**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-QSB**





**(Mark
      One)**





**(X)**
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





**For
      the quarterly period ended: September 30, 2006**





**(
                 )**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT**





**For
      the transition period _________ to____________**





**Commission
      file number: 000-51248**





**OPTIGENEX
      INC.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
            **20-1678933**(State
                or other jurisdiction of
            (IRS
                Employer I.D. Number)incorporation
                or organization)**750
                Lexington Avenue 6th Floor**
            **10022**(Address
                of principal executive offices)
            (Zip
                Code)





**Registrant’s
      telephone number: (212) 905-0189**





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes [X]





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





There
      were 10,850,234 shares of Common Stock outstanding as of November 13,
      2006.





Transitional
      Small Business Disclosure Format (check one): Yes [  ] No [X]










**OPTIGENEX
      INC.**





**Table
      of Contents**








PART
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Condensed
                Financial Statements (Unaudited)Condensed
                Balance Sheet as of September 30, 2006
            
            1Condensed
                Statements of Operations for the three and nine months ended September
                30,
                2006 and 2005
            
            2Condensed
                Statement of Stockholder’s Equity (Deficit) for the nine months ended
                September 30, 2006
            
            3Condensed
                Statements of Cash Flows for the nine months ended September 30,
                2006 and
                2005
            
            4Notes
                to Condensed Financial Statements
            
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
            
            13Item
                3.
            Controls
                and Procedures
            
            23PART
                II
            OTHER
                INFORMATIONItem
                1.
            Legal
                Proceedings
            
            23Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            23Item
                3.
            Defaults
                Upon Senior Securities
            
            23Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            23Item
                5.
            Other
                Information
            
            23Item
                6.
            Exhibits
            
            23SIGNATURES
            
            
            
            24











**PART
      1. FINANCIAL INFORMATION**





**Item
      1.**   **Condensed
      Financial Statements - Unaudited**





**OPTIGENEX
      INC.**





**Condensed
      Balance Sheet**








**September
                30,**
              **2006****(Unaudited)****ASSETS**Current
                assets:Cash
            
            $
            421,993Accounts
                receivable, net
            
            
            29,215Inventories
            
            
            2,138,368Prepaid
                expenses and other current assets
            
            
            52,963Total
                current assets
            
            
            2,642,539Property
                and equipment, net
            
            
            80,732Intangible
                assets, net
            
            
            2,449,979Other
                assets
            
            
            125,033**Total
                Assets**
            
            $
            5,298,283**LIABILITIES
                AND STOCKHOLDERS' DEFICIENCY**Current
                liabilities:Accounts
                payable
            
            $
            262,672Accrued
                expenses
            
            
            231,908Deferred
                income
            
            
            5,253Total
                current liabilities
            
            
            499,833Callable
                secured convertible notes, net of debt discount of
                $3,375,206including
                embedded derivative liability
            
            
            5,659,306Common
                stock warrants
            
            
            4,006,251Total
                liabilities
            
            
            10,165,390Stockholders'
                deficiency:Preferred
                stock - $0.001 par value; 5,000,000 shares authorized,
              none
                issuedCommon
                stock - $0.001 par value; 100,000,000 shares authorized,10,850,234
                shares issued and outstanding
            
            
            10,850Additional
                paid-in capital
            
            
            18,059,622Accumulated
                deficit
            
            
            (22,937,579
            )Total
                stockholders’ deficiency
            
            
            (4,867,107
            )**Total
                Liabilities and Stockholders’ Deficiency**
            
            $
            5,298,283





See notes to condensed financial statements




1





**OPTIGENEX
      INC.**





**Condensed
      Statements of Operations - Unaudited**








Three
                Months Ended
              September
                30,
            
            
            Nine
                Months Ended
              September
                30,2006
            
            
            2005
            
            
            2006
            
            
            2005Net
                sales
            
            $
            77,603
            
            $
            40,468
            
            $
            201,387
            
            $
            161,807Cost
                of sales
            
            
            179,137
            
            
            29,091
            
            
            268,392
            
            
            98,245Gross
                profit (loss)
            
            
            (101,534
            )
            
            11,377
            
            
            (67,005
            )
            
            63,562Selling,
                general and administrative
            
            
            465,392
            
            
            1,245,095
            
            
            2,407,384
            
            
            3,799,888Loss
                from operations
            
            
            (566,926
            )
            
            (1,233,718
            )
            
            (2,474,389
            )
            
            (3,736,326
            )Other
                (income) expense:Interest
                expense, net
            
            
            8,483,380
            
            
            187,381
            
            
            9,527,320
            
            
            187,381Equity
                in loss from joint ventures
            
            
            (2,705
            )
            
            (7,810
            )
            
            36,145
            
            
            9,334Net
                change in fair value of common stockwarrants
                and derivative liability
            
            
            (4,582,942
            )
            
            176,056
            
            
            (4,667,916
            )
            
            176,056Net
                loss
            
            $
            (4,464,659
            )
            $
            (1,589,345
            )
            $
            (7,369,938
            )
            $
            (4,109,097
            )Net
                loss per common share - basic and diluted
            
            $
            (0.41
            )
            $
            (0.15
            )
            $
            (0.69
            )
            $
            (0.41
            )Weighted
                average number of commonshares
                outstanding - basic and diluted
            
            
            10,850,234
            
            
            10,305,985
            
            
            10,744,007
            
            
            10,020,716








See notes to condensed financial statements




2




**OPTIGENEX
      INC.**





**Condensed
      Statement of Changes in Stockholders' Equity (Deficiency) -
      Unaudited**





**Additional****Common
                Stock**
            
            **Paid-in**
            
            
            **Accumulated****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Total****Balance
                - December 31, 2005**
            
            
            10,450,234
            
            $
            10,450
            
            $
            17,797,247
            
            $
            (15,567,641
            )
            $
            2,240,056Conversion
                of convertible notes to common stock
            
            
            300,000
            
            
            300
            
            
            51,300
            
            
            
            
            
            51,600Issuance
                of common stock for services
            
            
            100,000
            
            
            100
            
            
            12,900
            
            
            
            
            
            13,000Issuance
                of stock options to employees and consultants
            
            
            
            
            
            
            
            
            198,175
            
            
            
            
            
            198,175Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,369,938
            )
            
            (7,369,938
            )**Balance
                - September 30, 2006**
            
            
            10,850,234
            
            $
            10,850
            
            $
            18,059,622
            
            $
            (22,937,579
            )
            $
            (4,867,107
            )





















See notes to condensed financial statements




3




**OPTIGENEX
      INC.**





**Condensed
      Statements of Cash Flows - Unaudited**





**Nine
                Months Ended**
              **September
                30,****2006**
            
            
            **2005****Cash
                flows from operating activities:**Net
                loss
            
            $
            (7,369,938
            )
            $
            (4,109,097
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Depreciation
            
            
            36,102
            
            
            36,174Amortization
                of intangibles
            
            
            155,156
            
            
            171,610Amortization
                of debt discount
            
            
            900,593
            
            
            36,111Amortization
                of deferred financing costs
            
            
            29,723
            
            
            2,778Stock-based
                compensation
            
            
            211,175
            
            
            53,540Write-off
                of obsolete inventory
            
            
            151,921
            
            
            -Bad
                debt expense -recovery
            
            
            (10,000
            )
            
            -Non-cash
                financing costs
            
            
            8,406,927
            
            
            142,603Equity
                in loss from joint venture
            
            
            36,145
            
            
            9,334Income
                from change in value of warrantsand
                embedded derivative liability
            
            
            (4,667,916
            )
            
            176,056Changes
                in operating assets and liabilities:Decrease
                in accounts receivable
            
            
            75,030
            
            
            14,907Increase
                in inventories
            
            
            (286,511
            )
            
            (348,012
            )Decrease
                in prepaid expenses and othercurrent
                assets
            
            
            117,693
            
            
            260,162Increase
                in other assets
            
            
            -
            
            
            2,419Decrease
                in accounts payable
            
            
            (133,328
            )
            
            (154,102
            )Increase
                (decrease) in accrued expenses
            
            
            112,188
            
            
            (61,309
            )Increase
                (decrease) in deferred income
            
            
            (16,783
            )
            
            18,823Net
                cash used in operating activities
            
            
            (2,251,823
            )
            
            (3,748,003
            )**Cash
                flows from investing activities:**Patent
                costs
            
            
            (26,559
            )
            
            (22,117
            )Purchases
                of property and equipment
            
            
            -
            
            
            (11,304
            )Proceeds
                from sale of investment in joint venture
            
            
            6,841
            
            
            -Investment
                in joint venture
            
            
            (5,000
            )
            
            (40,000
            )Net
                cash used in investing activities
            
            
            (24,718
            )
            
            (73,421
            )**Cash
                flows from financing activities:**Proceeds
                from the sale of convertible notes
            
            
            1,865,000
            
            
            1,300,000Principal
                payments under convertible notes
            
            
            (115,555
            )
            
            -Proceeds
                from the issuance of common stock
            
            
            
            
            
            2,381,987Deferred
                financing costs
            
            
            (20,200
            )
            
            (100,000
            )Net
                cash provided by financing activities
            
            
            1,729,245
            
            
            3,581,987**Net
                increase (decrease) in cash**
            
            
            (547,296
            )
            
            (239,437
            )**Cash
                - beginning of period**
            
            
            969,289
            
            
            1,196,568**Cash
                - end of period**
            
            $
            421,993
            
            $
            957,131**Supplemental
                schedule of cash flow information:**Cash
                paid for interest
            
            $
            205,123
            
            $
            34,666**Supplemental
                schedule of non-cash investing and financing
                activities:**Debt
                discount in connection with recordingvalue
              of
                embedded derivative liabilityfeature
            
            $
            1,865,000
            
            $
            1,186,667Allocation
                of convertible note proceeds to warrants
            
            $
            8,021,094
            
            $
            255,936Common
                stock issued in connection with conversion of
              convertible
                notes
            
            $
            51,600




See notes to condensed financial statements




4


**OPTIGENEX
        INC.**
 **Notes
        to Condensed Financial Statements - Unaudited**




**Note
      1.**   **Basis
      of Presentation**





The
      accompanying unaudited condensed interim financial statements of Optigenex
      Inc.
      (the “Company”) have been prepared in accordance with generally accepted
      accounting principles for interim financial information and the requirements
      of
      Item 310(b) of Regulation S-B. Accordingly, certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with generally accepted accounting principles have been condensed or omitted
      pursuant to the rules and regulations of the Securities and Exchange Commission.





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. Actual results could differ from those estimates. The
      unaudited condensed interim financial statements for the nine month periods
      ended September 30, 2006 and 2005 include all adjustments (consisting only
      of
      those of a normal recurring nature) necessary for a fair statement of the
      results of the interim period.





The
      results of operations for the three and nine month periods ended September
      30,
      2006 are not necessarily indicative of the results of operations expected for
      the year ending December 31, 2006. These financial statements should be read
      in
      conjunction with the audited financial statements as of December 31, 2005 and
      for the year then ended and the notes thereto, which are contained in the
      Company’s Form 10-KSB for the year ended December 31, 2005 filed with the
      Securities and Exchange Commission.





Certain
      items in the September 30, 2005 income statement have been reclassified to
      conform to the 2006 presentation.





The
      Company maintains cash in bank deposit accounts which, at times, may exceed
      federally insured limits. The Company has not experienced any losses on these
      accounts.





Accounts
      receivable are reported at their outstanding unpaid principal balances reduced
      by an allowance for doubtful accounts. The Company estimates doubtful accounts
      based on historical bad debts, factors related to specific customers' ability
      to
      pay and current economic trends. The Company writes off accounts receivable
      against the allowance when a balance is determined to be uncollectible.





Our
      inventories are stated at the lower of cost, determined by the average cost
      method, or market. Our inventories consists of (i) raw materials that we
      purchase from a sole supplier in Brazil; (ii) our proprietary compound known
      as
      AC-11 which is manufactured in Brazil; and (iii) our line of nutritional
      supplement and skin care products that are produced by a contract manufacturer
      in the United States. We periodically review our inventories for evidence of
      spoilage and/or obsolescence and we remove these items from inventory at their
      carrying value.





The
      Company reviews long-lived assets for impairment whenever events or changes
      in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. An asset is considered to be impaired when the sum of the
      undiscounted future net cash flows expected to result from the use of the asset
      and its eventual disposition is less than its carrying amount. The amount of
      impairment loss, if any, is measured as the difference between the net book
      value of the asset and its estimated fair value.





The
      fair
      value of the Company’s financial instruments consisting of Callable Secured
      Convertible Notes approximates the principal value due to the terms of the
      Notes.





Revenue
      is recognized when persuasive evidence of an arrangement exists, the product
      has
      been delivered, the rights and risks of ownership have passed to the customer,
      the price is fixed and determinable, and collection of the resulting receivable
      is reasonably assured. For arrangements that include customer acceptance
      provisions, revenue is not recognized until the terms of acceptance are met.
      Reserves for sales returns and allowances are estimated and provided for at
      the
      time of shipment.





In
      June 2006, the FASB issued Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements in accordance with SFAS
      No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      FIN
      48 is effective for fiscal years beginning after December 15, 2006. We are
      currently reviewing this new standard to determine its effects, if any, on
      our
      results of operations or financial position.





In
      February 2006, the FASB issued Statement No. 155, *Accounting
      for Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
      133 and 140* . 
      Among other matters, that statement provides that where a company is required
      to
      bifurcate a derivative from its host contract, the company may irrevocably
      elect
      to initially and subsequently measure that hybrid financial instrument in its
      entirety at fair value, with changes in fair value recognized in operations.
      The
      statement is effective for financial instruments issued after the beginning
      of
      an entity’s first fiscal year that begins after September 15, 2006. Earlier
      adoption is permitted as of the beginning of an entity’s fiscal year, provided
      the entity has not yet issued financial statements, including financial
      statements for any interim period for that fiscal year.





5


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


Prior
      to
      January 1, 2006, the Company accounted for stock option awards in
      accordance with the recognition and measurement provisions of Accounting
      Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees”, (“APB 25”) and related Interpretations, as permitted by Statement of
      Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation”, (“SFAS 123”). Share-based employee compensation expense was not
      recognized in the Company’s consolidated statements of operations prior to
      January 1, 2006, as all stock option awards granted had an exercise price
      equal to or greater than the market value of the common stock on the date of
      the
      grant. As permitted by SFAS 123, the Company reported pro-forma disclosures
      presenting results and earnings per share as if the Company had used the fair
      value recognition provisions of SFAS 123 in the Notes to Consolidated Financial
      Statements. Share-based compensation related to non-employees and modifications
      of options granted were accounted for based on the fair value of the related
      stock or options in accordance with SFAS 123 and its interpretations.





Effective
      January 1, 2006, the Company adopted the provisions of Statement of
      Financial Accounting Standards No. 123 (revised 2004), “Share-Based
      Payment”, (“SFAS 123(R)”), which requires the measurement and recognition of
      compensation expense for all share-based payment awards to employees and
      directors based on estimated fair values. The Company adopted SFAS 123(R) using
      the modified prospective transition method. Under this transition method,
      share-based compensation expense recognized during the three and nine months
      ended September 30, 2006 includes: (a) compensation expense for all
      share-based awards granted prior to, but not yet vested, as of January 1, 2006,
      based on the grant date fair value estimated in accordance with the original
      provisions of SFAS 123, and (b) compensation expense for all share-based
      awards granted on or after January 1, 2006, based on the grant date fair value
      estimated in accordance with the provisions of SFAS 123(R). In accordance with
      the modified prospective transition method, our consolidated financial
      statements for prior periods have not been restated to reflect the impact of
      SFAS 123(R).




The
      following table illustrates the effect on net loss for the three and nine months
      ended September 30, 2005 as if we had applied the fair value method to our
      stock-based compensation:





Three
                Months
              Ended
              September
                30,
              2005
            
            
            Nine
                Months
              Ended
              September
                30,
              2005Reported
                net loss
            
            $
            (1,589,345
            )
            $
            (4,109,097
            )Deduct:
                Total stock-based employee
              compensation
                expense determined under
              fair
                value based method for all awards,
              net
                of related tax effects
            
            
            (99,793
            )
            
            (230,379
            )Proforma
                net loss
            
            $
            (1,689,138
            )
            $
            (4,339,476
            )Reported
                net loss per share - basic and diluted
            
            $
            (0.15
            )
            $
            (0.41
            )Proforma
                net loss per share - basic and diluted
            
            $
            (0.16
            )
            $
            (0.43
            )





Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying financial statements.





**Note
      2.**   **Loss
      per Share**





Basic
      loss per share is computed by dividing net loss by the weighted-average number
      of shares of common stock outstanding during the period. Diluted earnings per
      share gives effect to dilutive options, warrants and other potential common
      stock outstanding during the period. Potential common stock, consisting of
      options and warrants outstanding are shown in the table below:





Potential
      common stock consists of the following:





At
                September 30,
            
            
            2006
            
            
            2005Stock
                options
            
            
            2,551,605
            
            
            3,376,140Common
                stock warrants
            
            
            100,891,918
            
            
            470,042Common
                stock issuable upon
              conversion
                of convertible notes (1)
            
            
            144,928,167
            
            
            3,170,732Total
            
            
            248,371,690
            
            
            7,016,914





(1)
      At
      September 30, 2006 and 2005 the Company had Callable Secured Convertible Notes
      outstanding of $4,347,845 and $1,300,000, respectively. The Notes are
      convertible into shares of the Company's common stock at the Note Holders'
      option, at the lower of (i) $3.20 per share or (ii) 60% of the average of the
      three lowest intra-day trading prices for the common stock as quoted on the
      Over-the-Counter Bulletin Board for the 20 trading days preceding the conversion
      date. At September 30, 2006 and 2005 the Notes would have been convertible
      into
      shares of the Company’s common stock at a price of $0.03 and $0.41,
      respectively. See Note 6 for a complete discussion of the Callable Secured
      Convertible Notes.





The
      potential common stock has not been included in the computation of diluted
      loss
      per share, as the effect would be anti-dilutive.





6


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


**Note
      3.**   **Inventories**





Inventories
      consisted of the following components at September 30, 2006:





Raw
                materials
            
            $
            910,585Bulk
                AC-11
            
            
            1,049,180Finished
                goods
            
            
            178,603$
            2,138,368





During
      the quarter ended September 30, 2006, the Company incurred a write-off of
      approximately $152,000 related to obsolete inventory which consisted of finished
      nutritional supplements that reached their stated expiration date.





**Note
      4.**   **Stockholders’
      Equity**





On
      February 14, 2006, the Note Holders converted a total of $30,000 of Convertible
      Notes into 150,000 shares of the Company's common stock at a price of $0.20
      per
      share.





On
      February 28, 2006, the Note Holders converted a total of $21,600 of Convertible
      Notes into 150,000 shares of the Company's common stock at a price of $0.144
      per
      share.





On
      May
      18, 2006, the Company issued 100,000 shares to its law firm in exchange for
      services rendered. The fair market value of the shares on the date of issuance
      was $0.13 and accordingly, the Company recorded stock based compensation expense
      of $13,000. These shares were issued pursuant to an effective registration
      statement on Form S-8.





**Note
      5.**   **Joint
      Ventures**





*PMO
      Products Inc.*





In
      November 2004, the Company entered into a joint venture with the two principals
      of Pierre Michel Salon, a leading New York City based hair salon to develop
      and
      market a line of professional hair care products that contain AC-11 as an
      ingredient. The Company contributed $25,000 in cash for a 50% ownership interest
      in a newly formed corporation named PMO Products Inc., a New York corporation
      ("PMO"). In August 2005, PMO began selling these products exclusively to the
      Pierre Michel Salon in New York City.





On
      August
      31, 2006, the Company and PMO entered into an agreement whereby PMO purchased
      the Company’s 50% ownership interest in exchange for $6,841 in cash. The
      purchase price represented the net book value of the Company’s investment in PMO
      as of such date. The parties also entered into a seven-year Supply Licensing
      Agreement with PMO which allows PMO to utilize the Company’s registered
      trademark AC-11® for the sale of hair-care products in North America, South
      America and Japan. PMO granted the Company a seven-year trademark license to
      use
      its trademark “RepHair, by Pierre Michel” for hair-care products sold in Europe,
      all of Asia (except Japan) and Australia.





Since
      inception in November 2004 and through August 31, 2006, the Company sold
      approximately $26,000 of products to PMO. The Company recorded as deferred
      income, the profit from any sales it made to PMO until such time that the
      products were resold by PMO to an independent third party. At August 31, 2006,
      deferred income related to product sales made to PMO was $7,837. In connection
      with the sale of its ownership interest in PMO on such date, the Company
      reclassified the remaining deferred income of $7,837 to revenue as it no longer
      had any rights to the remaining inventory of PMO.





*Prometheon
      Labs LLC*





In
      September 2005, the Company contributed $40,000 in cash for a 50% ownership
      interest in Prometheon Labs LLC, (“Prometheon”) a New York limited liability
      company which was formed for the purpose of developing and marketing an oral
      nutritional supplement containing the Company’s ingredient AC-11. The Company’s
      joint venture partner Prometheon Holding LLC, contributed $40,000 in cash for
      its 50% ownership interest in Prometheon Labs. In June 2006, the Company
      advanced an additional $5,000 in cash to Prometheon for working capital
      purposes. The joint venture partners share equally in the net income or net
      loss
      generated by Prometheon.





In
      2005,
      the Company manufactured and sold a nutritional supplement known as Avatar
      8 to
      Prometheon. Total sales to Prometheon in 2005 were approximately $27,000. The
      Company records as deferred income, the profit from any sales it makes to
      Prometheon until such time that the products are resold by Prometheon to an
      independent third party. At September 30, 2006, deferred income related to
      sales
      made to Prometheon was $5,253. The Company accounts for its investment in
      Prometheon under the equity method. For the nine months ended September 30,
      2006, Prometheon had a net loss of $87,890 and accordingly, the Company’s 50%
      share of Prometheon’s net loss was $43,945. Since inception in September 2005
      through September 2006, Prometheon has incurred a total net loss of $124,322
      of
      which the Company’s 50% share is $62,161 however the Company has only recorded
      losses totaling $45,000 which represents the entire amount of its investment.




7


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


**Note
      6.**   **Callable
      Secured Convertible Notes and Common Stock Warrants**





On
      September 15, 2006, the Company entered into a Securities Purchase Agreement
      (the "Securities Purchase Agreement") with New Millennium Capital Partners
      II,
      LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
      (collectively, the "Note Holders"). Under the terms of the Securities Purchase
      Agreement, the Note Holders purchased an aggregate of (i) $515,000 in callable
      secured convertible notes (the "Notes") and (ii) issued warrants to purchase
      100,000,0000 shares of the Company’s common stock (the "Warrants"). The Company
      received net cash proceeds of $489,800 after the payment of transaction costs.
      The transaction costs have been capitalized and will be expensed over the three
      year term of the Notes.





The
      Notes
      bear interest at 8% per annum and mature on September 15, 2009. The Company
      is
      not required to make any principal payments during the term of the Notes. The
      Notes are convertible into shares of the Company's common stock at the Note
      Holders' option, at the lower of (i) $0.10 per share or (ii) 60% of the average
      of the three lowest intra-day trading prices for the Company’s common stock as
      quoted on the Over-the-Counter Bulletin Board for the 20 trading days preceding
      the conversion date. The full principal amount of the Notes is due upon the
      occurrence of an event of default.





The
      Warrants are exercisable for a period of seven years from the date of issuance
      and have an exercise price of $0.10 per share. In addition, the conversion
      price
      of the Notes and the exercise price of the Warrants will be adjusted in the
      event that the Company issues common stock at a price below the initial fixed
      conversion price of $0.10, with the exception of any shares of common stock
      issued in connection with the Notes. The conversion price of the Notes and
      the
      exercise price of the Warrants may also be adjusted in certain circumstances
      such as if the Company pays a stock dividend, subdivides or combines outstanding
      shares of common stock into a greater or lesser number of shares, or takes
      such
      other actions as would otherwise result in dilution of the Note Holders'
      position.





The
      Note
      Holders have contractually agreed to restrict their ability to convert their
      Notes or exercise their Warrants and receive shares of the Company's common
      stock such that the number of shares of common stock held by the Note Holders
      and their affiliates after such conversion or exercise does not exceed 4.99%
      of
      the then issued and outstanding shares of common stock. In addition, the Company
      has granted the Note Holders a security interest in substantially all of the
      Company's assets.





The
      Company has the right to prepay the entire outstanding balance of the Notes
      under certain circumstances at a premium ranging from 35% to 50%. The Company
      also has the right to prepay a portion of the Notes (“Partial Call Option”) each
      month in an amount equal to 104% of the then outstanding principal balance
      divided by 36, plus one month’s interest. The Company may only prepay the Notes
      in the event that no event of default exists, there are a sufficient number
      of
      shares available for conversion of the Notes and the market price is at or
      below
      $.10 per share. This partial call option has the effect of preventing the Note
      Holders from converting their Notes into shares of the Company’s common stock in
      the succeeding month.





The
      Company committed to registering the shares of common stock underlying the
      Notes
      upon written demand of the Note Holders (“Demand Notice”). The Company is
      required to file the registration statement within forty-five (45) days from
      the
      date on which it receives the Demand Notice otherwise it may be subject to
      penalty provisions. There are also penalty provisions should the filing not
      be
      declared effective within 120 days from the date on which the Company receives
      the Demand Notice.





Prior
      to
      the sale of Notes on September 15, 2006 described above, the Company sold an
      aggregate of $4,000,000 in Notes and issued Warrants to purchase an aggregate
      of
      625,000 shares of its common stock to the same Note Holders. These sales were
      made in three installments as follows:





·
            On
                August 31, 2005, the Company sold $1,300,000 of Notes and issued
                Warrants
                to purchase 203,124 shares of its common stock (the "First Installment").
                The Company received net cash proceeds of $1,165,334 after the payment
                of
                transaction costs of $100,000 and prepaid interest of $34,666. The
                transaction costs have been capitalized and will be expensed over
                the
                three year term of the Notes. The prepaid interest represented four
                months
                of interest on the Notes and was amortized to interest expense
                accordingly.





·
            On
                October 19, 2005, following the filing of the Company's registration
                statement on October 17, 2005, the Company sold an additional $1,350,000
                of Notes and issued Warrants to purchase 210,938 shares of its common
                stock (the "Second Installment"). The Company received net cash proceeds
                of $1,304,000 after the payment of transaction costs of $10,000 and
                prepaid interest of $36,000. The transaction costs have been capitalized
                and will be expensed over the three year term of the Notes. The prepaid
                interest represented four months of interest on the Notes and was
                amortized to interest expense accordingly.





·
            On
                February 14, 2006, the Company’s registration statement was declared
                effective by the Securities and Exchange Commission and on February
                17,
                2006, the Company sold an additional $1,350,000 of Notes and issued
                Warrants to purchase 210,938 shares of its common stock (the "Third
                Installment"). The Company received net cash proceeds of $1,304,000
                after
                the payment of transaction costs of $10,000 and prepaid interest
                of
                $36,000. The transaction costs have been capitalized and will be
                expensed
                over the three year term of the Notes. The prepaid interest represented
                four months of interest on the Notes and was amortized to interest
                expense
                accordingly.





8


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


The
      Notes
      bear interest at 8% per annum and have a maturity date of three years from
      the
      respective date of each issuance. The Company is not required to make any
      principal payments during the term of the Notes. The Notes are convertible
      into
      shares of the Company's common stock at the Note Holders' option, at the lower
      of (i) $3.20 per share or (ii) 60% of the average of the three lowest intra-day
      trading prices for the Company’s common stock as quoted on the Over-the-Counter
      Bulletin Board for the 20 trading days preceding the conversion date. The full
      principal amount of the Notes is due upon the occurrence of an event of
      default.





The
      Warrants are exercisable for a period of five years from the date of issuance
      and have an exercise price of $4.50 per share. In addition, the conversion
      price
      of the Notes and the exercise price of the Warrants will be adjusted in the
      event that the Company issues common stock at a price below the initial fixed
      conversion price of $3.20, with the exception of any shares of common stock
      issued in connection with the Notes. The conversion price of the Notes and
      the
      exercise price of the Warrants may also be adjusted in certain circumstances
      such as if the Company pays a stock dividend, subdivides or combines outstanding
      shares of common stock into a greater or lesser number of shares, or takes
      such
      other actions as would otherwise result in dilution of the Note Holders'
      position.





The
      Note
      Holders have contractually agreed to restrict their ability to convert their
      Notes or exercise their Warrants and receive shares of the Company's common
      stock such that the number of shares of common stock held by the Note Holders
      and their affiliates after such conversion or exercise does not exceed 4.99%
      of
      the then issued and outstanding shares of common stock. In addition, the Company
      has granted the Note Holders a security interest in substantially all of the
      Company's assets.





The
      Company has the right to prepay the entire outstanding balance of the Notes
      under certain circumstances at a premium of 50%. The Company also has the right
      to prepay a portion of the Notes (“Partial Call Option”) each month in an amount
      equal to 104% of the then outstanding principal balance divided by 36, plus
      one
      month’s interest. The Company may only prepay the Notes in the event that no
      event of default exists, there are a sufficient number of shares available
      for
      conversion of the Notes and the market price is at or below $3.20 per share.
      This partial call option has the effect of preventing the Note Holders from
      converting their Notes into shares of the Company’s common stock in the
      succeeding month.





In
      accounting for the Convertible Notes and the Warrants described above, the
      Company considered the guidance contained EITF 00-19, "Accounting for Derivative
      Financial Instruments Indexed To, and Potentially Settled In, a Company's Own
      Common Stock," and SFAS 133 "Accounting for Derivative Instruments and Hedging
      Activities." In accordance with the guidance provided in EITF 00-19, the Company
      determined that the conversion feature of the Notes represents an embedded
      derivative since the note is convertible into a variable number of shares upon
      conversion and a liquidated damage clause contained in the Registration Rights
      Agreement requires the Company to pay liquidated damages of 2.0% per month
      of
      the outstanding principal amount of the notes, in cash or shares of common
      stock
      to the Note Holders in the event that a registration statement covering the
      shares underlying the Notes and warrants is not declared effective within 120
      days from the date that the Note Holders notify the Company that such
      registration statement is required to be filed. Accordingly, the Notes are
      not
      considered to be "conventional" convertible debt under EITF 00-19 and thus
      the
      embedded conversion feature must be bifurcated from the debt host and accounted
      for as a derivative liability.





The
      Company calculated the fair value of the embedded conversion feature related
      to
      the First Installment of $1,300,000 on August 31, 2005 using the Black-Scholes
      valuation model with the following assumptions: market price of $3.25; exercise
      price of $1.95, which represents a 40% discount to the market price on August
      31, 2005; risk free interest rate of 4.0%; expected volatility of 50% and an
      expected life of 3 years. The fair value of $1,186,667 was recorded as a debt
      discount, which reduced the carrying amount of the Notes. To determine the
      liability related to the warrants, the Company calculated the fair value of
      the
      warrants on August 31, 2005 using the Black-Scholes valuation model with the
      following assumptions: market price of $3.25; exercise price of $4.50; risk
      free
      interest rate of 4.0%; expected volatility of 50% and an expected life of 5
      years. The fair value of $255,936 was also recorded as a debt discount. The
      total debt discount attributable to the warrants and embedded conversion feature
      of $1,442,603 exceeded the principal amount of the Notes by $142,603 and
      accordingly this excess amount was charged directly to interest expense on
      August 31, 2005. The remaining $1,300,000 of debt discount will be amortized
      over the three year term of the Notes using the interest method.





The
      Company calculated the fair value of the embedded conversion feature related
      to
      the Second Installment of $1,350,000 on October 19, 2005 using the Black-Scholes
      valuation model with the following assumptions: market price of $0.65; exercise
      price of $0.39, which represents a 40% discount to the market price on October
      19, 2005; risk free interest rate of 4.0%; expected volatility of 100% and
      an
      expected life of 3 years. The fair value of $1,626,923 was recorded as a debt
      discount, which reduced the carrying amount of the Notes. To determine the
      liability related to the warrants, the Company calculated the fair value of
      the
      warrants on October 19, 2005 using the Black-Scholes valuation model with the
      following assumptions: market price of $0.65; exercise price of $4.50; risk
      free
      interest rate of 4.0%; expected volatility of 100% and an expected life of
      5
      years. The fair value of $63,282 was also recorded as a debt discount. The
      total
      debt discount attributable to the warrants and embedded conversion feature
      of
      $1,690,205 exceeded the principal amount of the Notes by $340,205 and
      accordingly this excess amount was charged directly to interest expense on
      October 19, 2005. The remaining $1,350,000 of debt discount will be amortized
      over the three year term of the Notes using the interest method.





The
      Company calculated the fair value of the embedded conversion feature related
      to
      the Third Installment of $1,350,000 on February 17, 2006 using the Black-Scholes
      valuation model with the following assumptions: market price of $0.30; exercise
      price of $0.18, which represents a 40% discount to the market price on February
      17, 2006; risk free interest rate of 4.0%; expected volatility of 100% and
      an
      expected life of 3 years. The fair value of $1,650,000 was recorded as a debt
      discount, which reduced the carrying amount of the Notes. To determine the
      liability related to the warrants, the Company calculated the fair value of
      the
      warrants on February 17, 2006 using the Black-Scholes valuation model with
      the
      following assumptions: market price of $0.30; exercise price of $4.50;
      risk




9


**OPTIGENEX
        INC.**
 **Notes
        to Condensed Financial Statements - Unaudited**
  free
      interest rate of 4.0%; expected volatility of 100% and an expected life of
      5
      years. The fair value of $21,094 was also recorded as a debt discount. The
      total
      debt discount attributable to the warrants and embedded conversion feature
      of
      $1,671,094 exceeded the principal amount of the Notes by $321,094 and
      accordingly this excess amount was charged directly to interest expense on
      February 17, 2006. The remaining $1,350,000 of debt discount will be amortized
      over the three year term of the Notes using the interest method.





On
      September 15, 2006, the Company calculated the fair value of the embedded
      conversion feature related to the sale of $515,000 of Notes using the
      Black-Scholes valuation model with the following assumptions: market price
      of
      $0.10; exercise price of $0.06, which represents a 40% discount to the market
      price on September 15, 2006; risk free interest rate of 4.73%; expected
      volatility of 100% and an expected life of 3 years. The fair value of $600,833
      was recorded as a debt discount, which reduced the carrying amount of the Notes.
      To determine the liability related to the warrants, the Company calculated
      the
      fair value of the warrants on September 15, 2006 using the Black-Scholes
      valuation model with the following assumptions: market price of $0.10; exercise
      price of $0.10; risk free interest rate of 4.73%; expected volatility of 100%
      and an expected life of 7 years. The fair value of $8,000,000 was also recorded
      as a debt discount. The total debt discount attributable to the warrants and
      embedded conversion feature of $8,600,833 exceeded the principal amount of
      the
      Notes by $8,085,833 and accordingly this excess amount was charged directly
      to
      interest expense on September 15, 2006. The remaining $515,000 of debt discount
      will be amortized over the three year term of the Notes using the interest
      method.





On
      February 14, 2006, the Note Holders converted a total of $30,000 of Convertible
      Notes into 150,000 shares of the Company's common stock at a price of $0.20
      per
      share.





On
      February 28, 2006, the Note Holders converted a total of $21,600 of Convertible
      Notes into 150,000 shares of the Company's common stock at a price of $0.144
      per
      share.





On
      February 28, 2006, the Company elected to make a payment of $142,222 to the
      Note
      Holders pursuant to the partial call option feature contained in the Notes.
      Of
      the total payment, $115,555 was a reduction of the outstanding principal balance
      of the Notes and the remaining $26,667 represented one month of interest due
      under the Notes.





As
      a
      result of the conversions and principal payments made under the Notes the
      outstanding principal balance of the Notes at September 30, 2006 was
      $4,347,845.





*Re-measurement
      of the fair value of common stock warrants*





The
      Company is required to measure the fair value of the warrants on the date of
      each reporting period. The effect of this re-measurement will be to adjust
      the
      carrying value of the liabilities related to the warrants. Accordingly, the
      Company measured the fair value of the 625,000 warrants at September 30, 2006
      using the Black-Scholes valuation model with the following assumptions: market
      price of common stock on the measurement date of $0.05, exercise price of
      warrants $4.50, risk-free interest rate of 4.56%, expected volatility of 100%,
      and an expected life of 4.3 years. This resulted in a fair value for the 625,000
      warrants of $6,251 at September 30, 2006. The decrease in the fair value of
      the
      warrants resulted in non-cash other income of $2,109 for the three months ended
      September 30, 2006.





The
      Company is also required to measure the fair value of the 100,000,000 warrants
      on the date of each reporting period. The effect of this re-measurement will
      be
      to adjust the carrying value of the liabilities related to the warrants.
      Accordingly, the Company measured the fair value of the 100,000,000 warrants
      at
      September 30, 2006 using the Black-Scholes valuation model with the following
      assumptions: market price of common stock on the measurement date of $0.05,
      exercise price of warrants $0.10, risk-free interest rate of 4.56%, expected
      volatility of 100%, and an expected life of 6.95 years. This resulted in a
      fair
      value for the 100,000,000 warrants of $4,000,000 at September 30, 2006. The
      decrease in the fair value of the warrants resulted in non-cash other income
      of
      $4,000,000 for the three months ended September 30, 2006.





*Re-measurement
      of the fair value of the embedded conversion feature*




The
      Company is required to measure the fair value of the embedded conversion feature
      related to the $4,000,000 of Notes at September 30, 2006 using the Black-Scholes
      valuation model with the following assumptions: market price of common stock
      on
      the measurement date of $0.05, exercise price of $0.03 which represents a 40%
      discount to the market price on September 30, 2006; risk-free interest rate
      of
      4.56%, expected volatility of 100% and an expected life of 2 years. This
      resulted in a fair value for the embedded conversion feature of $4,000,000.
      The
      decrease in the fair value of the embedded conversion feature of resulted in
      non-cash other income of $666,667 in the quarter ended September 30,
      2006.





The
      Company is also required to measure the fair value of the embedded conversion
      feature related to the $515,000 of Notes at September 30, 2006 using the
      Black-Scholes valuation model with the following assumptions: market price
      of
      common stock on the measurement date of $0.05, exercise price of $0.03 which
      represents a 40% discount to the market price on September 30, 2006; risk-free
      interest rate of 4.56%, expected volatility of 100% and an expected life of
      2.9
      years. This resulted in a fair value for the embedded conversion feature of
      $686,667. The increase in the fair value of the embedded conversion feature
      of
      resulted in non-cash other expense of $85,834 in the quarter ended September
      30,
      2006.





10


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


In
      total,
      for the three months ended September 30, 2006, the Company recorded non-cash
      other income of $4,582,942 related to the net change in the fair value of the
      liabilities related to the warrants and embedded conversion
      feature.





A
      summary
      of the Callable Secured Convertible Notes at September 30, 2006 is as follows:





Callable
                Secured Convertible Notes; 8% per annum;due
                August 31, 2008
            
            $
            1,132,845Callable
                Secured Convertible Notes; 8% per annum;due
                October 19, 2008
            
            $
            1,350,000Callable
                Secured Convertible Notes; 8% per annum;due
                February 17, 2009
            
            $
            1,350,000Callable
                Secured Convertible Notes; 8% per annum;due
                September 15, 2009
            
            $
            515,000Debt
                Discount, net of accumulated amortization of $972,639
            
            
            (3,375,206
            )Embedded
                Derivative Liability
            
            
            4,686,667Total
            
            $
            5,659,306





The
      Company did not pay $78,139 of interest related to the Notes which was due
      on
      September 30, 2006. As of September 30, 2006, the total amount of accrued but
      unpaid interest due under the Notes was $133,196. This amount is included in
      accrued expenses at September 30, 2006.




**Note
      7.**   **Stock
      Based Compensation**





In
      July
      2004, the Board of Directors and then sole stockholder of the Company adopted
      the 2004 Stock Incentive Plan, pursuant to which 5,000,000 shares of common
      stock have been reserved for issuance. The plan provides for grants of incentive
      stock options, non-qualified stock options and shares of common stock to
      employees, non-employee directors and others. In the case of an incentive stock
      option, the exercise price cannot be less than the fair market value of the
      Company's common stock on the date of grant. Vesting schedules for options
      and
      stock awards and certain other conditions are to be determined by the Board
      of
      Directors or a committee appointed by the Board of Directors.




The
      fair
      value of each option award is estimated on the date of each option grant using
      the Black-Scholes option valuation model using the assumptions noted in the
      following table. Because the Company’s common stock has only traded publicly
      since April 2005, the expected volatility for the three months ended September
      30, 2005 was estimated based on a sampling of similar size companies. The
      Company has limited history by which to estimate the expected holding period
      of
      the options, and therefore, has estimated that the expected holding period
      for
      all stock options granted is equal to the contractual life of the option. As
      a
      result of the adoption of FASB 123R, the Company has recorded stock based
      compensation expense related to employee stock options of $211,175 for the
      nine
      months ended September 30, 2006.





Three
                months ended
              September
                30,
            
            
            Nine
                months ended
              September
                30,2006(1)
            
            
            2005
            
            
            2006
            
            
            2005Expected
                life (in years)
            
            
            NA
            
            
            5
            
            
            5
            
            
            2-5Risk-free
                interest rate
            
            
            NA
            
            
            4.0
            %
            
            4.66-5.20
            %
            
            4.0
            %Volatility
            
            
            NA
            
            
            50
            %
            
            100
            %
            
            0-50
            %Dividend
                yield
            
            
            NA
            
            
            None
            
            
            None
            
            
            None





(1)
      The
      Company did not issue any stock options during the three months ended September
      30, 2006





The
      following table summarizes the stock option activity for the nine months ended
      September 30, 2006:





Number
                of
              Options
            
            
            Weighted
              Average
              Exercise
                Price
            
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at December 31, 2005
            
            
            3,301,605
            
            $
            2.73Granted
            
            
            1,600,000
            
            $
            0.54Exercised
            
            
            --
            
            
            --Forfeited/Cancelled
            
            
            (2,350,000
            )
            $
            1.43Outstanding
                at September 30, 2006
            
            
            2,551,605
            
            $
            2.55
            
            $
            1,091Exercisable
                at September 30, 2006
            
            
            2,501,605
            
            $
            2.59
            
            $
            1,091Vested
                and expected to vest at September 30, 2006
            
            
            2,551,605
            
            $
            2.12
            
            $
            1,091




11


**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


A
      summary
      of the status of the Company’s non-vested stock options as of September 30,
      2006, and of changes during the nine months ended September 30, 2006, is
      presented below:





Number
                of
              Options
            
            
            Weighted
              Average
              Option
                PriceNon-vested
                at December 31, 2005
            
            
            225,000
            
            $
            3.00Granted
            
            
            750,000
            
            $
            0.95Vested
            
            
            (225,000
            )
            $
            3.00Forfeited/Cancelled
            
            
            (700,000
            )
            $
            1.00Outstanding
                at September 30, 2006
            
            
            50,000
            
            $
            0.30





As
      of
      September 30, 2006, there was $2,000 of total unrecognized compensation cost
      related to non-vested stock options which is expected to be recognized in the
      fourth quarter of 2006.





The
      Company did not issue any stock options during the three months ended September
      30, 2006. The weighted average grant-date fair value of options granted during
      the three months ended September 30, 2005 was $0.68. The weighted average
      grant-date fair value of options granted during the nine months ended September
      30, 2006 and 2005 was $0.08 and $0.90, respectively.




The
      following table summarizes information about stock options outstanding and
      exercisable at September 30, 2006:




Options
                Outstanding
            
            Options
                ExercisableExercise
                prices
            
            Number
              outstanding
            
            Weighted
              average
              remaining
              contractual
              life
                (years)
            
            Weighted
              average
              exercise
                price
            
            Number
              exercisable
            
            Weighted
              average
              exercise
                price$0.001
            
            9,210
            
            2.16
            
            $0.001
            
            9,210
            
            $0.001$0.01
            
            16,000
            
            3.00
            
            $0.01
            
            16,000
            
            $0.01$0.30
            
            100,000
            
            2.65
            
            $0.30
            
            50,000
            
            $0.30$1.00
            
            277,000
            
            1.25
            
            $1.00
            
            277,000
            
            $1.00$2.00
            
            259,395
            
            1.33
            
            $2.00
            
            259,395
            
            $2.00$3.00
            
            1,890,000
            
            2.92
            
            $3.00
            
            1,890,000
            
            $3.00$0.001
                - $3.00
            
            2,551,605
            
            2.56
            
            $2.55
            
            2,501,605
            
            $2.59





**Note
      8.**   **Going
      Concern**





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has suffered recurring losses
      from
      operations and a stockholders’ deficiency which raises substantial doubt about
      its ability to continue as a going concern. In the event that the Company’s
      operations do not generate sufficient cash flow in the future, the Company
      will
      need to obtain additional debt or equity capital. There can be no assurances
      that the Company will be successful in raising additional debt or equity capital
      on terms acceptable to the Company or at all. The accompanying financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.




12




**OPTIGENEX
      INC.**


**Notes
      to Condensed Financial Statements - Unaudited**


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





The
      following discussion and analysis should be read in conjunction with our
      Condensed Financial Statements and Notes thereto included elsewhere in this
      Form
      10-QSB.





**Cautionary
      Note Regarding Forward Looking Statements**





Certain
      statements in this Quarterly Report on Form 10-QSB constitute forward-looking
      statements for purposes of the securities laws. Forward-looking statements
      include all statements that do not relate solely to the historical or current
      facts, and can be identified by the use of forward looking words such as "may",
      "believe", "will", "expect", "expected", "project", "anticipate", "anticipated",
      "estimates", "plans", "strategy", "target", "prospects" or "continue". These
      forward looking statements are based on the current plans and expectations
      of
      our management and are subject to a number of uncertainties and risks that
      could
      significantly affect our current plans and expectations, as well as future
      results of operations and financial condition and may cause our actual results,
      performances or achievements to be materially different from any future results,
      performances or achievements expressed or implied by such forward-looking
      statements. Such risks and uncertainties include those set forth in our most
      recent report on Form 10-KSB. In making these forward-looking statements, we
      claim the protection of the safe-harbor for forward-looking statements contained
      in the Private Securities Reform Act of 1995. Although we believe that the
      expectations reflected in such forward-looking statements are reasonable, there
      can be no assurance that such expectations will prove to have been correct.
      We
      do not assume any obligation to update these forward-looking statements to
      reflect actual results, changes in assumptions, or changes in other factors
      affecting such forward-looking statements.





**Overview**





We
      develop and market proprietary products that are designed to counter the
      negative effects of aging by supporting the body's natural ability to repair
      and
      maintain its DNA. Our patented compound AC-11 is a bioactive form of the
      medicinal herb known as *Uncaria
      tomentosa* which is
      indigenous to the Amazon rainforest and other tropical areas of South and
      Central America. AC-11 is manufactured for us by the Centroflora Group of Sao
      Paulo, Brazil, using a patented process which we own that delivers a
      standardized, water soluble extract. This manufacturing takes place in a
      facility utilizing equipment that we own. This facility complies with worldwide,
      voluntary standards for quality management.





We
      do not
      conduct our own human and animal studies. However, in in-vitro studies and
      clinical trials previously conducted by third parties on our behalf, AC-11
      has
      been shown to increase the body's natural ability to repair DNA damage. Among
      the known causes of DNA damage are pollution and hydrocarbons, ultraviolet
      rays
      (including exposure to sunlight), environmental toxins, oxidative stress and
      lifestyle choices such as smoking, drinking alcohol, and strenuous exercise.
      AC-11 has demonstrated positive results as an immune system enhancer, and an
      anti-tumor agent. In addition, in laboratory studies, it has shown to be an
      inhibitor of inflammatory biochemicals.





We
      sell
      Activar AC-11, an oral nutritional supplement, direct to the consumer primarily
      through our Internet website www.AC-11.com. We do not sell Activar AC-11 through
      traditional wholesale or retail outlets. Activar AC-11 is a once
      daily capsule containing 350 mg of AC-11 with a suggested retail price of $29.95
      for a one month supply. To increase consumer awareness of the benefits of
      Activar AC-11, we advertised the product in various magazines such as Glamour,
      Self and Allure in the first quarter of 2006. Activar AC-11 is manufactured
      for
      us by Garden State Nutritionals in New Jersey.





We
      sell
      AC-11 as a bulk ingredient to companies in the nutraceutical, cosmeceutical,
      personal care, skin care and hair care industries. We continue to be highly
      dependent on a small base of customers that purchase bulk AC-11 as an ingredient
      and as such, these customers make purchases from us only when required to do
      so
      in connection with their manufacturing schedule. We do not have an in-house
      sales force and as such, we rely on independent commissioned sales people to
      introduce us to potential new customers.





In
      the
      third quarter of 2005, we commenced development of a line of proprietary topical
      skin care products which contain AC-11 as an active ingredient. These skin
      care
      products which consist of a day cream, night cream and eye cream are marketed
      under the brand name “Activar Skin Renewal System”. These
      products contain AC-11 as an ingredient and are designed to repair damage to
      the
      skin from multiple causes including; exposure to ultraviolet rays, stress and
      pollution while enhancing skin elasticity, and reducing wrinkles and other
      visible signs of aging. These products are intended to appeal to a targeted
      demographic audience which includes women ages 30 and over. The Activar Skin
      Renewal System is manufactured for us by Celmark, a division of Garden State
      Nutritionals.





In
      March
      2006, we began test marketing our skin care products direct to the consumer
      through a celebrity endorsed, 30-minute television infomercial. This infomercial
      cost approximately $400,000 to produce. Based
      on
      the initial test marketing results, we determined that the infomercial needed
      to
      be modified and subsequently re-tested. We spent approximately $50,000 to
      reproduce certain portions of the infomercial and we began testing the modified
      program in April. We
      purchased media time on various over -the-air and cable TV channels in a variety
      of local, regional and national markets. After evaluating the results of the
      revised infomercial, we determined that the level of product sales which were
      achieved did not warrant the expenditure of additional funds to purchase media
      time. As a result, we discontinued the airing of the infomercial in June
      2006.





13


We
      plan
      to seek other wholesale channels of distribution for our nutritional supplement,
      bulk AC-11 and skin care products such as multi-level marketing organizations
      and distribution networks both domestically and in certain international
      markets.





**Joint
      Ventures**





*PMO
      Products Inc.*





In
      November 2004, the Company entered into a joint venture with the two principals
      of Pierre Michel Salon, a leading New York City based hair salon to develop
      and
      market a line of professional hair care products that contain AC-11 as an
      ingredient. The Company contributed $25,000 in cash for a 50% ownership interest
      in a newly formed corporation named PMO Products Inc., a New York corporation
      ("PMO"). In August 2005, PMO began selling these products exclusively to the
      Pierre Michel Salon in New York City.





On
      August
      31, 2006, the Company and PMO entered into an agreement whereby PMO purchased
      the Company’s 50% ownership interest in exchange for $6,841 in cash. The
      purchase price represented the net book value of the Company’s investment in PMO
      as of such date. The parties also entered into a seven-year Supply Licensing
      Agreement with PMO which allows PMO to utilize the Company’s registered
      trademark AC-11® for the sale of hair-care products in North America, South
      America and Japan. PMO granted the Company a seven-year trademark license to
      use
      its trademark “RepHair, by Pierre Michel” for hair-care products sold in Europe,
      all of Asia (except Japan) and Australia.





Since
      inception in November 2004 and through August 31, 2006, the Company sold
      approximately $26,000 of products to PMO. The Company recorded as deferred
      income, the profit from any sales it made to PMO until such time that the
      products were resold by PMO to an independent third party. At August 31, 2006,
      deferred income related to product sales made to PMO was $7,837. In connection
      with the sale of its ownership interest in PMO on such date, the Company
      reclassified the remaining deferred income of $7,837 to revenue as it no longer
      had any rights to the remaining inventory of PMO.





*Prometheon
      Labs LLC*





In
      September 2005, the Company contributed $40,000 in cash for a 50% ownership
      interest in Prometheon Labs LLC, (“Prometheon”) a New York limited liability
      company which was formed for the purpose of developing and marketing an oral
      nutritional supplement containing the Company’s ingredient AC-11. The Company’s
      joint venture partner Prometheon Holding LLC, contributed $40,000 in cash for
      its 50% ownership interest in Prometheon Labs. In June 2006, the Company
      advanced an additional $5,000 in cash to Prometheon for working capital
      purposes. The joint venture partners share equally in the net income or net
      loss
      generated by Prometheon.





In
      2005,
      the Company manufactured and sold a nutritional supplement known as Avatar
      8 to
      Prometheon. Total sales to Prometheon in 2005 were approximately $27,000. The
      Company records as deferred income, the profit from any sales it makes to
      Prometheon until such time that the products are resold by Prometheon to an
      independent third party. At September 30, 2006, deferred income related to
      sales
      made to Prometheon was $5,253. The Company accounts for its investment in
      Prometheon under the equity method. For the nine months ended September 30,
      2006, Prometheon had a net loss of $87,890 and accordingly, the Company’s 50%
      share of Prometheon’s net loss was $43,945. Since inception in September 2005
      through September 2006, Prometheon has incurred a total net loss of $124,322
      of
      which the Company’s 50% share is $62,161 however the Company has only recorded
      losses totaling $45,000 which represents the entire amount of its investment.





**Critical
      Accounting Policies and Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires us to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting periods. On an on-going basis, we evaluate our estimates, including
      those related to collection of accounts receivable, inventory obsolescence,
      sales returns and non-monetary transactions such as stock based compensation,
      impairment of intangible assets and derivative liabilities related to
      convertible notes payable. We base our estimates on historical experience and
      on
      other assumptions that are believed to be reasonable under the circumstances.
      As
      the number of variables and assumptions affecting the probable future resolution
      of the uncertainties increase, these judgments become even more subjective
      and
      complex. Actual results may differ from these estimates.





We
      have
      identified the following critical accounting policies, described below, that
      are
      the most important to the portrayal of our current financial condition and
      results of operations.





**Accounts
      Receivable and Bad Debt Expense**





Accounts
      receivable are reported at their outstanding unpaid principal balances net
      of an
      allowance for doubtful accounts. We estimate bad debt expense based upon past
      experience related to specific customers' ability to pay and current economic
      conditions. At September 30, 2006, our allowance for doubtful accounts was
      approximately $27,000.





14


**Inventory**





Our
      inventories are stated at the lower of cost, determined by the average cost
      method, or market. Our inventories consists of (i) raw materials that we
      purchase from a sole supplier in Brazil; (ii) our proprietary compound known
      as
      AC-11 which is manufactured in Brazil; and (iii) our line of nutritional
      supplement and skin care products that are produced for us by a contract
      manufacturer in the United States. We periodically review our inventories for
      evidence of spoilage and/or obsolescence and we remove these items from
      inventory at their carrying value. During the quarter ended September 30, 2006,
      the Company incurred a write-off of approximately $152,000 related to obsolete
      inventory which consisted of finished nutritional supplements that reached
      their
      stated expiration date.





**Revenue
      Recognition**





Revenue
      is recognized when persuasive evidence of an arrangement exists, the product
      has
      been delivered, the rights and risks of ownership have passed to the customer,
      the price is fixed and determinable, and collection of the resulting receivable
      is reasonably assured. For arrangements that include customer acceptance
      provisions, revenue is not recognized until the terms of acceptance are met.





For
      our
      nutritional supplement and skin care products, we provide a 100% money back
      guarantee on all unopened and undamaged products that are returned to us within
      60 days of purchase. For our skin care products we offer an unconditional 100%
      money back guarantee. We estimate an allowance for product returns at the time
      of shipment based on historical experience. We monitor our estimates on an
      ongoing basis and we may revise our allowance for product returns to reflect
      recent experience. To date, we have not made any significant changes in our
      allowance for returns. Products returned as a result of damage incurred during
      shipment are replaced at our cost. We do not estimate an allowance for returns
      due to damage as historically the level of returns has been negligible. For
      our
      bulk sales of AC-11, our standard return policy provides for a reimbursement
      of
      the full purchase price for any bulk AC-11 that does not conform with the stated
      specifications. We must receive notification of a return request within 30
      days
      from the date that the customer accepts delivery.





From
      time
      to time, we sold bulk AC-11 and/or finished nutritional supplements to our
      joint
      venture companies PMO Products Inc. and Prometheon Labs. At the time of such
      sales, we record revenue in an amount equal to our actual cost and we defer
      the
      profit, if any, from the sale until such time that it is determined that the
      products containing the AC-11 have been sold to an independent third party.
      This
      deferred income is recorded as a liability. As of September 30, 2006, the
      balance of deferred income is $5,253.





**Intangibles**





We
      account for long-lived assets and certain identified intangible assets such
      as
      patents and trademarks in accordance with Statement of Financial Accounting
      Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
      Management reviews these long-lived assets for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. An asset is considered to be impaired when the sum of the
      undiscounted future net cash flows expected to result from the use of the asset
      and its eventual disposition is less than its carrying amount. The amount of
      impairment loss, if any, is measured as the difference between the net book
      value of the asset and its estimated fair value. We monitor our projections
      of
      expected future net cash flows on an ongoing basis. If we determine that our
      projections are not accurate due to specific events such as a delayed product
      launch or a change in our product mix, or changes in economic conditions, we
      may
      incur additional write-offs. We recorded an impairment charge of approximately
      $1,272,000 in 2005 which represented the net book value of certain patents
      that
      management determined were not going to utilized in the foreseeable
      future.





**Derivative
      Instrument Liabilities related to Convertible Notes and Warrants**





In
      connection with the sale of convertible notes and warrants on August 31, 2005,
      October 17, 2005, February 17, 2006 and September 15, 2006 we determined that
      in
      accordance with EITF No. 00-19, "Accounting for Derivative Financial Instruments
      Indexed To, and Potentially Settled in, a Company's Own Stock," and SFAS 133,
      "Accounting for Derivative Instruments and Hedging Activities," that the
      conversion feature of the convertible notes represents an embedded derivative.
      As such, we are required to estimate the fair value of the embedded derivative
      and the warrants at of the end of each reporting period and these values are
      recorded as liabilities. We estimate fair value using the Black-Scholes option
      pricing model. This model requires us to make estimates such as the expected
      holding period, the expected future volatility of our common stock and the
      risk-free rate of return over the holding period. These estimates directly
      affect the reported amounts of the derivative instrument
      liabilities.





15


**Employee
      Stock Options and Stock Based Compensation**





Prior
      to
      January 1, 2006, the Company accounted for stock option awards in
      accordance with the recognition and measurement provisions of Accounting
      Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees”, (“APB 25”) and related Interpretations, as permitted by Statement of
      Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation”, (“SFAS 123”). Share-based employee compensation expense was not
      recognized in the Company’s consolidated statements of operations prior to
      January 1, 2006, as all stock option awards granted had an exercise price
      equal to or greater than the market value of the common stock on the date of
      the
      grant. As permitted by SFAS 123, the Company reported pro-forma disclosures
      presenting results and earnings per share as if the Company had used the fair
      value recognition provisions of SFAS 123 in the Notes to Consolidated Financial
      Statements. Share-based compensation related to non-employees and modifications
      of options granted were accounted for based on the fair value of the related
      stock or options in accordance with SFAS 123 and its
      interpretations.




Effective
      January 1, 2006, the Company adopted the provisions of Statement of
      Financial Accounting Standards No. 123 (revised 2004), “Share-Based
      Payment”, (“SFAS 123(R)”), which requires the measurement and recognition of
      compensation expense for all share-based payment awards to employees and
      directors based on estimated fair values. The Company adopted SFAS 123(R) using
      the modified prospective transition method. Under this transition method,
      share-based compensation expense recognized during the three months ended
      March 31, 2006 included: (a) compensation expense for all share-based
      awards granted prior to, but not yet vested, as of January 1, 2006, based on
      the
      grant date fair value estimated in accordance with the original provisions
      of
      SFAS 123, and (b) compensation expense for all share-based awards granted
      on or after January 1, 2006, based on the grant date fair value estimated in
      accordance with the provisions of SFAS 123(R). In accordance with the modified
      prospective transition method, our consolidated financial statements for prior
      periods have not been restated to reflect the impact of SFAS 123(R).





**Recent
      Accounting Pronouncements**





In
      February 2006, the FASB issued Statement No. 155, *Accounting
      for Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
      133 and 140* . 
      Among other matters, that statement provides that where a company is required
      to
      bifurcate a derivative from its host contract, the company may irrevocably
      elect
      to initially and subsequently measure that hybrid financial instrument in its
      entirety at fair value, with changes in fair value recognized in operations.
      The
      statement is effective for financial instruments issued after the beginning
      of
      an entity’s first fiscal year that begins after September 15, 2006. Earlier
      adoption is permitted as of the beginning of an entity’s fiscal year, provided
      the entity has not yet issued financial statements, including financial
      statements for any interim period for that fiscal year.





In
      June 2006, the FASB issued Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements in accordance with SFAS
      No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      FIN
      48 is effective for fiscal years beginning after December 15, 2006. We are
      currently reviewing this new standard to determine its effects, if any, on
      our
      results of operations or financial position.





Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying financial statements.


16


**RESULTS
      OF OPERATIONS**





***Comparison
      of Three Months Ended September 30, 2006 and 2005***





**Revenues**





Our
      revenues are derived from the sale of our nutritional supplement product Activar
      AC-11 and our line of proprietary skin care products known as the Activar Skin
      Renewal System. We also sell AC-11 as a bulk ingredient to other companies
      in
      the nutritional supplement and cosmeceutical industries who utilize it in their
      own proprietary products. We sell our products direct to consumers through
      our
      Internet website www.AC-11.com. In April 2006, we commenced selling the Activar
      Skin Renewal System via a 30-minute television infomercial.





Net
      sales
      for the quarter ended September 30, 2006 were $77,603 compared to net sales
      of
      $40,468 for the quarter ended September 30, 2005, an increase of $37,135. Our
      net sales are summarized in the following table:




Three
                Months Ended
              September
                30,
            
            $
            
            %2006
            
            2005
            
            Inc/(Dec)
            
            Inc/(Dec)Nutritional
                Supplements:Activar
                AC-11
            
            $
            9,399
            
            $
            11,770
            
            $
            (2,371
            )
            
            (20.1
            %)Age
                Manager *
            
            
            --
            
            
            3,967
            
            
            (3,967
            )
            
            (100.0
            %)Age
                Manager Pro *
            
            
            --
            
            
            3,429
            
            
            (3,429
            )
            
            (100.0
            %)Total
                Nutritional Supplements
            
            
            9,399
            
            
            19,166
            
            
            (9,767
            )
            
            (51.0
            %)Bulk
                AC-11
            
            
            39,175
            
            
            3,500
            
            
            35,675
            
            
            1,019.3
            %Activar
                Skin Renewal System
            
            
            18,495
            
            
            --
            
            
            18,495
            
            
            NAOther
            
            
            10,534
            
            
            17,802
            
            
            (7,268
            )
            
            (40.8
            %)Total
                Revenue
            
            $
            77,603
            
            $
            40,468
            
            $
            37,135
            
            
            91.8
            %





*
      Products
      were discontinued in December 2005





Supplement
      sales for the three months ended September 30, 2006 decreased $9,767 or 51%
      compared to the three months ended September 30, 2005. The overall decrease
      was
      due primarily to the discontinuation of our Age Manager and Age Manager Pro
      supplement products. Sales of bulk AC-11 increased $35,675 from $3,500 for
      the
      three months ended September 30, 2005 to $39,175 for the comparable period
      in
      2006. This increase was due primarily to sales made to two new customers. Other
      sales decreased $7,268 from $17,802 for the three months ended September 30,
      2005 to $10,534 for the comparable period in 2006 due to lower royalties
      earned.





**Cost
      of Sales**





Cost
      of
      sales includes direct and indirect costs associated with manufacturing bulk
      AC-11 and our nutritional supplement and skin care products that contain AC-11.
      Cost of sales was $179,137 and $29,091 for the three months ended September
      30,
      2006 and 2005, respectively. We had a gross loss of $101,534 in 2006 due
      primarily to the effect of a write-off of expired inventory of $151,921.
      Excluding the effect of the inventory write-off, our gross profit would have
      been 35.1% for the three months ended September 30, 2006 compared to a gross
      profit of 28.1% for the comparable period in 2005.




17


**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative (SG&A) expenses include salaries, employee
      benefits, marketing and advertising costs, professional fees related to
      scientific research, legal and accounting fees, rent and other office related
      expenses. Also included in SG&A are various non-cash expenses such as
      depreciation, amortization of intangible assets including patents and other
      intellectual property, and stock-based compensation. The table below highlights
      the major components of our SG&A expenses:





Three
                Months Ended
              September
                30,
            
            
            $
            
            
            %2006
            
            
            2005
            
            
            Inc/(Dec)
            
            
            Inc/(Dec)Employee
                compensation and benefits
            
            $
            119,555
            
            $
            289,118
            
            $
            (169,563
            )
            
            (58.6
            %)Marketing,
                advertising and promotion
            
            
            44,480
            
            
            400,529
            
            
            (356,049
            )
            
            (88.9
            %)Research
                and development
            
            
            8,884
            
            
            95,530
            
            
            (86,646
            )
            
            (90.7
            %)Consulting
                and other professional services
            
            
            2,178
            
            
            77,758
            
            
            (75,580
            )
            
            (97.2
            %)Legal
                and accounting
            
            
            130,146
            
            
            120,418
            
            
            9,728
            
            
            8.1
            %General
                and administrative
            
            
            48,754
            
            
            132,079
            
            
            (83,325
            )
            
            (63.1
            %)Occupancy
            
            
            36,782
            
            
            41,399
            
            
            (4,617
            )
            
            (11.2
            %)Stock
                based compensation
            
            
            2,000
            
            
            14,220
            
            
            (12,220
            )
            
            (85.9
            %)Depreciation
                and amortization
            
            
            72,613
            
            
            74,044
            
            
            (1,431
            )
            
            (1.9
            %)Total
                SG&A
            
            $
            465,392
            
            $
            1,245,095
            
            $
            (779,703
            )
            
            (62.6
            %)





In
      total,
      SG&A expenses decreased $779,703 or 62.6% from $1,245,095 for the three
      months ended September 30, 2005 to $465,392 for the comparable period in 2006.
      Expenses decreased in all categories with the exception of a small increase
      in
      legal and accounting. Areas where we achieved significant cost savings are
      as
      follows:




·
            Employee
                compensation expense decreased $169,563 or 58.6% in 2006 compared
                to 2005.
                This decrease is due primarily to a reduction in the number of full-time
                employees from seven in 2005 to three in
                2006.





·
            Marketing,
                advertising and promotion expenses decreased $356,049 or 88.9% in
                2006
                compared to 2005. This decrease is due to a reduction in the number
                of
                marketing, branding and public relations consultants that were retained
                in
                2005.





·
            Research
                and development expenses decreased $86,646 or 90.7% in 2006 compared
                to
                2005. This decrease was due to higher product development costs in
                2005
                and costs related to services provided by scientific advisors in
                2005.





·
            Consulting
                and other professional services decreased $75,580 or 97.2% in 2006
                compared to 2005. A majority of this decrease is due to the fact
                that in
                2005, we engaged the services of consultants in the areas of strategic
                planning, mergers and acquisitions, investor relations and business
                development.





·
            General
                and administrative expenses decreased $83,325 or 63.1% due primarily
                to a
                reduction in travel and entertainment costs and other ancillary office
                expenses.




**Interest
      Expense**





Net
      interest expense for the three months ended September 30, 2006 was $8,483,380.
      We did not incur interest expense in the comparable period in 2005. Of the
      total, approximately $8,405,582 was non-cash interest expense resulting from
      the
      accounting treatment of our convertible notes. We did not pay $78,139 of
      interest due under our convertible notes. This amount is included in accrued
      expenses at September 30, 2006. We had interest income of $342 during the
      quarter ended September 30, 2006 related to interest earned from an escrow
      account.





**Net
      Change in Value of Common Stock Warrants and Embedded Derivative
      Liability**





We
      are
      required to measure the fair value of the warrants and the embedded conversion
      feature related to our convertible notes on the date of each reporting period.
      The effect of this re-measurement is to adjust the carrying value of the
      liabilities related to the warrants and the embedded conversion feature.
      Accordingly, the Company recorded non-cash other income of $4,582,942 in the
      quarter ended September 30, 2006 related to the increase in the fair market
      value of the warrants and embedded derivative liability.





**Net
      Loss**





Net
      loss
      for the three months ended September 30, 2006 was $4,464,659 or $0.41 per share,
      compared to $1,589,345 or $0.15 for the three months ended September 30,
      2005.


18


***Comparison
      of Nine Months Ended September 30, 2006 and 2005***





**Revenues**





Our
      revenues are derived from the sale of our nutritional supplement product Activar
      AC-11 and our line of proprietary skin care products known as the Activar Skin
      Renewal System. We also sell AC-11 as a bulk ingredient to other companies
      in
      the nutritional supplement and cosmeceutical industries who utilize it in their
      own proprietary products. We sell Activar AC-11 direct to consumers through
      our
      Internet website www.AC-11.com. During the three months ended June 30, 2006,
      we
      commenced selling the Activar Skin Renewal System via a 30-minute television
      infomercial.





Net
      sales
      for the nine months ended September 30, 2006 were $201,387 compared to net
      sales
      of $161,807 for the nine months ended September 30, 2005, an increase of $39,580
      or 24.5%. Our net sales are summarized in the following table:




Nine
                Months Ended
              September
                30,
            
            
            $
            
            
            %2006
            
            
            2005
            
            
            Inc/(Dec)
            
            
            Inc/(Dec)Nutritional
                Supplements:Activar
                AC-11
            
            $
            34,442
            
            $
            36,985
            
            $
            (2,543
            )
            
            (6.9
            %)Age
                Manager *
            
            
            --
            
            
            31,639
            
            
            (31,639
            )
            
            (100.0
            %)Age
                Manager Pro *
            
            
            --
            
            
            22,275
            
            
            (22,275
            )
            
            (100.0
            %)Total
                Nutritional Supplements
            
            
            34,442
            
            
            90,899
            
            
            (56,457
            )
            
            (62.1
            %)Bulk
                AC-11
            
            
            82,000
            
            
            40,337
            
            
            41,663
            
            
            103.3
            %Activar
                Skin Renewal System
            
            
            61,947
            
            
            --
            
            
            61,947
            
            
            NAOther
            
            
            22,998
            
            
            30,571
            
            
            (7,573
            )
            
            (24.8
            %)Total
                Revenue
            
            $
            201,387
            
            $
            161,807
            
            $
            39,580
            
            
            24.5
            %





*
      Products
      were discontinued in December 2005





Supplement
      sales for the nine months ended September 30, 2006 decreased $56,457 or 62.1%
      compared to the nine months ended September 30, 2005. The overall decrease
      was
      due primarily to the discontinuation of our Age Manager and Age Manager Pro
      supplement products. Sales of bulk AC-11 increased $56,457 from $40,337 for
      the
      nine months ended September 30, 2005 to $82,000 for the comparable period in
      2006. Other sales decreased $7,573 from $30,571 for the nine months ended
      September 30, 2005 to $22,998 for the comparable period in 2006 due to lower
      royalties earned.





**Cost
      of Sales**





Cost
      of
      sales includes direct and indirect costs associated with manufacturing bulk
      AC-11 and our nutritional supplement and skin care products that contain AC-11.
      Cost of sales was $268,392 and $98,245 for the nine months ended September
      30,
      2006 and 2005, respectively. We had a gross loss of $67,005 in 2006 due
      primarily to the effect of a write-off of expired inventory of $151,921.
      Excluding the effect of the inventory write-off, our gross profit would have
      been 42.2% for the nine months ended September 30, 2006 compared to a gross
      profit of 39.2% for the comparable period in 2005.





19


**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative (SG&A) expenses include salaries, employee
      benefits, marketing and advertising costs, professional fees related to
      scientific research, legal and accounting fees, rent and other office related
      expenses. Also included in SG&A are various non-cash expenses such as
      depreciation, amortization of intangible assets including patents and other
      intellectual property, and stock-based compensation. The table below highlights
      the major components of our SG&A expenses:





Nine
                Months Ended
              September
                30,
            
            $
            
            %2006
            
            2005
            
            Inc/(Dec)
            
            Inc/(Dec)Employee
                compensation and benefits
            
            $
            505,340
            
            $
            1,048,148
            
            $
            (542,808
            )
            
            (51.8
            %)Marketing,
                advertising and promotion
            
            
            487,815
            
            
            770,242
            
            
            (282,427
            )
            
            (36.7
            %)Research
                and development
            
            
            79,439
            
            
            273,331
            
            
            (193,892
            )
            
            (71.0
            %)Consulting
                and other professional services
            
            
            137,848
            
            
            377,350
            
            
            (239,502
            )
            
            (63.5
            %)Legal
                and accounting
            
            
            462,907
            
            
            571,125
            
            
            (108,218
            )
            
            (18.9
            %)General
                and administrative
            
            
            179,023
            
            
            343,275
            
            
            (164,252
            )
            
            (47.8
            %)Occupancy
            
            
            122,857
            
            
            152,315
            
            
            (29,458
            )
            
            (19.3
            %)Stock
                based compensation
            
            
            211,175
            
            
            53,540
            
            
            157,635
            
            
            294.4
            %Depreciation
                and amortization
            
            
            220,980
            
            
            210,562
            
            
            10,418
            
            
            4.9
            %Total
                SG&A
            
            $
            2,407,384
            
            $
            3,799,888
            
            $
            (1,392,504
            )
            
            (36.6
            %)





In
      total,
      SG&A expenses decreased $1,392,504 or 36.6% from $3,799,888 for the nine
      months ended September 30, 2005 to $2,407,384 for the comparable period in
      2006.
      Expenses decreased in all categories with the exception of an increase in stock
      based compensation. Areas where we achieved significant cost savings are as
      follows:





·
            Employee
                compensation expense decreased $542,808 or 51.8% in 2006 compared
                to 2005.
                This decrease is due to a reduction in the number of full-time employees
                from seven in 2005 to three in
                2006.





·
            Marketing,
                advertising and promotion expenses decreased $282,427 or 36.7% in
                2006
                compared to 2005. During 2006, we incurred increased costs related
                to the
                production of our TV infomercial and the purchase of media time.
                These
                costs increases were offset by decreased costs related to the reduction
                in
                the number of marketing, branding and public relations consultants
                that
                were retained in 2005.





·
            Research
                and development expenses decreased $193,892 or 71.0% in 2006 compared
                to
                2005. This decrease was due to higher product development costs in
                2005
                and costs related to services provided by scientific advisors in
                2005.





·
            Consulting
                and other professional services decreased $239,502 or 63.5% in 2006
                compared to 2005. A majority of this decrease is due to the fact
                that in
                2005, we engaged the services of consultants in the areas of strategic
                planning, mergers and acquisitions, investor relations and business
                development.




·
            Legal
                and accounting expenses decreased $108,218 or 18.9% in 2006 compared
                to
                2005. In 2005, we incurred legal fees related to a proposed acquisition
                that was never consummated and legal fees related to litigation in
                which
                we were the plaintiff.





·
            General
                and administrative expenses decreased $164,252 or 47.8% due primarily
                to a
                reduction in travel and entertainment costs and other ancillary office
                expenses.





·
            Stock
                based compensation expense increased $157,635 or 294.4% in 2006 compared
                to 2005. In 2006, we began expensing the fair market value of stock
                options issued to employees pursuant to FASB
                123R.





**Interest
      Expense**





Interest
      expense for the nine months ended September 30, 2006 was $9,527,320. We did
      not
      incur interest expense in the comparable period in 2005. Of the total,
      approximately $9,307,520 was non-cash interest expense resulting from the
      accounting treatment of our convertible notes. From April 1, 2006 through
      September 30, 2006, we have not paid $133,197 of interest due under our
      convertible notes and accordingly this amount is included in accrued expenses
      at
      September 30, 2006.





20


**Net
      Change in Value of Common Stock Warrants and Embedded Derivative
      Liability**





We
      are
      required to measure the fair value of the warrants and the embedded conversion
      feature related to our convertible notes on the date of each reporting period.
      The effect of this re-measurement is to adjust the carrying value of the
      liabilities related to the warrants and the embedded conversion feature.
      Accordingly, the Company recorded non-cash other income of $4,667,916 for the
      nine months ended September 30, 2006 related to the decrease in the fair value
      of the warrants and embedded derivative liability.





**Net
      Loss**





Net
      loss
      for the nine months ended September 30, 2006 was $7,369,938 or $0.69 per share,
      compared to $4,109,097 or $0.41 for the nine months ended September 30,
      2005.





**LIQUIDITY
      AND CAPITAL RESOURCES**





Based
      upon our recurring losses from operations and stockholders’ deficit as of
      September 30, 2006, our current rate of cash consumption and the uncertainty
      of
      liquidity related initiatives described below, there is substantial doubt as
      to
      our ability to continue as a going concern. Future losses are likely to continue
      unless we successfully implement our business plan. At September 30, 2006,
      we
      had cash of approximately $422,000 and net working capital of approximately
      $2,143,000. Excluding approximately $2,138,000 of inventory, we have net working
      capital of approximately $4,700. As of that same date, we had approximately
      $500,000 in current liabilities.





On
      September 15, 2006, we entered into a Securities Purchase Agreement with four
      accredited investors ("Note Holders") for the sale of $515,000 in Callable
      Secured Convertible Notes (the "Notes") and warrants to purchase 100,000,000
      shares of our common stock. The Notes bear interest at 8.0% and mature on
      September 15, 2009. We received net proceeds of $489,800 after the payment
      of
      $25,200 in transaction costs. We are not required to make any principal payments
      during the term of the Notes. The Notes are convertible into shares of our
      common stock at the Note Holders' option, at the lower of (i) $0.10 per share
      (“Fixed Conversion Price”) or (ii) 60% of the average of the three lowest
      intra-day trading prices for our common stock as quoted on the Over-the-Counter
      Bulletin Board for the 20 trading days preceding the conversion date. The full
      principal amount of the Notes is due upon the occurrence of an event of default.
      Interest on the Notes is paid quarterly in arrears.





The
      warrants are exercisable for a period of seven years from the date of issuance
      and have an exercise price of $0.10 per share. In addition, the conversion
      price
      of the Notes and the exercise price of the warrants will be adjusted in the
      event that we issue common stock at a price below the fixed conversion price
      of
      $0.10, with the exception of any shares of common stock issued in connection
      with the Notes. We have the right to prepay the entire outstanding balance
      of
      the Convertible Notes under certain circumstances at premiums ranging from
      35%
      to 50%. We also have the right to prepay a portion of the Notes (“Partial Call
      Option”) each month in an amount equal to 104% of the then outstanding principal
      balance divided by 36, plus one month’s interest. This partial call option has
      the effect of preventing the Note Holders from converting their Notes into
      shares of the Company’s common stock in the succeeding month.





As
      of
      September 18, 2006, we have an aggregate of $4,347,845 of Notes outstanding,
      which may hinder our ability to raise additional debt or equity capital. In
      addition, we have granted a security interest in substantially all of our assets
      to the holders of the Notes. We anticipate that the full amount of the Notes
      will be converted into shares of our common stock, however, if we were required
      to repay all or a portion of the outstanding balance of the Notes in cash due
      to
      the occurrence of an event of default, we would be required to raise additional
      funds in the event that we do not have sufficient cash available. There can
      be
      no assurance that any additional financing will be available when needed, on
      commercially reasonable terms or at all. If we were to seek asset based
      financing, we would need the approval of the existing Note Holders which we
      may
      not receive. Any additional equity financing may involve substantial dilution
      to
      our then existing shareholders. Consequently, if we were unable to repay the
      Notes, the Note Holders could commence legal action against us and foreclose
      on
      all of our assets to recover the amounts due. Any such action would require
      us
      to curtail or cease operations.





The
      major
      component of our operating plan for 2006 was the introduction of a new line
      of
      proprietary skin care products known as the “Activar Skin Renewal System.” This
      product line consists of two skin creams (day and night) and a topical eye
      cream. In
      March
      2006, we began test marketing these skin care products direct to the consumer
      through a celebrity endorsed, 30-minute television infomercial. This infomercial
      cost approximately $400,000 to produce. Based
      on
      the initial test marketing results, we determined that the infomercial needed
      to
      be modified and subsequently re-tested. We spent approximately $50,000 to
      reproduce certain portions of the infomercial and we began testing the modified
      program in April. We
      purchased media time on various over -the-air and cable TV channels in a variety
      of local, regional and national markets. After evaluating the results of the
      revised infomercial, we determined that the level of product sales which were
      achieved, did not warrant the expenditure of additional funds to purchase media
      time. As a result, we discontinued the airing of the infomercial in June
      2006.




21





We
      plan
      to seek other channels of wholesale distribution for our nutritional supplement,
      bulk AC-11 and skin care products such as multi-level marketing organizations
      and other distribution networks both domestically and in certain international
      markets. Future sales generated from our products will depend on numerous
      factors including the degree to which consumers' perceive that these products
      offer superior benefits compared to other more established brands. If consumers
      do not believe that our products offer benefits commensurate with the purchase
      price, our sales may suffer.


We
        maintain high levels of inventory relative to  our
        historical product sales. We intend to aggressively market our existing
        inventory of skin care products and bulk AC-11 in order to convert this
        inventory into cash. The shelf life of our bulk AC-11 is approximately three
        years from the date of processing. The majority of our bulk AC-11 inventory
        expires in 2007. In October 2006, we began testing several lots of our existing
        inventory of bulk AC-11 using established and accepted protocols to determine
        the stability and microbiology profile. Based on the outcome of this testing,
        we
        intend to either extend the shelf life of this existing inventory by 18 months
        or write it off at its stated expiration date. We are unable to predict the
        likelihood at this time of a write-down related to our bulk inventory.
        Additionally, if any products are discontinued, we will be forced to write
        down
        our inventory as well as the intellectual property related to those
        products.




Given
      our
      limited cash on hand, we have taken steps to decrease the amount of cash
      required to fund our existing operations. We estimate that we will require
      approximately $1,200,000 over the next twelve months or $100,000 per month
      to
      fund our existing operations. These costs include (i) compensation and
      healthcare benefits for our two full-time employees, (ii) compensation for
      two
      consultants who we deem critical to our business, one in sales/marketing and
      one
      in accounting/finance, (iii) general office expenses including rent and
      utilities, (iv) insurance, (v) outside legal and accounting services and, (vi)
      order fulfillment operations.





We
      currently do not have the required cash on hand and therefore, we will be
      relying on product sales to augment our existing cash. In addition, this
      estimated “burn rate” does not include costs related to (i) marketing and
      advertising our products, (ii) cash needed to satisfy existing accounts payable,
      (iii) research and new product development and, (iv) interest payable under
      our
      Notes.





22


**Item
      3.**   **Controls
      and Procedures**





*a)*
            *Evaluation
                of Disclosure Controls and Procedures:*As
                of September 30, 2006, our management carried out an evaluation,
                under the
                supervision of our Chief Executive Officer and Chief Financial Officer
                of
                the effectiveness of the design and operation of our system of disclosure
                controls and procedures pursuant to the Securities and Exchange Act,
                Rule
                13a-15(e) and 15d-15(e) under the Exchange Act).  Based on that
                evaluation, our chief executive officer and chief financial officer
                concluded that our disclosure controls and procedures are effective
                to
                provide reasonable assurance that information we are required to
                disclose
                in reports that we file or submit under the Exchange Act is recorded,
                processed, summarized and reported within the time periods specified
                in
                Securities and Exchange Commission rules and forms, and that such
                information is accumulated and communicated to our management, including
                our chief executive officer and chief financial officer, as appropriate,
                to allow timely decisions regarding required
                disclosure.





*b)*
            *Changes
                in internal controls:*There were no changes in internal controls over financial reporting
                that
                occurred during the period covered by this report that have materially
                affected, or are reasonably likely to materially effect, our internal
                control over financial reporting.








**PART
      II**  **OTHER
      INFORMATION**








**Item
      1.**   **Legal
      Proceedings**





From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. We are currently not aware
      of any such legal proceedings or claims that we believe will have, individually
      or in the aggregate, a material adverse affect on our business, financial
      condition or operating results.





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





None.





**Item
      3.**   **Defaults
      Upon Senior Securities**





None.





**Item
      4.**   **Submission
      of Matters to a Vote of Security Holders**





None.





**Item
      5.**   **Other
      Information**





None.





**Item
      6.**   **Exhibits**





Exhibit
                No.
            Title31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)32.2
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)





23


**SIGNATURES**








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





**Dated:** November
      14, 2006





OPTIGENEX
      INC.


Registrant








By:
            /s/
                Daniel
                ZwirenDaniel
                ZwirenPresident,
                Chief Executive Officer and Chief Financial
                Officer







24