in the
        normal course of business.
  BASIS
        OF
        CONSOLIDATION. The reverse-takeover transaction between us and Eugene Science
        Korea, our Korean subsidiary, has been recorded as our recapitalization,
        with
        our net assets brought forward at their historical basis. The intention of
        Eugene Science Korea’s management was to acquire us as a shell company listed on
        a stock market. As such, accounting for the reverse-takeover as our
        recapitalization is deemed appropriate. The consolidated financial statements
        included the accounts of us (formerly, Ezcomm Enterprises) in the United
        States,
        Eugene Science Korea, our Korean subsidiary, in Korea, and Ucolebio, Inc.,
        a
        subsidiary of Eugene Science Korea, in Korea. Significant inter company
        transactions, if any, have been eliminated in consolidation. Minority interests
        are recorded to the extent of their equity. Losses in excess of minority
        interest equity capital are charged against the majority interest and will
        be
        reversed when the losses reverse.
  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. We retain
        substantially all of the benefits and risks of ownership of our income
        properties and therefore account for leases with our tenants as operating
        leases.
  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.
  25
  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.
  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* .
  26
  **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.
  ***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.
  27
  ***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.
  28
  ***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.  29
  ***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*** .
  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.
  30
  **Risks
        Related to Our Industry**
  ***Our
        failure to comply with current or future governmental regulations could
        adversely affect our business*** .
  The
        formulation, manufacturing, packaging, labeling, advertising, distribution,
        and
        sale of functional foods and food additives, such as those sold by us, are
        subject to regulation by a number of federal, state and local agencies,
        including the United States Food and Drug Administration, or the FDA, and
        the
        United States Federal Trade Commission, or the FTC, as well as government
        agencies in other countries where we may operate. Among other matters, this
        regulation is concerned with product safety and claims made with respect
        to a
        product's ability to provide health-related benefits. These agencies have
        a
        variety of procedures and enforcement remedies available to them, including
        the
        following:
  ·
            initiating
                investigations;  ·
            issuing
                warning letters and cease and desist
                orders;  ·
            requiring
                corrective labeling or advertising;  ·
            requiring
                consumer redress, such as requiring that we offer to repurchase products
                previously sold to consumers;  ·
            seeking
                injunctive relief or product seizures;
                and  ·
            imposing
                civil penalties or commencing criminal
                prosecution.  United
        States federal and state agencies have in the past used these remedies in
        regulating participants in the dietary supplements industry, including the
        imposition by federal agencies of civil penalties in the millions of dollars
        against a few industry participants. In addition, publicity related to dietary
        supplements may result in increased regulatory scrutiny of the nutritional
        supplements industry.
  Our
        failure to comply with applicable laws could subject us to severe legal
        sanctions, which could have a material adverse effect on our business and
        results of operations. We cannot assure you that the regulatory environment
        in
        which we operate will not change or that such regulatory environment, or
        any
        specific action taken against us, will not result in a material adverse effect
        on our business and operations. We cannot assure you that a state will not
        interpret claims presumptively valid under federal law as illegal under that
        state's regulations, or that future FDA regulations or FTC decisions will
        not
        restrict the permissible scope of such claims. Additionally, we cannot assure
        you that such proceedings or investigations or any future proceedings or
        investigations will not have a material adverse effect on our business or
        operations.
  ***We
        may be unable to compete effectively with competitors of perceived competing
        technologies or direct competitors that may enter our market with new
        technologies*** .
  The
        market for our products is relatively new. Our ability to increase revenues
        and
        generate profitability is directly related to our ability to maintain a
        competitive advantage. We face potential direct competition from companies
        that
        may enter this market with new competing technologies and with greater
        financial, marketing and distribution resources than us. These greater resources
        could permit our competitors to introduce new products and implement extensive
        advertising and promotional programs, with which we may not be able to compete.
        As a result, we can provide no assurances that we will be able to compete
        effectively in the future.
  31
  ***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*** .
  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.
  32
  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 information required to be
        disclosed in reports that we file under the Exchange Act, is recorded,
        processed, summarized and reported within the time periods specified in the
        SEC’s rules and forms, and that such information is accumulated and communicated
        to our management, including our principal executive officer and principal
        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 principal executive officer and principal
        financial officer, of the effectiveness of our “disclosure controls and
        procedures” as of the end of the period covered by this quarterly report,
        pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on
        that
        evaluation, our principal executive officer and principal financial officer
        have
        concluded that our disclosure controls and procedures, as of the end of the
        period covered by this quarterly report, were effective in timely alerting
        them
        to material information relating to us required to be included in our periodic
        filings with the SEC.
  33
  There
        has
        been no change 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 fiscal
        quarter ended March 31, 2007, that has materially affected, or is reasonably
        likely to materially affect, our internal control over financial
        reporting.
  Section
        404 of the Sarbanes-Oxley Act of 2002 requires management's review and
        evaluation of our internal controls beginning with our Annual Report on Form
        10-KSB for the fiscal year ending December 31, 2007 and an attestation of
        the
        effectiveness of these controls by our independent registered public accounting
        firm beginning with our Annual Report on Form 10-KSB for the fiscal year
        ending
        December 31, 2008. We plan to dedicate significant resources, including
        management time and effort, and to incur substantial costs in connection
        with
        our Section 404 assessment. The evaluation of our internal controls will
        be
        conducted under the direction of our principal executive officer and principal
        financial officer. 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- Q SB:
  **Exhibit**
                **Number**
              
              **Description**31.1
              
              Certification
                  of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                  under
                  the Securities Exchange Act of 1934.31.2
              
              Certification
                  of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                  under
                  the Securities Exchange Act of 1934.32.1
              
              Certification
                  of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                  under
                  the Securities Exchange Act of 1934 and 18 U.S.C. Section
                  1350.32.2
              
              Certification
                  of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                  under
                  the Securities Exchange Act of 1934 and 18 U.S.C. Section
                  1350.
  34
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 EUGENE
                SCIENCE,
                INC.Date: May
                21,
                2007
              By:
              /s/ SEUNG
                KWON NOHSeung
                Kwon NohPresident,
                Chief
                Executive Officer and Director(Principal Executive
                Officer)
 Date: May
                21, 2007
              By:
              /s/ JAE
                HONG
                YOOJae
                Hong YooChief
                Financial Officer(Principal Financial and Accounting
                Officer)
  35
  **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.
  36