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: June 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 September
15, 2006.

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


<PAGE>

                                 OPTIGENEX INC.

                                Table of Contents

<TABLE>
<CAPTION>

<S>                                                                                                               <C>
PART I      FINANCIAL INFORMATION

Item 1.     Condensed Financial Statements (Unaudited)

                  Condensed Balance Sheet as of June 30, 2006                                                      1

                  Condensed Statements of Operations for the three and six months
                  ended June 30, 2006 and 2005                                                                     2

                  Condensed Statement of Stockholder's Equity (Deficit) for the six months
                  ended June 30, 2006                                                                              3

                  Condensed Statements of Cash Flows for the six months ended June 30, 2006
                  and 2005                                                                                         4

                  Notes to Condensed Financial Statements                                                          5

Item 2.     Management's Discussion and Analysis of Financial Condition                                           13

Item 3.     Controls and Procedures                                                                               22

PART II     OTHER INFORMATION

Item 1.     Legal Proceedings                                                                                     22

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds                                           22

Item 3.     Defaults Upon Senior Securities                                                                       22

Item 4.     Submission of Matters to a Vote of Security Holders                                                   22

Item 5.     Other Information                                                                                     22

Item 6.     Exhibits                                                                                              22

SIGNATURES                                                                                                        23
</TABLE>


<PAGE>

                          PART 1. FINANCIAL INFORMATION


Item 1. Condensed Financial Statements - Unaudited


                                 OPTIGENEX INC.

                             Condensed Balance Sheet

<TABLE>
<CAPTION>
                                                                              June 30,
                                                                                2006
                                                                           ------------
                                                                            (Unaudited)
<S>                                                                        <C>
ASSETS

Current assets:
   Cash                                                                    $    306,059
   Accounts receivable, net                                                      26,735
   Inventories                                                                2,305,636
   Prepaid expenses and other current assets                                     64,126
                                                                           ------------

      Total current assets                                                    2,702,556

Property and equipment, net                                                      91,441
Intangible assets, net                                                        2,489,945
Other assets                                                                    128,969
                                                                           ------------

Total Assets                                                               $  5,412,911
                                                                           ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
   Accounts payable                                                        $    324,853
   Accrued expenses                                                             151,064
   Deferred income                                                               13,525
                                                                           ------------

      Total current liabilities                                                 489,442

Callable secured convertible notes, net of debt discount of $3,179,955,
  including embedded derivative liability                                     5,319,557
Common stock warrants                                                             8,360
                                                                           ------------

      Total liabilities                                                       5,817,359

Stockholders' deficiency:
   Preferred stock - $0.001 par value; 5,000,000 shares authorized,
      none issued
   Common stock - $0.001 par value; 100,000,000 shares authorized,
      10,850,234 shares issued and outstanding                                   10,850
   Additional paid-in capital                                                18,057,622
   Accumulated deficit                                                      (18,472,920)
                                                                           ------------
      Total stockholders' deficiency                                           (404,448)
                                                                           ------------

Total Liabilities and Stockholders' Deficiency                             $  5,412,911
                                                                           ============
</TABLE>

                   See notes to condensed financial statements


                                        1
<PAGE>

                                 OPTIGENEX INC.

                 Condensed Statements of Operations - Unaudited

<TABLE>
<CAPTION>
                                                        Three Months Ended               Six Months Ended
                                                             June 30,                         June 30,
                                                 -----------------------------     -----------------------------
                                                     2006             2005             2006             2005
                                                 ------------     ------------     ------------     ------------
<S>                                              <C>              <C>              <C>              <C>
Net sales                                        $     85,178     $      4,043     $    123,784     $    121,339

Cost of sales                                          61,230           15,723           89,255           69,154
                                                 -----------------------------     -----------------------------

Gross profit                                           23,948          (11,680)          34,529           52,185

Selling, general and administrative                   692,542        1,412,577        1,941,992        2,554,793
                                                 -----------------------------     -----------------------------

Loss from operations                                 (668,094)      (1,424,257)      (1,907,463)      (2,502,608)

Other (income) expense:
  Interest expense                                    383,868               --        1,043,940               --
  Equity in loss from joint ventures                   24,556            3,077           38,850           17,144
  Net change in fair value of common stock
      warrants and derivative liability               254,170               --          (84,974)              --
                                                 -----------------------------     -----------------------------


Net loss                                         $ (1,330,688)    $ (1,427,334)    $ (2,905,279)    $ (2,519,752)
                                                 =============================     =============================

Net loss per common share - basic and diluted    $      (0.12)    $      (0.14)    $      (0.27)    $      (0.26)
                                                 =============================     =============================

Weighted average number of common
   shares outstanding - basic and diluted          10,798,586       10,071,543       10,690,013        9,875,717
                                                 =============================     =============================
</TABLE>

                   See notes to condensed financial statements


                                        2
<PAGE>

                                 OPTIGENEX INC.

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

<TABLE>
<CAPTION>

                                                            Common Stock            Additional
                                                   ----------------------------       Paid-in      Accumulated
                                                       Shares         Amount          Capital         Deficit           Total
                                                   ------------    ------------    ------------    ------------     ------------
<S>                                                  <C>           <C>             <C>             <C>              <C>
Balance - December 31, 2005                          10,450,234    $     10,450    $ 17,797,247    $(15,567,641)    $  2,240,056

Conversion of convertible notes to common stock         300,000             300          51,300                           51,600

Issuance of common stock for services                   100,000             100          12,900                           13,000

Issuance of stock options to employees and
consultants                                                                             196,175                          196,175


Net loss                                                     --              --              --      (2,905,279)      (2,905,279)
                                                   ------------    ------------    ------------    ------------     ------------

Balance - June 30, 2006                              10,850,234    $     10,850    $ 18,057,622    $(18,472,920)    $   (404,448)
                                                   ============    ============    ============    ============     ============
</TABLE>

                   See notes to condensed financial statements


                                        3
<PAGE>

                                 OPTIGENEX INC.

                 Condensed Statements of Cash Flows - Unaudited

<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                                       June 30,
                                                             ---------------------------
                                                                 2006            2005
                                                             -----------     -----------
<S>                                                          <C>             <C>
Cash flows from operating activities:
   Net loss                                                  $(2,905,279)    $(2,519,752)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
        Depreciation                                              25,393          23,858
        Amortization of intangibles                              103,252         114,272
        Amortization of debt discount                            580,844              --
        Amortization of deferred financing costs                  19,723              --
        Stock-based compensation                                 209,175          39,320
        Non-cash financing costs                                 321,094              --
        Equity in loss from joint venture                         38,850          17,144
        Income from change in value of warrants
                 and embedded derivative liability               (84,974)             --
   Changes in operating assets and liabilities:
      Decrease in accounts receivable                             67,510          23,986
      Increase in inventories                                   (301,858)        (45,131)
      (Increase) decrease in prepaid expenses and other
                 current assets                                  106,530         (33,107)
      Decrease in accounts payable                               (71,147)       (283,037)
      Increase in accrued expenses                                31,344           3,732
      Increase (decrease) in deferred income                      (8,511)          5,329
                                                             -----------     -----------
           Net cash used in operating activities              (1,868,054)     (2,653,386)
                                                             -----------     -----------

Cash flows from investing activities:
   Patent costs                                                  (14,621)        (19,117)
   Purchases of property and equipment                                --          (5,832)
   Investment in joint venture                                    (5,000)             --
                                                             -----------     -----------

           Net cash used in investing activities                 (19,621)        (24,949)
                                                             -----------     -----------

Cash flows from financing activities:
   Proceeds from the sale of convertible notes                 1,350,000              --
   Principal payments under convertible notes                   (115,555)             --
   Proceeds from the issuance of common stock                  1,861,721
   Deferred financing costs                                      (10,000)             --
                                                             -----------     -----------
           Net cash provided by financing activities           1,224,445       1,861,721
                                                             -----------     -----------

Net increase (decrease) in cash                                 (663,230)       (816,614)
Cash - beginning of period                                       969,289       1,196,568
                                                             -----------     -----------
Cash - end of period                                         $   306,059     $   379,954
                                                             ===========     ===========

Supplemental schedule of cash flow information:
  Cash paid for interest                                     $   126,983

Supplemental schedule of non-cash investing and financing
activities:

  Debt discount in connection with recording
    value of embedded derivative liability                   $ 1,350,000
  Allocation of convertible note proceeds to warrants        $    21,094
  Common stock issued in connection with conversion of
     convertible notes                                       $    51,600
</TABLE>


                   See notes to condensed financial statements


                                        4
<PAGE>

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 six month periods ended
June 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 six-month periods ended June 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 June 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
<PAGE>

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 six months ended June 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 six
months ended June 30, 2005 as if we had applied the fair value method to our
stock-based compensation:

                                               Three Months    Six Months
                                                  Ended           Ended
                                              June 30, 2005   June 30, 2005
                                               ---------------------------
Reported net loss                              $(1,427,334)    $(2,519,752)

Deduct: Total stock-based employee
   compensation expense determined under
   fair value based method for all awards,
   net of related tax effects                      (99,793)       (130,586)
                                               ---------------------------

Proforma net loss                              $(1,527,127)    $(2,650,338)
                                               ===========================

Reported  net  loss per  share - basic  and
diluted                                        $     (0.14)    $     (0.26)
                                               ===========================

Proforma  net  loss per  share - basic  and
diluted                                        $     (0.15)    $     (0.27)
                                               ===========================

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 June 30,                                 2006          2005
-----------                              ----------    ----------
Stock options                             4,101,605     3,463,395
Common stock warrants                       891,918       209,118
Common stock issuable upon
  conversion of convertible notes (1)    63,880,750
                                         ----------    ----------
Total                                    68,874,273     3,672,513

(1) At June 30, 2006, the Company had $3,832,845 of Callable Secured Convertible
Notes outstanding. 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 June 30, 2006, the Notes would have been
convertible into shares of the Company's common stock at a price of $0.06. 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
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

Note 3. Inventories

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

Raw materials     $1,968,332
Finished goods       337,304
                  ----------
                  $2,305,636
                  ==========


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"). The two principals of Pierre Michel Salon contributed in
the aggregate $25,000 in cash for their 50% ownership interest. The Company
sells its ingredient AC-11 to PMO which in turn utilizes it in the formulation
and manufacturing of six products. In August 2005, PMO began selling these
products exclusively to the Pierre Michel Salon in New York City. The joint
venture partners share equally in the net income or net loss generated by PMO
however, PMO does not participate in any of the profits generated from the
retail sales of the products at the Pierre Michel Salon.

During 2005, the Company sold approximately $26,000 of products to PMO. The
Company records as deferred income, the profit from any sales it makes to PMO
until such time that the products are resold by PMO to an independent third
party. At June 30, 2006, deferred income related to sales to PMO was $7,837. The
Company accounts for its investment in PMO under the equity method. For the six
months ended June 30, 2006, PMO had a net loss of $20,682 and accordingly, the
Company's 50% share of PMO's net loss was $10,341.

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. 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 June 30, 2006, deferred income related to
sales to Prometheon was $5,688. The Company accounts for its investment in
Prometheon under the equity method. For the six months ended June 30, 2006,
Prometheon had a net loss of $57,018 and accordingly, the Company's 50% share of
Prometheon's net loss was $28,509.

In June 2006, the Company advanced an additional $5,000 in cash to Prometheon
for working capital purposes.


                                        7
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

Note 6. Callable Secured Convertible Notes

On August 31, 2005, the Company entered into a Securities Purchase Agreement
with four accredited investors ("Note Holders") for the sale of up to (i)
$4,000,000 in Callable Secured Convertible Notes (the "Notes") and (ii) warrants
to purchase up to 625,000 shares of its common stock. The Notes bear interest at
8% and have a maturity date of three years from the date of 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 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 registration
rights and a security interest in substantially all of the Company's assets. The
Company has the right to prepay the entire outstanding balance of the
Convertible Notes under certain circumstances at a premium 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. 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.

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 term of the three year
term of the Notes. The prepaid interest represents four months of interest on
the Notes and will be amortized to interest expense accordingly. The Company is
then required to pay interest on a quarterly basis to the Note Holders.

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 to the Note Holders 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 term of the three year term of the Notes. The prepaid interest
represents four months of interest on the Notes and will be amortized to
interest expense accordingly. The Company is then required to pay interest on a
quarterly basis to the Note Holders.

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 to the Note Holders 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 term of
the three year term of the Notes. The prepaid interest represents four months of
interest on the Notes and will be amortized to interest expense accordingly. The
Company is then required to pay interest on a quarterly basis to the Note
Holders.

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 was not declared effective by December
29, 2005. 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.


                                        8
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

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 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 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 June 30, 2006 was $3,832,845.

The Company is required to measure the fair value of the warrants and the
embedded conversion feature 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 and the embedded conversion feature. Accordingly, the
Company measured the fair value of the warrants at June 30, 2006 using the
Black-Scholes valuation model with the following assumptions: market price of
common stock on the measurement date of $0.10, exercise price of warrants $4.50,
risk-free interest rate of 5.2%, expected volatility of 100%, and an expected
life of 4.3 years. This resulted in a fair market value for the warrants of
$8,360 at June 30, 2006. The decrease in the fair market value of the warrants
resulted in non-cash other income of $12,497 for the three months ended June 30,
2006.

The Company measured the fair value of the embedded conversion feature at June
30, 2006 using the Black-Scholes valuation model with the following assumptions:
market price of common stock on the measurement date of $0.10, exercise price of
$0.06 which represents a 40% discount to the market price on June 30, 2006;
risk-free interest rate of 5.2%, expected volatility of 100% and an expected
life of 2.25 years. This resulted in a fair market value for the embedded
conversion feature of $4,666,667. The increase in the fair market value of the
embedded conversion feature of resulted in non-cash expense of $266,667.
Accordingly, the Company recorded non-cash other expense of $254,170 in the
quarter ended June 30, 2006 related to the net change in the fair market value
of the common stock warrants and embedded derivative liability.


                                        9
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

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

Callable Secured Convertible Notes; 8% per annum;
  due August 31, 2008                                         $ 1,132,845

Callable Secured Convertible Notes; 8% per annum;
  due October 19, 2008                                        $ 1,350,000

Callable Secured Convertible Notes; 8% per annum;
  due February 17, 2009                                       $ 1,350,000

Debt Discount, net of accumulated amortization of $820,045     (3,179,955)

Embedded Derivative Liability                                   4,666,667
                                                              -----------

Total                                                         $ 5,319,557
                                                              ===========

The Company did not pay approximately $55,000 of interest related to the
convertible notes which was due on June 30, 2006. This amount is included in
accrued expenses at June 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 and six months
ended June 30, 2006 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 $182,675 for the six
months ended June 30, 2006.

                                Three months
                                   ended
                                  June 30,
                              --------------
                              2006      2005
                              ----      ----
Expected life (in years)        5       2-5
Risk-free interest rate       5.2%      4.0%
Volatility                    100%     0-50%
Dividend yield                None      None

The following table summarizes the stock option activity for the six months
ended June 30, 2006:

                                                       Weighted
                                                        Average
                                           Number of   Exercise    Aggregate
                                            Options      Price  Intrinsic Value
                                          ----------     -----  ---------------
Outstanding at December 31, 2005           3,301,605     $2.73
   Granted                                 1,600,000     $0.54
   Exercised                                      --                      --
   Forfeited/Cancelled                      (800,000)    $1.42
                                          ----------     -----    ----------
Outstanding at June 30, 2006               4,101,605     $2.12    $    2,352
Exercisable at June 30, 2006               3,551,605     $2.31    $    2,352
Vested  and  expected  to vest at June
30, 2006                                   4,101,605     $2.12    $    2,352


                                       10
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

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

                                             Weighted
                                              Average
                                Number of     Option
                                 Options       Price
                                --------     --------
Non-vested at December 31,       225,000     $   2.71
2005

   Granted                       750,000     $   1.02

   Vested                       (175,000)    $   3.00

   Forfeited/Cancelled          (250,000)    $   1.40
                                --------     --------
Outstanding at June 30, 2006     550,000     $   0.94
                                ========     ========

As of June 30, 2006, there was $33,393 of total unrecognized compensation cost
related to non-vested stock options which is expected to be recognized over a
remaining weighted average life of 1.5 years.

The weighted average grant-date fair value of options granted during the three
months ended June 30, 2006 and 2005 was $0.06 and $0.92, respectively. The
weighted average grant-date fair value of options granted during the six months
ended June 30, 2006 and 2005 was $0.08 and $0.83, respectively.

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

<TABLE>
<CAPTION>
                            Options Outstanding                    Options Exercisable
                   -----------------------------------------    ---------------------------
                                  Weighted
                                   average         Weighted
                                  remaining        exercise                      Weighted
                      Number     contractual       average         Number     average exercise
Exercise prices    outstanding   life (years)       price       exercisable        price
---------------    -----------   -----------    ------------    ----------    -------------
<S>      <C>             <C>            <C>           <C>            <C>             <C>
         $0.001          9,210          2.41          $0.001         9,210           $0.001
          $0.01         16,000          3.25           $0.01        16,000            $0.01
          $0.13        500,000          4.67           $0.13       500,000            $0.13
          $0.30        100,000          2.90           $0.30        50,000            $0.30
          $1.00        777,000          1.50           $1.00       277,000            $1.00
          $2.00        259,395          1.58           $2.00       259,395            $2.00
          $3.00      2,440,000          3.17           $3.00     2,440,000            $3.00
---------------     ----------   -----------    ------------    ----------    -------------
 $0.001 - $3.00      4,101,605          2.93           $2.12     3,551,605            $2.31
===============     ==========   ===========    ============    ==========    =============
</TABLE>

Note 8. Subsequent Event

On September 15, 2006, the Company 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 its common stock. The Notes bear interest at 8.0% and have
a maturity date of three years from the date of 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) $0.10 per share ("Fixed Conversion Price") 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. 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 the Company issues 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. 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 demand registration rights
with respect to shares of common stock underlying the Notes and a security
interest in substantially all of the Company's assets. The Company has the right
to prepay the entire outstanding balance of the Convertible Notes under certain
circumstances at a premiums 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. 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 accounting treatment for the Notes will be
similar to the accounting treatment for the Company's existing Notes as more
fully described in Note 6.


                                       11
<PAGE>

OPTIGENEX INC.
Notes to Condensed Financial Statements - Unaudited

Note 9. 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
<PAGE>

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.

Recent Developments

Sale of Callable Secured Convertible Notes

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 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. The conversion price of the Notes and the
exercise price of the warrants may also be adjusted in certain circumstances
such as if we pay a stock dividend, subdivide or combine outstanding shares of
our common stock into a greater or lesser number of shares, or take such other
actions as would otherwise result in the 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 our 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, we have granted
the Note Holders demand registration rights and a security interest in all of
our assets. 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.

Management Changes

As previously reported on Form 8-K filed with the Securities and Exchange
Commission on August 24, 2006, Anthony Bonelli voluntarily resigned his position
as President, Chief Executive Officer and Director of our Company on August 23,
2006.

On September 14, 2006, our Board of Directors appointed Dan Zwiren, our current
Chief Financial Officer, to the additional positions of President and Chief
Executive Officer.


                                       13
<PAGE>

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.

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, we 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. We contributed $25,000 in cash for a 50% ownership interest in a
newly formed corporation named PMO Products Inc., a New York corporation
("PMO"). The two principals of Pierre Michel Salon contributed in the aggregate
$25,000 in cash for their 50% ownership interest. We sell bulk AC-11 to PMO
which in turn utilizes it in the formulation and manufacturing of six products.
In August 2005, PMO began selling these products exclusively to the Pierre
Michel Salon in New York City. The joint venture partners share equally in the
net income or net loss generated by PMO however, PMO does not participate in any
of the profits generated from the retail sales of the products at the Pierre
Michel Salon.

During 2005, we sold approximately $26,000 of products to PMO. We record as
deferred income, the profit from any sales we make to PMO until such time that
the products are resold by PMO to an independent third party. At June 30, 2006,
deferred income related to sales to PMO was $7,837. We account for our
investment in PMO under the equity method. For the six months ended June 30,
2006, PMO had a net loss of $20,682 and accordingly, our 50% share of PMO's net
loss was $10,341.


                                       14
<PAGE>

Prometheon Labs LLC

In September 2005, we 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 our ingredient AC-11. Our joint venture partner Prometheon
Holding LLC, contributed $40,000 in cash for its 50% ownership interest in
Prometheon Labs. The joint venture partners share equally in the net income or
net loss generated by Prometheon.

In 2005, we manufactured and sold a nutritional supplement known as Avatar 8 to
Prometheon. Total sales to Prometheon in 2005 were approximately $27,000. We
record as deferred income, the profit from any sales we make to Prometheon until
such time that the products are resold by Prometheon to an independent third
party. At June 30, 2006, deferred income related to sales to Prometheon was
$5,688. We account for our investment in Prometheon under the equity method. For
the six months ended June 30, 2006, Prometheon had a net loss of $57,018 and
accordingly, the Company's 50% share of Prometheon's net loss was $28,509.

In June 2006, we advanced an additional $5,000 in cash to Prometheon for working
capital purposes.

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 June 30, 2006, our allowance for doubtful accounts was
approximately $37,000.

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.

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.

We sell bulk AC-11 to PMO Products Inc. and Prometheon Labs, each of which we
own a 50% equity interest in. These companies utilize the AC-11 as an ingredient
in the products that they manufacture and sell. At the time of sale, 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 June 30, 2006, we have recorded deferred income
of $13,525.


                                       15
<PAGE>

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 and February 17, 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.

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
<PAGE>

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 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 quarter ended June 30, 2006 were $85,178 compared to net sales
of $4,043 for the quarter ended June 30, 2005, an increase of $81,135. Our net
sales are summarized in the following table:

<TABLE>
<CAPTION>
                                         Three Months Ended
                                             June 30,              $           %
                                      --------------------
                                         2006       2005       Inc/(Dec)   Inc/(Dec)
                                      --------    --------     --------     ------
Nutritional Supplements:
<S>                                   <C>         <C>          <C>             <C>
   Activar AC-11                      $ 12,412    $ 11,642     $    770        6.6%

   Age Manager *                            --       9,391       (9,391)    (100.0%)

   Age Manager Pro *                        --       7,418       (7,418)    (100.0%)
                                      --------    --------     --------     ------
Total Nutritional Supplements           12,412      28,451      (16,039)     (56.4%)

   Bulk AC-11                           22,300     (32,779)      55,079         NA

   Activar Skin Renewal System          43,452          --       43,452         NA

   Other                                 7,014       8,371       (1,357)     (16.2%)
                                      --------    --------     --------     ------
Total Revenue                         $ 85,178    $  4,043     $ 81,135     2006.8%
                                      ========    ========     ========     ======
</TABLE>

* Products were discontinued in December 2005

Net supplement sales decreased $16,039 or approximately 56% in 2006 compared to
2005 due to the discontinuation of Age Manager and Age Manager Pro.

Sales of bulk AC-11 increased $55,079 in 2006 compared to 2005. This increase
was due primarily to the effect of a return of a large sale made to one customer
in 2005. In the second quarter of 2005, we accepted the return of a $47,000
order that was recorded as a sale in the first quarter of 2005. This return was
accepted outside of our standard 30 day period. Since our inception, this is the
only return that we have accepted for bulk AC-11. We accepted this return to
accommodate a new customer that intended to utilize AC-11 as an ingredient in a
number of products that it is developing. The customer accepted delivery of the
product and pursuant to the terms and conditions contained in our bill of sale,
a bona-fide sale was deemed to have occurred. Subsequent to this sale and after
the 30-day return period, the customer notified us that it had conducted its own
internal testing of the chemical composition of the AC-11 and that certain
chemical byproducts appeared to exceed levels acceptable to the customer. Upon
our approval of the return, the customer shipped the AC-11 to us and requested
that we prepare and send them a modified sample of AC-11 that would conform to
their acceptable levels.

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 $61,230 and $15,723 for the three months ended June 30,
2006 and 2005, respectively. Gross profit in 2006 was $23,948 or 28.1% of sales
compared to a gross loss of $11,680 in 2005. The gross loss was due primarily to
the effect of the product return discussed above.


                                       17
<PAGE>

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:

<TABLE>
<CAPTION>
                                            Three Months Ended
                                                 June 30,                $            %
                                            2006          2005       Inc/(Dec)    Inc/(Dec)
                                        ----------    ----------    ----------    ---------
<S>                                     <C>           <C>           <C>            <C>
Employee compensation and benefits      $  170,895    $  406,348    $ (235,453)    (57.9%)

Marketing, advertising and promotion       115,382       226,906      (111,524)    (49.1%)

Research and development                    19,550        70,591       (51,041)    (72.3%)

Consulting  and  other  professional
services                                    27,730       149,740      (122,010)    (81.5%)

Legal and accounting                       164,727       327,567      (162,840)    (49.7%)

General and administrative                  64,252       102,473       (38,221)    (37.3%)

Occupancy                                   34,497        42,291        (7,794)    (18.4%)

Stock based compensation                    20,625        18,860         1,765       9.3%

Depreciation and amortization               74,384        67,801         6,583       9.7%
                                        ----------    ----------    ----------     -----

       Total SG&A                       $  692,042    $1,412,577    $ (720,535)    (51.0%)
                                        ==========    ==========    ==========     =====
</TABLE>

In total, SG&A expenses decreased $720,535 or 51% from $1,412,577 in 2005 to
$692,042 in 2006. Specific areas where costs decreased in 2006 were (i) employee
compensation, (ii) marketing, advertising and promotion, (iii) research and
development, (iv) consulting and other professional services and; (v) legal and
accounting.

Employee compensation expense decreased $235,453 or approximately 58% 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 $111,524 or
approximately 49% 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 $51,041 or approximately 72% 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 $122,010 or approximately
82% 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 $162,840 or approximately 50% 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.

Interest Expense

Interest expense in 2006 was $383,868. We did not incur interest expense in
2005. Of the total, approximately $307,000 was non-cash interest expense
resulting from the accounting treatment of our convertible notes. We did not pay
approximately $55,000 of interest related to our convertible notes which was due
on June 30, 2006. This amount is included in accrued expenses at June 30, 2006.

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 expense of $254,170 in
the quarter ended June 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 June 30, 2006 was $1,330,688 or $0.12 per
share, compared to $1,427,334 or $0.14 for the three months ended June 30, 2005.


                                       18
<PAGE>

Comparison of Six Months Ended June 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 six months ended June 30, 2006 were $123,784 compared to net
sales of $121,339 for the six months ended June 30, 2005, an increase of $2,445
or 2%. Our net sales are summarized in the following table:

                                     Six Months Ended
                                         June 30,             $           %
                                       ---------------
                                     2006       2005      Inc/(Dec)   Inc/(Dec)
                                  --------    --------    --------     -----
Nutritional Supplements:
   Activar AC-11                  $ 25,043    $ 25,215    $   (172)     (0.7%)

   Age Manager *                        --      27,672     (27,672)    (100.0%)

   Age Manager Pro *                    --      18,846     (18,846)    (100.0%)
                                  --------    --------    --------     -----
Total Nutritional Supplements       25,043      71,733     (46,690)    (65.1%)

   Bulk AC-11                       42,825      36,839       5,986      16.2%

   Activar Skin Renewal System      43,452          --      43,452        NA

   Other                            12,464      12,767        (303)     (2.4%)
                                  --------    --------    --------     -----

Total Revenue                     $123,784    $121,339    $  2,445       2.0%
                                  ========    ========    ========     =====

* Products were discontinued in December 2005

Net supplement sales decreased $46,690 or approximately 65% in 2006 compared to
2005 due to the discontinuation of Age Manager and Age Manager Pro. Sales of
bulk AC-11 increased $5,986 or approximately 16% in 2006 compared to 2005.

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 $89,255 and $69,154 for the six months ended June 30,
2006 and 2005, respectively. Gross profit in 2006 was $34,529 or 27.9% of sales
compared to a gross profit of $52,185 or 43.0% in 2005. The decrease in gross
profit as a percentage of sales in 2006 was due primarily to the discontinuation
of two nutritional supplement products Age Manager and Age Manager Pro. These
products carried a higher gross margin than Activar AC-11.

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:

<TABLE>
<CAPTION>
                                            Six Months Ended
                                                 June 30,                $            %
                                            2006         2005        Inc/(Dec)    Inc/(Dec)
                                        ----------    ----------    ----------     -----
<S>                                     <C>           <C>           <C>            <C>
Employee compensation and benefits      $  385,785    $  759,030    $ (373,245)    (49.2%)

Marketing, advertising and promotion       443,335       369,713        73,622      19.9%

Research and development                    70,555       177,801      (107,246)    (60.3%)

Consulting  and  other  professional
services                                   135,670       299,592      (163,922)    (54.7%)

Legal and accounting                       332,761       450,707      (117,946)    (26.2%)

General and administrative                 130,269       211,196       (80,927)    (38.3%)

Occupancy                                   86,075       110,916       (24,841)    (22.4%)

Stock based compensation                   209,175        39,320       169,855     432.8%

Depreciation and amortization              148,367       136,518        11,849       8.7%
                                        ----------    ----------    ----------     -----

       Total SG&A                       $1,941,992    $2,554,793    $ (612,801)    (24.0%)
                                        ==========    ==========    ==========     =====
</TABLE>


                                       19
<PAGE>

In total, SG&A expenses decreased $612,801 or 24% from $2,554,793 in 2005 to
$1,941,992 in 2006. Specific areas where costs decreased in 2006 were (i)
employee compensation, (ii) research and development, (iii) consulting and other
professional services and; (iv) legal and accounting.

Areas where costs increased in 2006 compared to 2005 were (i) marketing,
advertising and promotion and (ii) stock based compensation.

Employee compensation expense decreased $373,245 or approximately 49% 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.

Research and development expenses decreased $107,246 or approximately 60% 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 $163,922 or approximately
55% 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 $117,946 or approximately 26% 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.

Marketing, advertising and promotion expenses increased $73,622 or approximately
20% 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 partially offset by decreased costs related to the
reduction in the number of marketing, branding and public relations consultants
that were retained in 2005.

Stock based compensation expense increased $169,855 or approximately 433% 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 in 2006 was $1,043,940. We did not incur interest expense in
2005. Of the total, approximately $902,000 was non-cash interest expense
resulting from the accounting treatment of our convertible notes. We did not pay
approximately $55,000 of interest related to our convertible notes which was due
on June 30, 2006. This amount is included in accrued expenses at June 30, 2006.

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 $84,974 for
the six months ended June 30, 2006 related to the decrease in the fair market
value of the warrants and embedded derivative liability.

Net Loss

Net loss for the six months ended June 30, 2006 was $2,905,279 or $0.27 per
share, compared to $2,519,752 or $0.26 for the six months ended June 30, 2005.


LIQUIDITY AND CAPITAL RESOURCES

Based upon our recurring losses from operations and stockholders' deficit as of
June 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 June 30, 2006, we had
cash of approximately $306,000 and net working capital of approximately
$2,213,000. Excluding approximately $2,306,000 of inventory, we have a net
working capital deficit of approximately $93,000. As of that same date, we had
approximately $489,000 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.


                                       20
<PAGE>

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.

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. While we believe that we
currently have sufficient inventory of bulk AC-11 on hand to meet expected
demand, if we do not sell the product prior to its stated expiration date, we
will incur a write-off. 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.


                                       21
<PAGE>

Item 3.     Controls and Procedures

      a)    Evaluation of Disclosure Controls and Procedures: As of June 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

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.

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.       Title
-----------       -----

31.1              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 amended

31.2              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 amended

32.1              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)


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<PAGE>

                                   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: September 20, 2006

OPTIGENEX INC.
--------------
Registrant


By:   /s/ Daniel Zwiren
      --------------------------------------------------------------
      Daniel Zwiren
      President, Chief Executive Officer and Chief Financial Officer


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