**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


________________




**AMENDEMENT
        NO. 1 ON**


**FORM
      10-KSB/A**


ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


________________





For
      the
      fiscal year ended June 30, 2007    Commission file number 000-27545





**QUICK-MED
      TECHNOLOGIES, INC** **.**


----------------------------------------------


(Name
      of
      registrant as specified in its charter)





**Nevada**  **65-0797243**


(State
      or
      Other Jurisdiction of organization)  (IRS
      Employer Identification Number)





**3427
      SW 42nd Way**


**Gainesville,
      Florida 32608**


**(888)
      835-2211**


(Address,
      including zip code, and telephone number,


including
      area code, of registrant’s principal executive offices)





**Securities
      registered pursuant to Section 12(b) of the Act:**


None





**Securities
      registered pursuant to Section 12(g) of the Act:**


Common
      Stock, $0.0001 par value





Check
      whether the registrant (1) filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90 days.
      Yes
      [X] No [ ]





Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B is not contained in this form, and no disclosure will be contained, to
      the
      best of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB/ or any further
      amendment to this Form 10-KSB. [ ]




The
      registrant’s revenues for its most recent fiscal year were $1,952,758.




The
      aggregate market value of the registrant’s voting stock held by non-affiliates
      of the registrant as of September 21, 2007 (based upon the closing price of
      $0.71 per share on September 21, 2007) was $1,874,722.




As
      at
      September 21, 2007 there were 30,608,624 shares of the registrant’s common stock
      issued and outstanding.






**DOCUMENTS
      INCORPORATED BY REFERENCE**






None





**EXPLANATORY
        NOTE**
  This
        Amendment No. 1 to the Annual Report on Form 10-KSB/A of Quick-Med Technologies,
        Inc. (the "Company") for the fiscal year ended June 30, 2007 is being filed
        in
        order to correct a typographic error to the financial statements. The “net loss”
entry for the fiscal year ended June 30, 2006 in the Statement of Cash Flows
        was
        incorrect in the original filed report and has been corrected in this amendment.
        Such audited financial statements remain otherwise unchanged. This Amendment
        does not revise or update or in any way alter any other information or
        disclosures contained in such Annual Report.











**QUICK-MED
      TECHNOLOGIES, INC.**





**ANNUAL
      REPORT**


**ON
      FORM 10-KSB/A**


**For
      the Year Ended June 30, 2007**





**INDEX**





Page


**PART
      I**





Item
                1.
            Description
                of Business..............................................................................
            1Item
                1A.
            Risk
                Factors
            12Item
                2.
            Description
                of Property..............................................................................
            16Item
                3.
            Legal
                Proceedings....................................................................................
            16Item
                4.
            Submission
                of Matters to a Vote of Security Holders...............................................
            16





**PART
      II**





Item
                5.
            Market
                for Common Equity and Related Stockholder Matters.................................
            17Item
                6.
            Management’s
                Discussion & Analysis of Financial
                Condition and Results of Operations
            20Item
                7.
            Financial
                Statements..................................................................................
            26Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting
                & Financial Disclosure
            26





**PART
      III**





Item
                9.
            Directors,
                Executive Officers, Promoters and Control
                Persons;
              Compliance
                with Section 16(a) of the Exchange Act............................................
            27Item
                10.
            Executive
                Compensation............................................................................
            31Item
                11.
            Security
                Ownership of Certain Beneficial Owners and
                Management.........................
            36Item
                12.
            Certain
                Relationships and Related Transactions.................................................
            37Item
                13.
            Exhibits..................................................................
            38Item
                14.
            Principal
                Accountant Fees and Services...........................................................
            39








Signatures
            ................................................................................................................................
            40











Index




**PART
      I**




**ITEM1.**
            **DESCRIPTION
              OF BUSINESS**




***This
      Form 10-KSB/A contains forward-looking statements based on our current
      expectations, assumptions and estimates and that involve risks and
      uncertainties. Any statements contained in this Form 10-KSB/A (including,
      without limitation, statements to the effect that we “estimate,” “expect,”
“anticipate,” “plan,” believe,” “may” or “will” or statements concerning
      potential or opportunity or variations thereof or comparable terminology or
      the
      negative thereof) that are not statements of historical fact should be construed
      as forward-looking statements. Actual results could differ materially and
      adversely from those projected or anticipated in the forward-looking statements
      as a result of a number of risks and uncertainties pertaining to our business,
      including, without limitation, those risks and uncertainties described in the
      section entitled “Risk Factors” in this Form 10-KSB/A. We undertake no
      obligation to revise or update any such forward-looking
      statements.***




***Unless
      specified otherwise, as used in this Form 10-KSB/A, the terms “we,” “us,” “our,”
the “Company” or “Quick-Med” refer to Quick-Med Technologies,
      Inc.***




***Corporate
      History***





We
      were
      incorporated in the State of Nevada on April 21, 1997 in the name of Above
      Average Investments, Ltd. to engage in any lawful corporate purpose. Other
      than
      issuing shares to its stockholders, Above Average Investments, Ltd. never
      commenced operations. In September 2000, Above Average Investments, Ltd. became
      a public reporting Company 60 days following the voluntary filing of its Form
      10-SB Registration Statement with the Securities and Exchange Commission. In
      March 2001, we acquired all of Quick-Med Technology, Inc.'s issued and
      outstanding shares of capital stock in exchange for 10,260,000 shares of our
      common stock. Upon completion of the merger in February 2002, our name was
      changed to Quick-Med Technologies, Inc.





We
      have
      never been the subject of a bankruptcy, receivership or similar proceeding.





Our
      principal executive offices are located at 3427 SW 42 nd Way,
      Gainesville, Florida 32608. Our telephone number is (888) 835-2211.





***Business
      Development***





We
      are a
      life sciences company that is developing proprietary technologies for the
      medical and consumer healthcare markets. Our two core technologies under
      development are:





**NIMBUS** **®** **** (“NIMBUS”),
      a family of polymers that are bio-engineered to have antimicrobial,
      super-absorbent, and other properties that can be used in a wide range of
      applications, such as wound dressings and apparel. We are seeking to use our
      NIMBUS technology in: (a) advanced wound care products and other medical
      devices; and (b) consumer products, including apparel and personal care. We
      believe that the size and growth characteristics of the antimicrobial market
      represent an attractive opportunity for the NIMBUS technology. Additionally,
      we
      believe there are no competing technologies on the market today that offer
      the
      unique combination of safety, efficacy and cost-effectiveness offered by NIMBUS.
      We have developed “proofs-of-principle” in several applications and are seeking
      to move these products to the commercialization stage. On September 18, 2006
      we
      received a Phase II SBIR grant for continued work on an advanced wound dressing
      using the NIMBUS technology. In April, 2007, we entered into a license agreement
      with Derma Sciences Inc. for NIMBUS treatment of select substrates used in
      traditional wound care.





**MultiStat** **TM** (“MutltiStat”), a family of patented matrix metalloproteinase inhibitors
      (“MMPIs”) that we believe to have significant benefit in the maintenance,
      healing and repair of skin and eyes. Independent laboratories as well as our
      research show that MultiStat is effective in medical (wound care) and consumer
      (cosmetic) applications. MultiStat is currently being sold as a performance
      ingredient to several cosmetics companies via an agreement with BASF
      Corporation, which is currently being renegotiated. MultiStat is also being
      evaluated as a post-injury treatment for mustard gas exposure, with the initial
      product currently being developed under a Cooperative Research and Development
      Agreement (CRADA) with the U.S. Army Medical Research Institute for Chemical
      Defense .





***Business
      Strategy***





Our
      business strategy is to further develop and execute commercialization strategies
      for each of our broad technologies. We will seek to generate revenue through
      four sources:





(1)
            Licenses
                of proprietary technology to industry partners;


(2)
            Contracts
                with government agencies;


(3)
            Sales
                of product (compounds); and,


(4)
            Research
                and development support agreements.





We
      expect
      that the majority of future revenue from NIMBUS will be generated via licenses,
      royalties and profit-sharing agreements. We believe that our intellectual
      property is the value driver and, as such, manufacturing, sales and distribution
      are and will be conducted either through client partners or
      outsourced.




-1-
 Index





***NIMBUS*** ***®***





NIMBUS
      refers to “Novel Intrinsically MicroBonded Utility Substrate” - a family of
      patents, techniques, and other intellectual property in which polymer chemistry
      is used to permanently bond biologically active molecules onto substrates.
      NIMBUS is produced by bonding a selection of polyquaternaries to various
      materials and can take many forms including: cellulosics, synthetics,
      microspheres, sprayable suspensions, superabsorbent polymers, powders,
      derivatized mineral particles, and others. We seek to use low-cost processes
      by
      which typically inexpensive chemicals can be permanently bonded to create added
      value to end products.





·
            The
                NIMBUS technology has potential commercial applications spanning
                medical
                and consumer healthcare products. Choices of the substrate, the bonded
                molecules, or the method of bonding generate a range of products
                that can
                be modified to produce varying product attributes. By altering aspects
                of
                the formulation, the product can be made to be super-absorbent, have
                haemostatic properties, or serve as a drug delivery system. For example,
                it is capable of being used to add a second, slowly releasable ingredient
                to a substrate to permit more than one mode of action or property
                (e.g.,
                perfume, protease inhibitor, fungicide, or antibiotic).





·
            The
                raw materials cost of NIMBUS is more economical than many other active
                ingredients, such as silver or PHMB (polyhexamethylene biguanide),
                used in
                healthcare today. Additionally, in wound care materials and other
                roll
                goods-based substrates, NIMBUS requires no more than standard textile
                or
                paper finishing equipment.





·
            The
                most deeply studied potential commercial application of NIMBUS is
                in
                medical devices where permanent bonding to various substrates can
                be
                performed using broadband microbicides that are highly effective,
                as
                verified by independent laboratories. In certain proto-type wound
                dressings, NIMBUS begins to eradicate bacteria immediately and is
                effective for seven days or more. Tested in a typical potential commercial
                application, NIMBUS killed 99.9999% of the bacteria or other microbes
                present in the environment.





·
            Third
                party and our research show that NIMBUS-treated articles are effective
                against MRSA (Methicillin-Resistant Staphylococcus Aureus)and
                VRE (Vancomycin-Resistant Enterococcus), two antibiotic-resistant
                organisms responsible for a significant and growing number of hospital
                and
                community-related infections. Other high bacterial kill levels have
                been
                demonstrated for contact lenses against Pseudomonas; in food preservation
                against bacteria that cause Listeria monocytogenes and Salmonella
                typhimurium; and in footwear protection against a wide range of other
                germs including Trichophyton mentagrophytes, a fungus that causes
                athlete’s foot.





·
            While
                lethal to most bacteria, studies performed by us and third party
                laboratories show that NIMBUS is not harmful to human cells. Independent
                laboratory tests have shown that NIMBUS is non-toxic, non-sensitizing
                and
                non-irritating to humans, using standard ISO or ASTM test methodologies.





·
            The
                NIMBUS technology permanently bonds the active agent to the substrate.
                This attribute is a source of differentiation from many competing
                technologies and gives NIMBUS potential advantages, including lower
                cost
                and the possible use in devices such as contact lenses, wound dressings,
                incontinence products, or disposable gloves where leaching chemicals
                into
                the body may pose unacceptable medical
                risk.





A
      characteristic of NIMBUS medical devices relates to the reduced likelihood
      of
      bacteria to develop resistance to the microbicide employed - a growing concern
      in healthcare facilities. This characteristic results from the combined effect
      of (a) the mechanism by which bacteria are killed - by cell wall disruption
      and
      (b) the bonding of the microbicide to the substrate, which prevents
      concentrations of the active molecule from falling below minimum inhibitory
      levels.






-2-
 Index





Quick-Med
      is seeking to commercialize NIMBUS in key end-markets where we believe the
      technology provides either a solution to a defined market need or an opportunity
      to create attractive new products or product attributes. We have been in
      communication with potential clients or development partners in the following
      markets.





**Substrate**
            **Medical**
            **Consumer
                Healthcare**Cotton
                and cotton blends,
              including
                cotton, cotton-rayon blends, cotton-PET blends, cellulosic
                materials
            Wound
                dressings *
              Hospital
                gowns *
              Hospital
                bedding *
              Antimicrobial
                wipes
            Feminine
                protection
              Adult
                incontinence
              Diapers
              Wipes
              Underwear*Synthetics*
              including
                polyurethane, polypropylene, PE, PET, nylon, polycarbonates,
                silicones
            Wound
                tapes/films *
              Wound
                dressings *
              Sutures
                *
              Catheters
                *
            Contact
                lenses/cases *
              Toothbrushes
              Mattresses*Water/Oil-based
                Formulations*
            Hand
                sanitizers
              Skin
                care products
              Wound
                care gels *
            Hand
                sanitizers
              Contact
                lens solution *
              Skin
                care products





*
      denotes
      a medical device application that may require regulatory approval





We
      are
      initially focusing our NIMBUS technology on the following
      industries:




·
            *Wound
                Dressings and other Medical Devices*:
                Potential wound care products under development that use the NIMBUS
                technology have undergone proof-of-concept testing to demonstrate
                their
                desired characteristics, such as bacterial resistance or the ability
                to
                control bleeding.


·
            *Apparel*:
                Apparel products being developed that use the NIMBUS technology have
                undergone proof-of-concept testing to demonstrate desired characteristics
                such as resistance to odor causing bacteria and
                discoloration.





Effective
      February 1, 2007, we and HBI entered into a Development and Exclusive Option
      Agreement (the “Agreement”). Under the Agreement, we granted to HBI an exclusive
      option (the “Option”) for a period of six months (“Option Period”) to obtain an
      exclusive license to our technology relating to certain products produced by
      HBI
      (the “License Agreement”). In consideration for the Option, HBI is obligated to
      pay the Company $45,000 every three month period during the Option Period.
      During the Option Period, HBI will run and complete certain studies, and upon
      the conclusion of these studies, HBI will provide us with notice of the final
      decision with respect to entering into the License Agreement. In September
      2007,
      we were informed that HBI decided, for internal reasons unrelated to our
      technology, not to complete these studies and we and HBI mutually agreed
      not to extend the Option Period.






***MutiStatTM***





The
      MultiStat product line has been our primary source of revenue to date. MultiStat
      is a family of advanced, patented compounds and methods that have shown benefit
      in promoting the maintenance, healing and repair of skin and eyes. Both third
      party and Quick-Med research shows that MultiStat is effective in certain
      medical (wound care) and consumer (cosmetic) applications.





Matrix
      Metalloproteinases, or “MMPs”, are naturally occurring compounds in skin tissue.
      External or internal stimuli can trigger an overproduction of certain MMPs,
      which can produce chemical reactions within skin cells that induce adverse
      outcomes such as blistering, inflammation or accelerated collagen degradation.
      External triggers include prolonged sun exposure, as well as chemical burns
      from
      warfare agents such as mustard gas. Internal triggers include natural aging
      in
      which declining estrogen levels naturally inhibit MMPs and lead to accelerated
      skin wrinkling.





There
      are
      natural or synthetic compounds that safely inhibit MMP overproduction in the
      skin (MMP-inhibitors, or “MMPIs”). These MMPIs can be topically applied to
      mitigate the effects of triggering mechanisms. The bioscience of MMPI research
      includes the identification of safe compounds that individually or in
      combination yield a specific beneficial outcome. MultiStat represents our
      portfolio of patented compounds and techniques relating to MMP inhibition.
      MultiStat’s array of uses has been documented in a series of clinical findings
      by our scientists, third-party scientific laboratories, and in works published
      by other academic researchers.






-3-
 Index







**Pharmaceutical
      Applications**





Scientific
      studies have shown that MMP activity plays a major role in the deterioration
      of
      human tissue when exposed to chemical agents such as mustard gas. Ilomastat,
      a
      member of the MultiStat family of patented compounds and techniques relating
      to
      MMP-inhibition, has been demonstrated to be safe and highly effective in
      treating mustard gas exposures based on efficacy studies conducted in Israel
      and
      the Netherlands by third-party scientific laboratories. We are seeking to
      develop Ilomastat as a post-injury agent for mustard gas exposure.





In
      November 2000, we entered into a Cooperative Research and Development Agreement
      (“CRADA”) with the U.S. Army Medical Research Institute for Chemical Defense at
      Edgewood, Maryland, to develop a post-injury agent for mustard gas exposures
      to
      the eye and skin.





Other
      potential pharmaceutical applications for Ilomastat include psoriasis, acne
      and
      chronic wounds.






***Cosmetics***





Based
      on
      clinical studies performed by us and by the Engelhard Corporation (now a unit
      of
      BASF), MultiStat has shown success in improving the appearance of fine facial
      lines and wrinkles associated with skin deterioration resulting from natural
      aging or sun damage. Additionally, MultiStat has been shown in the same clinical
      studies to have applications for other conditions, such as skin roughness or
      redness.





In
      September 2002, we announced an exclusive multi-year distribution agreement
      with
      Engelhard Corporation. This agreement provides for Engelhard Corporation to
      undertake product development and subsequent marketing and sales of
      MultiStat-related skin care products. Since 2005, through its agreement with
      Engelhard Corporation, products that have incorporated MultiStatTM technology
      have been commercialized through various skin care and anti-aging products
      sold
      to major cosmetics companies.





On
      August
      2, 2006, we restructured our agreement with Engelhard Long Island, Inc.
      (“Engelhard”), a wholly-owned subsidiary of BASF Catalysts LLC, with a Fourth
      Amendment to that certain Letter of Intent (“LOI”) dated February 1, 2006 and
      effective through April 28, 2006. The Fourth Amendment, effective as of June
      30,
      2006, extended the effective period of the LOI to August 1, 2007. The LOI amends
      certain terms included in the distribution agreement, in which we granted to
      Engelhard an exclusive license to develop and market our Ilomastat product
      (the
“Licensed Product”) for the field of over-the-counter anti-aging cosmetics and a
      nonexclusive license for the field of over-the-counter acne treatments and
      skin
      moisturizers in the cosmetics market. In consideration for this license, as
      amended by the LOI, we received monthly royalty payments based on a percentage
      of the net revenue Engelhard receives from sales of the Licensed Product but
      no
      less than annual minimum royalty payments equal to $1,140,000 for the first
      two
      years, assuming the LOI is not terminated during such period.  In
      addition, we transferred all right, title and interest to the Engelhard
      intellectual property developed under the agreement held by us back to Engelhard
      in exchange for one lump payment of $166,500.





We
      are
      currently in negotiation with BASF Corporation for a successor licensing
      agreement, should we be unable to complete a licensing agreement, our results
      of
      operations and financial condition would be materially affected.






-4-
 Index


**Competition**




The
      research and development pertaining to our technologies, which underlie our
      MMP-inhibitor (MultiStatTM), microbicide (NIMBUS) and potential future products,
      is extremely competitive and is characterized by rapid technological change.
      Many of our competitors have substantially greater financial, scientific, and
      human resources, and greater research and product development capabilities.
      In
      addition, many of our competitors have greater experience in marketing such
      technologies and products and greater potential to develop revenue streams.
      As a
      result, our competitors may be able to develop and expand their competing
      product offerings more rapidly, adapt to new or emerging technologies and
      changes in customer requirements more quickly, devote greater resources to
      marketing and sales of their products and adopt more aggressive pricing policies
      than we can.





Our
      competitors include any company that is involved in the development of active
      ingredients or catalyst molecules focused on our end markets. These may include
      for-profit companies as well as university, government or sponsored research
      organizations.





Specific
      examples of competition to our NIMBUS microbicidal technology and potential
      future products using that technology, include products utilizing fibers
      embedded with silver and/or copper ions to induce anti-bacterial and/or
      anti-fungal capabilities, or other microbicidal technologies. Competing
      companies developing or offering such products include:





·
            Nucryst
                Pharmaceuticals Inc.;


·
            Microban
                International, Ltd.; and


·
            Aegis
                Environments





We
      will
      attempt to overcome the competitive advantages of our competitors by entering
      into co-development agreements with industry leaders in the potential markets
      with exclusivity clauses for future license agreements.




**Intellectual
      Property: Patents, and Exclusive Patent Licenses**




Our
      strategy is to research and obtain original patents or, to the extent reasonably
      available, to license exclusive composition and relevant use patents related
      to
      its core technology. We believe that a comparatively strong intellectual
      property position can be a source of differentiation from competing
      products.





NIMBUS
      technology is covered by one issued U.S. patent, six issued foreign patents
      (Australia, China, Russia, Indonesia, Korea and Mexico), one allowed foreign
      patent (Canada) and eight pending U.S. patents, as well as a number of
      international patent applications filed under the Patent Cooperation Treaty
      (PCT), a treaty that covers 125 countries and a number of foreign patent
      applications.





MultiStatTM
      is covered by seven issued U.S. patents, four issued foreign patents, two
      pending U.S. patents and two pending international patents.





Several
      of these patent applications are now under examination in the United States
      Patent and Trademark Office. Several additional patent applications are in
      the
      process of being readied for filing in 2006.





**Agreements
      with Employees and Consultants**





With
      the
      exception of Drs. Schultz and Batich discussed below, all of our employees
      and
      scientific consultants have signed agreements that assign to us all intellectual
      property rights to any inventions or other proprietary information in any area
      in which that person is working with us. These agreements do not provide for
      the
      payment of any royalties. Drs.  Schultz and Batich, who are on the
      faculty of University of Florida at Gainesville, are the only consultants who
      currently have any rights in any intellectual property that may be shared with
      us. Under the University of Florida policy, any rights obtained by Drs. Schultz
      and Batich are assigned to the University. Drs. Schultz and Batich may be paid
      a
      royalty by the University out of royalties that may be paid by us to University
      of Florida.





**Issued
      and Pending - U.S. & Foreign Patents**





We
      have
      filed or own joint rights to patent applications for:


**U.S.
      ISSUED PATENTS**





**Number**
            **Issued
                Date**
            **Expiry
                Date**
            **Description**5,183,900
            February
                1993
            November
                21, 2010
            Matrix
                Metalloprotease Inhibitors (MMPIs)5,189,178
            February
                1993
            November
                21, 2010
            Matrix
                Metalloprotease Inhibitors (MMPIs)5,239,078
            August
                1993
            November
                21, 2010
            Matrix
                Metalloprotease Inhibitors (MMPIs)5,270,326
            December
                1993
            November
                21, 2007
              (November
                21, 2010)
            Treatment
                of Tissue Ulceration5,773,438
            June
                1998
            June
                30, 2015
            Synthetic
                Matrix Metalloprotease Inhibitors (MMPIs) and Use
                Thereof5,892,112
            April
                1999
            April
                6, 2016
            Process
                for Preparing Synthetic Matrix Metalloprotease Inhibitors
                (MMPIs)6,713,074
            March
                2004
            June
                29, 2021
            Cosmetic
                Composition and Method7,045,673
                B1
            May
                16, 2006
            December
                8, 2019
            Instrinsically
                Bactericidal Absorbent Dressing and Method of
                Fabrication




-5-
 Index





The
      above
      table includes patents, which are jointly owned by us and an arm of The
      University of Florida, as well as patents that are licensed to us by Drs.
      Galardy and Grobelny. Maintenance of patent protection through the expiration
      date is contingent upon payment of fees at certain intervals.





**INTERNATIONAL
      ISSUED PATENTS**





**Number**
            **Country(ies)**
            **Expiry
                Date(2)**EPO
                558681(1)
            Europe
                (Germany, Spain, France, Great Britain, Italy)
            November
                21, 2011EPO
                558648(1)
            Europe
                (Germany, France, Great Britain, Italy)
            November
                21, 20111971367
            Japan
            November
                21, 2011652016
              773532
            Australia
              Australia
            November
                21, 2011
              December
                8, 2019004160
            Russia
            December
                8, 20192096223
              99814229.8
              10-0689020
              248078
              2353436
            Canada
              China
              Korea
              Mexico
              Canada
                (allowed, not yet granted)
            November
                21, 2011
              December
                8, 2019
              December
                8, 2019
              December
                8, 2019
              December
                8, 2019.WOO
                2001 01469
            Indonesia
            December
                8, 2019





Notes:


(1)
            Issued
                by the European Patent Office. Registered in Germany, France, Great
                Britain, and Italy.(2)
            Maintenance
                of patent protection through the expiration date is contingent upon
                payment of yearly fees.








**PENDING
      PATENT APPLICATIONS - UNITED STATES**




Absorbent
                Materials Covalently Bonded, Non-Leachable Polymeric Antimicrobial
                Surfaces and Methods for
                Preparation.





ཙ
            Cosmetic
                Composition and Method





ཙ Composition and
      Method for Minimizing or Avoiding The Adverse Effects of Vesicants





ཙ
            Improved
                Antifungal Gypsum Board





ཙ
            Silicates
                and Other Oxides with Bonded Antimicrobials Polymers





ཙ
            Controlled
                Release of Biologically Active Substances From Select
                Substrates





ཙ
            Method
                of Attaching an Antimicrobial Compound to the Surface of a
                Substrate





ཙ
            Disinfectant
                with Quaternary Ammonium Polymer and
                Copolymers*





ཙ
            Non-Leaching
                Absorbent Wound Dressing *





*Note:
      United States filing imputed from designation in International Patent
      Application filed under the Patent Cooperation Treaty.






-6-
 Index





**PENDING
      PATENT APPLICATIONS - INTERNATIONAL**





ཙ
            Intrinsically
                Bactericidal Absorbent Dressing and Method of
                Fabrication





ཙ
            Absorbent
                Materials Covalently-Bonded, Non-Leachable Polymeric Antimicrobial
                Surfaces and Methods for
                Preparation.





ཙ
            Cosmetic
                Composition and Method





ཙ
            Composition
                and Method for Minimizing or Avoiding the Adverse Effects of
                Vesicants





ཙ
            Materials
                and Methods for Treating Lumber and
                Wood





ཙ
            Synthetic
                Matrix Metalloprotease Inhibitors and Uses Thereof
              
              Method
                of Attaching an Antimicrobial Compound to the Surface of a Substrate.
                *
              
              Disinfectant
                with Quaternary Ammonium Polymer sand Copolymers*
              
              Non-Leaching
                Absorbent Wound Dressing *





*International
      filings imputed from designations in the International Patent Application filed
      under the Patent Cooperation Treaty.





For
      all
      U.S. patents, the Inventor(s) is/are automatically the Applicant(s). For all
      foreign patents pertinent here, the Assignee(s), if any, is/are automatically
      the Applicant(s). Where both we and the University of Florida are mentioned,
      it
      is because both own the invention jointly as Assignees.





Our
      business and competitive position are dependent upon our ability to protect
      our
      proprietary technologies. Despite our efforts to protect our proprietary rights,
      unauthorized parties may attempt to obtain and use information that we regard
      as
      proprietary. We will rely on patent, trade secret and copyright law and
      nondisclosure and other contractual arrangements to protect such proprietary
      information. We will file patent applications for our proprietary methods and
      devices which we believe are patentable.





There
      can
      be no assurance that others will not independently develop substantially
      equivalent proprietary information and techniques or otherwise gain access
      to
      our proprietary information, that such information will not be disclosed or
      that
      we can effectively protect our rights to unpatented trade secrets or other
      proprietary information.





There
      can
      be no assurance that others will not obtain patents or other legal rights that
      would prevent us from commercializing our technologies in the United States
      or
      other jurisdictions.




There
      can
      be no assurance that our technologies will not be subject to environmental
      or
      other regulation that would impede their adoption and commercialization in
      the
      United States or other jurisdictions.





Our
      strategy is to obtain original patents or, to the extent reasonably available,
      exclusive composition and use licenses to patents relating to core technologies
      and their use in targeted applications.







-7-
 Index






**Patent
      Related Agreements**




***University
      of Florida***




On
      December 3, 2002, we entered into a licensing agreement with University of
      Florida that will give us exclusive worldwide rights for the manufacturing,
      marketing, and distribution of our NIMBUS and topical Ilomastat technologies.
      The license, which covers both awarded patents and patent applications, builds
      on intellectual property already owned by us, that includes, non-exclusive
      rights to these same technologies or other rights obtained through prior
      agreements. The agreement was amended to extend the date of the
      commercialization of products to the retail customer for the group of licensed
      patents to December 31, 2010, unless the delay is caused by governmental
      regulatory agency, including but not limited to the Food and Drug
      Administration, in which case we shall be afforded the opportunity to toll
      the
      December 31, 2010 date for a period equal to the period during which such
      regulatory review is diligently prosecuted by us.





We
      have
      executed a license agreement with University of Florida at Gainesville, DermaCo,
      Inc., Dr. R. Galardy and Dr. D. Grobelny to practice certain rights under
      patents relating to a family of MMPIs. We are using these rights to develop
      both
      the cosmetic anti-aging products and vesicant skin treatment products. U.S.
      and
      foreign patent rights, including but not limited to Germany, Spain, France,
      United Kingdom, and Italy have been licensed to us for these
      applications.




***University
      of Michigan***




In
      June
      2007, we entered into a patent license agreement with the University of Michigan
      (“U-M”) that significantly expands our MultiStatTM technology - its patented
      family of compounds for the cosmetic treatment of skin conditions, including
      chronological aging and photo-aging. The license grants us the exclusive right
      to commercialize important U-M patents in the field of cosmetic
      products.





We
      have
      been commercializing our MultiStat technology through an exclusive distribution
      agreement with BASF Corporation (See discussion above). Under the agreement,
      performance ingredients based on our patented compounds are formulated and
      sold
      to the cosmetics industry.





We
      own
      exclusive rights for topical use of the MultiStat compounds for cosmetic and
      military applications, but previously had non-exclusive patent rights for use
      of
      U-M patents in the anti-aging cosmetic arena. The agreement covers the exclusive
      rights to seven (7) U.S. and numerous foreign patents in cosmetics
      applications.






***Other
      Patent Related Agreements***




We
      also
      have an agreement with Engelhard Coporation (now a unit of BASF) that provides
      Engelhard exclusive worldwide right to develop and market certain products
      relating to skin care that employ our MultistatTM family of MMPIs. The agreement
      is currently being renegotiated.  See discussion below.






***Government
      Regulation***




The
      research and development, manufacture, and marketing of human pharmaceutical
      and
      diagnostic products and devices are subject to regulation, in the United States
      primarily by the Food and Drug Administration, and by comparable authorities
      in
      other countries. These national agencies and other federal, state, and local
      entities regulate, among other matters, research and development and the
      testing, manufacturing, safety, handling, effectiveness, labeling, storage,
      record keeping, approval, advertising, and promotion of the products like those
      we are developing.




Failure
      to comply with applicable regulatory requirements can result in the refusal
      by
      regulatory agencies to approve product licensing or the revocation of approvals
      previously granted. Non-compliance can also result in fines, criminal
      prosecution, recall or seizure of products, total or partial suspension of
      production, or refusal to enter into additional contracts.




Any
      regulatory approvals that are received for a product may be subject to
      limitations on approved uses for the product. After obtaining marketing approval
      for any product, the manufacturer and the manufacturing facilities for that
      product will be subject to continual review and periodic inspections by the
      Food
      and Drug Administration and other regulatory authorities. If previously unknown
      problems with the product or with the manufacturer or facility are discovered,
      restrictions may be imposed on the product or manufacturer, including an order
      to withdraw the product from the market. If we, and any contract manufacturers
      we choose to engage, fail to comply with applicable regulatory requirements,
      we
      may be fined, suspended or subject to withdrawal of regulatory approvals,
      product recalls, seizure of products, operating restrictions and criminal
      prosecution.






-8-
 Index




We
      work
      with a law firm specializing in regulatory affairs with respect to the
      pharmaceutical, cosmetic, and medical device industries. This firm will be
      able
      to assist us with the following regulatory activities when required:




·
            Regulatory
                Strategy and Liaison with the Food and Drug Administration;


·
            Non-clinical
                and clinical program
                assessment/development


·
            Non-clinical
                and clinical protocol review/monitoring of
                studies;


·
            Regulatory
                affairs management/guidance;


·
            Product
                development and launch strategy;


·
            Validation
                of methods/processes;


·
            Product
                development strategies/assessment;


·
            Product
                compliance; and


·
            Label
                and labeling compliance






***Food
      and Drug Administration***




Many
      of
      the end-user applications for our technology are regulated in the U.S. as
      medical devices by the FDA. The Agency’s regulations govern, among other things:
      pre-clinical testing; product design and development; pre-market clearance
      or
      approval; advertising and promotion; labeling; manufacturing; product
      import/export; storage; record keeping; reporting of adverse events; corrective
      actions and removals; recalls; and distribution.





Unless
      an
      exemption applies, each medical device to be commercially distributed in the
      United States required either a prior 510(k) clearance or prior pre-market
      approval (“PMA”) from the FDA. The FDA classifies medical devices into one of
      three classes, depending on the degree of risk associated with the device and
      the extent of controls that are needed to ensure safety and effectiveness.
      Devices deemed to pose the least risk are placed in Class I. Intermediate risk
      devices, or Class II devices, in most instances require the manufacturer to
      submit to the FDA a pre-market notification, requesting authorization for
      commercial distribution, known as 510(k) clearance, and may subject the device
      to special controls, such as performance standards, guidance documents specific
      to the device, or post-market surveillance. Most Class I and some low-risk
      Class
      II devices are exempted from this 510(k) requirement. Devices deemed by the
      FDA
      to pose the greatest risk, such as life-sustaining, life-supporting, or
      implantable devices, or a device deemed to be not substantially equivalent
      to a
      previously cleared 510(k) deice, are placed in Class III. In general, a Class
      III device cannot be marketed in the U.S. unless the FDA approves the device
      after submission of a PMA. The FDA can also impose restrictions on the sale,
      distribution, or use of devices at the time of their clearance or approval,
      or
      subsequent to marketing.




**510(k)
      Clearance Pathway**





A
      510(k)
      pre-market notification is submitted to the FDA to demonstrate that the new
      device is “substantially equivalent” to a previously cleared 510(k) device or a
      device that was in commercial distribution before May 29, 1976 (or to a pre-1976
      Class II device for which the FDA has not yet called for the submission of
      PMAs). Such devices are deemed to be “predicate devices” for future
      applications. The FDA attempts to respond to a 510(k) within 90 days of
      submission, but the response may be a request for additional information or
      data, sometimes including clinical data. As a practical matter, 510(k) clearance
      can take significantly longer than 90 days, potentially up to a year or more.
      If
      the FDA determines that the device, or its intended use, is not substantially
      equivalent to a previously cleared device or use, the FDA will place the device,
      or the particular use of the device, into Class III.





After
      a
      device receives 510(k) clearance for a specific intended use, any modification
      that could significantly affect its safety or effectiveness, or that would
      constitute a major change in its intended use, design, or manufacture, will
      require a new 510(k) clearance or could require a PMA. The FDA requires each
      manufacturer to make this determination initially, but the FDA can review any
      such decision and can disagree with a manufacturer’s determination. If the FDA disagrees
      with a manufacturer’s determination that a new clearance or approval is not
      required for a particular modification, the FDA
      can
      insist that the manufacturer cease marketing and/or recall the modified device
      until 510(k) clearance or pre-market approval is obtained.






-9-
 Index





**Pre-Market
      Approval Pathway**





A
      PMA
      must be submitted if the device cannot be cleared through the 510(k) process.
      The PMA process is much more demanding than the 510(k) pre-market notification
      process. A PMA must be supported by extensive data and information including,
      but not limited to, technical, pre-clinical, clinical, manufacturing and
      labeling to establish the safety and effectiveness of the device to the FDA’s
      satisfaction. A PMA usually also requires a substantial application fee (up
      to
      approximately $280,000 as of October 1, 2006).





After
      the
      FDA determines that a PMA is complete, the agency accepts the application and
      begins an in-depth review of the submitted information. The FDA, by statute
      and
      regulation, has 180 days to review an accepted PMA, although the review
      generally occurs over a significantly longer period of time, and can take up
      to
      several years. During this review period, the FDA may request additional
      information or clarification of information already provided. Also, during
      the
      review period, an advisory panel of experts from outside FDA may be convened
      to
      review and evaluate the application and provide recommendations to the FDA
      as to
      the approvability of the device. In addition, the FDA will conduct a
      pre-approval inspection of the manufacturing facility to ensure compliance
      with
      the Quality System Regulations. New PMA applications or supplemental PMAs are
      required for significant modifications to the manufacturing process, labeling,
      use and design of a device that is approved through the PMA process. PMA
      supplements often require submission of the same type of information as a PMA,
      except that the supplement is limited to information needed to support any
      changes from the device covered by the original PMA and may not require as
      extensive clinical data or the convening of an advisory panel.





**De
      Novo: Alternative Pathway to PMA**





If
      a
      medical device is found NSE (not substantially equivalent) by the FDA, an
      alternative pathway to the lengthy and costly PMA is available for low risk
      devices. The FDA Modernization Act of 1997 amended Section 513 (f) (2) of the
      Federal Food, Drug and Cosmetic Act (the Act) to provide this mechanism to
      reclassify statutorily classified class III products. This is considered a
      fairly unique pathway for clearance and typically is only allowed for new
      technologies of low risk. The FDA allows unlimited responses when on this
      pathway, different than the three allowed responses under a normal 510(k).
      A
      device placed into class I or II in this written order can then be commercially
      distributed, subject to other applicable provisions of the Act. A device
      classified into class I or II under this new provision becomes a predicate
      device for future premarket notification submissions, which means that a
      manufacturer may show that a new device is substantially equivalent to this
      predicate. This route to clearance is referred to as de novo because it
      establishes a new alternative for a new technology.







***Environmental
      Protection Agency***




The
      EPA
      regulates, among other things, antimicrobial products that are intended to
      destroy, prevent, repel, or mitigate any microorganism declared by EPA to be
      a
“pest” pursuant to its authority under the Federal Insecticide, Fungicide, and
      Rodenticide Act (“FIFRA”). Microorganisms declared to be pests by EPA are “any
      fungus, bacterium, virus, or other microorganisms, except for those on or in
      living man or other living animals and those on or in processed food or
      processed animal feed, beverages, drugs (as defined in sec. 201(g)(1) of the
      Federal Food, Drug, and Cosmetic Act (“FFDCA”)) and cosmetics (as defined in
      FFDCA sec. 201(i)). 40 C.F.R.§ 152.5(d). The principal EPA requirement is
      that antimicrobial products subject to EPA’s jurisdiction under FIFRA be
“registered” for the intended use under Section 3 of FIFRA. States also require
      registration of such products under state law. EPA registration requires among
      things the submission of data and information sufficient to allow EPA to make
      a
      determination that the product will perform its function without unreasonable
      adverse effects on health or the environment.





A
      number
      of the NIMBUS applications may require FIFRA registration for the specific
      end-use application. The major component of NIMBUS is currently registered
      with
      EPA by a third-party for certain unrelated uses, and Quick-Med intends, in
      collaboration with strategic corporate partners, to obtain its own EPA and
      state
      registrations for NIMBUS for antimicrobial use. After the registrations are
      secured, articles treated with the NIMBUS technology will not be required to
      be
      registered separately with EPA or the states, provided the antimicrobial claims
      made for such articles are limited to the control of odor-causing bacteria
      or
      other spoilage organisms. The intended use of NIMBUS-treated articles for the
      control of pathogenic organisms will require that the article itself be
      registered with EPA in those cases where the treated article falls under EPA
      jurisdiction. There are currently no articles treated with any antimicrobial
      that are registered by EPA for use against pathogenic organisms.





**Distribution
      of Technologies /Future Products**




Because
      we plan for industry partners in the medical and consumer healthcare markets
      to
      market and distribute co-developed products or products that incorporate our
      technologies, we will not directly distribute such products. Instead, we will
      rely upon our industry partners to utilize their advertising, name recognition,
      and other marketing techniques to promote such products or products that
      incorporate our technologies.






-10-
 Index





**Customers**




Because
      our technologies are intended to be used in potentially widely used products
      that are used by the general public, such as cosmetic anti-aging products,
      wound
      care products, apparel and personal care, we do not anticipate becoming
      dependent upon a few customers; however, to the extent that we enter into
      agreements with industry partners upon which we will become dependent for the
      marketing and distribution of such products, should any such agreements be
      terminated for any reason, our potential revenues and operations will be
      negatively impacted.




**Employees**




We
      have
      ten (10) full time employees consisting of:





·
            Our
                Chief Executive Officer, who directs our operations and our business
                development projects and executes our business strategy;


·
            Our
                President, who is responsible for business development in the textiles
                and
                apparel markets


·
            Our
                Vice President of Research & Development who leads our scientific
                programs


·
            Three
                Senior Research Scientists, who are responsible for product development
                and testing projects;


·
            A
                Director of Research and Business Development in Medical Devices,
                who is
                responsible for business development in the wound care
                industry.


·
            A
                Research Scientist, who is responsible in assisting the senior research
                scientist with testing and product development projects;


·
            A
                Product Development Engineer, who assists the research scientists
                with the
                product development projects; and


·
            A
                Microbiologist, who conducts the microbiological testing and assists
                in
                developing the applications of our technologies.





We
      also
      utilize several consulting scientists with PhDs in their fields and several
      part
      time employees to provide the necessary expertise in performing testing and
      participating in certain of our development projects.





Additionally,
      we utilize a full time consulting Chief Financial Officer, who is a certified
      public accountant, and a full time consultant as Director of Investors
      Relations.




**Cost
      of Compliance with Environmental Laws**




Because
      our potential products will be manufactured and sold by third parties, we are
      not directly subject to environmental laws.




**Research
      and Development**






During
      our fiscal year ended June 30, 2007, we spent $1,526,857 on research and
      development. During our 2006 fiscal year, we spent $1,136,851 on research and
      development. We intend to continue our research and development efforts during
      the current 2008 fiscal year.






**Reports
      to Security Holders**




We
      are
      subject to the informational requirements of the Securities Exchange Act of
      1934. Accordingly, we file annual, quarterly, and other reports and information
      with the Securities and Exchange Commission. Our filings are available to the
      public from commercial document retrieval services and the Internet website
      maintained by the Securities and Exchange Commission at http:// **www.sec.gov** .






-11-
 Index









**ITEM
      1A.**  **RISK
      FACTORS**




An
      investment in the shares of our common stock involves a substantial risk of
      loss. You should carefully read this entire report and should give particular
      attention to the following risk factors. You should recognize that other
      significant risks may arise in the future, which we cannot foresee at this
      time.
      Also, the risks that we now foresee might affect us to a greater or different
      degree than expected. There are a number of important factors that could cause
      our actual results to differ materially from those indicated by any
      forward-looking statements in this document. These factors include, without
      limitation, the risk factors listed below and other factors presented throughout
      this document and any other documents filed by us with the Securities and
      Exchange Commission.




***Our
      independent registered public accounting firm has issued a going concern opinion
      on our audited financial statements for the fiscal years ended June 30, 2007
      and
      2006 because, during those periods, the Company experienced recurring losses
      and
      negative cash flows from operations as well as a net capital deficiency at
      June
      30, 2007. These matters raise substantial doubt about our ability to continue
      as
      a going concern.***





We
      have
      been dependent primarily on private placements of our equity securities and
      stockholder loans to fund our operations, including research and development
      and
      efforts to license our products. Such funding may not be available to us when
      needed, on commercially reasonable terms, or at all. If we are unable to obtain
      additional financing if needed, we will likely be required to curtail our
      operating plans and possibly cease our operations. In addition, any additional
      equity financing may involve substantial dilution to our then-existing
      stockholders.





***We
      have a history of significant losses and we may never achieve or sustain
      profitability. If we are unable to become profitable, our operations will be
      adversely effected.***




We
      have
      incurred annual operating losses since our inception and our operations have
      never been profitable. At June 30, 2007, we had an accumulated deficit of
      $15,696,023. Our gross revenues for the years ended June 30, 2007 and 2006,
      were
      $1,952,758 and $1,230,441 with losses from operations of $1,577,085 and
      $1,636,697 and net losses of $1,506,018 and $1,701,064 respectively. There
      can
      be no assurance that we will ever become profitable.






***We
      have risks associated with our dependence on third party developers to
      commercialize our technology. If we are unable to attract such developers to
      exploit our technologies, our business will fail. Alternatively, if such
      developers fail to commercialize our technology, it would have a material
      adverse effect on our business, financial condition and results of
      operations.***





We
      depend
      upon third parties to develop our products. We must attract such third parties
      to develop and commercialize our technologies into end-user applications. If
      we
      are unable to do so our business model will fail.





The
      inability of a developer to make our products in a timely manner, including
      as a
      result of local financial market disruption which could impair the ability
      of
      such developers to finance their operations, or to meet quality standards,
      could
      cause us to miss the delivery date requirements of to their customers for those
      items, which could result in cancellation of orders, refusal to accept
      deliveries or a reduction in purchase prices, any of which could have a material
      adverse effect on our financial condition and results of operations.





For
      instance, BASF Catalysts, Inc. (a unit of BASF Corporation or BASF) develops
      and
      commercializes our MultiStat technology pursuant to a product development and
      distribution agreement, whereby it formulates our proprietary compound to
      specifications as ordered by cosmetic companies. BASF makes these formulations
      (“actives”) in kilograms containing our proprietary compound and ships them to
      cosmetic customers. They, in turn, will mix the actives in their formulations
      and sell the products to the end users. Any event that materially and adversely
      affects BASF’s ability or willingness to develop such technology will affect our
      revenues.






-12-
 Index




***Our
      intellectual properties may become obsolete if we are unable to stay abreast
      of
      technological developments.***





The
      biomedical industry is characterized by rapid and continuous scientific and
      technological development. If we are unable to stay abreast of such
      developments, our technologies may become obsolete. We lack the substantial
      research and development resources of some of our competitors. This may limit
      our ability to remain technologically competitive.





Other
      companies could create a technology that competes effectively with our NIMBUS
      and MultiStat technologies, and we may be unable to maintain our existing,
      or
      capture additional, market share in our markets. Based upon our review of the
      industry, we are unaware of any company today that markets a technology that
      is
      similar to our technologies. Nonetheless, our intended markets generally are
      dominated by very large corporations (or their subsidiaries), which have greater
      access to capital, manpower, technical expertise, distribution channels and
      other elements which would give them a competitive advantage over us were they
      to begin to compete directly against us. It is possible that these and other
      competitors may implement new, advanced technologies before we are able to,
      thus
      affecting our ability to license our intellectual properties at profitable
      rates.





We
      cannot
      assure investors that we will be able to achieve the technological advances
      to
      remain competitive and profitable, that new intellectual properties will be
      researched, tested and developed, that anticipated markets will exist or develop
      for our technologies, or that any product or services incorporating our
      intellectual properties will not become technologically obsolete.




***We
      are dependent on our patents and other intellectual property right protections.
      The failure to obtain patent protection could have a material adverse effect
      on
      our business, financial condition and results of
      operations.***





We
      have
      employed proprietary technologies to license our intellectual properties. We
      seek to protect our intellectual property rights through a combination of patent
      filings, trademark registrations, confidentiality agreements and inventions
      agreements. However, no assurance can be given that such measures will be
      sufficient to protect our intellectual property rights. If we cannot protect
      our
      rights, we may lose our competitive advantage. Moreover, if it is determined
      that our products infringe on the intellectual property rights of third parties,
      we may be prevented from marketing our intellectual properties.





The
      failure to protect our patents, trademarks and trade names, may have a material
      adverse effect on our business, financial condition and operating results.
      Litigation may be required to enforce our intellectual property rights, protect
      our trade secrets or determine the validity and scope of proprietary rights
      of
      others. Any action we take to protect our intellectual property rights could
      be
      costly and could absorb significant amounts of our management’s time and
      attention. In addition, as a result of any such litigation, we could lose any
      proprietary rights we have. If any of the foregoing occurs, we may be unable
      to
      execute our business plan and you could lose your investment.





***We
      depend on key personnel in a competitive market for skilled employees, and
      failure to retain and attract qualified personnel could substantially harm
      our
      business.***





We
      believe that our future success will depend in large part on our ability to
      attract and retain highly skilled scientific, technical and management
      personnel. We obtained loans from our Chairman and a major shareholder to pay
      for one year salary of our Chief Executive Officer and Director in June 2007.
      If
      we are unable to hire the necessary personnel, the development of our business
      will likely be delayed or prevented. Competition for these highly skilled
      employees is intense. As a result, we cannot assure you that we will be
      successful in retaining our key personnel or in attracting and retaining the
      personnel we require for expansion.






-13-
 Index




***We
      may be liable for products liability claims for which we have no
      insurance.***





Although
      we do not manufacture our products and the partners that we license our
      technologies to have their own products liability insurance coverage (under
      which we are covered or indemnified against such liabilities), we may be sued
      for products liability if products incorporating our patented technologies
      injure the end user. In the event that we are sued on this basis, liability
      claims could require us to spend significant time and money in litigation and
      pay significant damages that are not covered by insurance. As a result, any
      of
      these claims, whether or not valid or successfully prosecuted, could have a
      material adverse effect on our business and financial results.




***Failure
      to repay our loan obligations may severely impair our business operations,
      assets and your investment in the Company.***





If
      we are
      unable to successfully repay or restructure loans from our Chairman of the
      Board, or our other outstanding liabilities as they become due, we may have
      to
      liquidate our business and undertake any or all the steps outlined below:





·
            Significantly
                reduce, eliminate or curtail our business, operating and research
                and
                development activities so as to reduce operating
                costs;





·
            Sell,
                assign or otherwise dispose of our assets, if any, to raise cash
                or to
                settle claims by creditors, including our Chairman of the
                Board;





·
            Pay
                our liabilities in order of priority, if we have available cash to
                pay
                such liabilities;





·
            If
                any cash remains after we satisfy amounts due to our creditors, distribute
                any remaining cash to our stockholders in an amount equal to the
                net
                market value of our net assets;





·
            File
                a Certificate of Dissolution with the State of Nevada to dissolve
                our
                corporation and close our business;





·
            Make
                the appropriate filings with the Securities and Exchange Commission
                so
                that we will no longer be required to file periodic and other required
                reports with the Securities and Exchange Commission, if, in fact,
                we are a
                reporting company at that time; and





·
            Make
                the appropriate filings with the National Association of Security
                Dealers
                to affect a delisting of our stock.




***We
      have not paid cash dividends and it is unlikely that we will pay cash dividends
      in the foreseeable future. Investing in our securities will not provide you
      with
      income.***





We
      plan
      to use all of our earnings, to the extent we have earnings, to fund our
      operations. We do not plan to pay any cash dividends in the foreseeable future.
      We cannot guarantee that we will, at any time, generate sufficient surplus
      cash
      that would be available for distribution as a dividend to the holders of our
      common stock. You should not expect to receive cash dividends on our common
      stock.







-14-
 Index




***We
      have the ability to issue additional shares of our common stock, without asking
      for stockholder approval, which could cause your investment to be
      diluted.***





Our
      Articles of Incorporation currently authorize the Board of Directors to issue
      up
      to 100,000,000 shares of common stock. The authority of the Board of Directors
      to issue shares of common stock, or warrants or options to purchase shares
      of
      common stock, is generally not subject to stockholder approval. Accordingly,
      any
      additional issuance of our common stock may have the effect of further diluting
      your investment.




***We
      may raise additional capital through a securities offering that could dilute
      your ownership interest.***





We
      require substantial working capital to fund our business. If we raise additional
      funds through the issuance of equity, equity-related or convertible debt
      securities, these securities may have rights, preferences or privileges senior
      to those of the holders of our common stock. The issuance of additional common
      stock by our management will also have the effect of further diluting the
      proportionate equity interest and voting power of holders of our common
      stock.





***The
      market for our common stock is volatile. This affects both the ability of our
      investors to sell their shares, as well as the price at which they are able
      to
      sell their shares.***





The
      market price for our common stock is extremely volatile and is significantly
      affected by factors such as reports written by third parties, over whom we
      have
      no control, about our business and sales of large amounts of our common stock
      relative to our average volume. Furthermore, in recent years the stock market
      has experienced extreme price and volume fluctuations that are unrelated to
      the
      operating performance of the affected companies. These volatile conditions
      may
      make it difficult for you to sell our common stock at a price that is acceptable
      to you.





***There
      is a limited public market for our common stock and our stockholders may be
      unable to liquidate their shares.***





Our
      common stock is listed on the Over-the-Counter Bulletin Board, and there is
      a
      limited volume of sales, thus providing limited liquidity for our shares. As
      a
      result, stockholders may be unable to sell their shares in a timely
      manner.




***Our
      executive officers and directors control a large percentage of our common stock,
      which allow them to control matters submitted to stockholders for
      approval.***





Our
      executive officers and directors (and their affiliates), in the aggregate,
      own
      approximately 83% of our outstanding common stock, and a substantial majority
      of
      our outstanding voting stock. Therefore, our officers and directors have the
      ability to decide the outcome of matters submitted to our stockholders for
      approval (including the election and removal of directors and any merger,
      consolidation or sale of all or substantially all of our assets) and to control
      our management and affairs. This concentration of ownership may have the effect
      of entrenching management and delaying, deferring or preventing a change in
      control, impede a merger, consolidation, takeover or other business combination
      or discourage a potential acquirer from making a tender offer or otherwise
      attempting to obtain control, which in turn could have an adverse effect on
      the
      market price of our common stock.






-15-
 Index






**ITEM
              2.**
            **DESCRIPTION
              OF PROPERTY**






Our
      corporate headquarters are located at 3427 SW 42 nd Way,
      Gainesville, Florida. This 3,200 square foot premises is composed of two offices
      and an equipped laboratory. We pay monthly lease payments of $1,532 and our
      lease expires in March 2009






In
      accordance with a verbal agreement between our President and us, we lease and
      occupy 500 square feet of office space at the residence of our President in
      Boca
      Raton, Florida, which we use for administrative purposes. This space is provided
      to us at a fixed gross rental rate of $750 per month by our President. This
      lease has a month to month term.






We
      have
      invested from inception to date approximately $75,000 for leasehold improvements
      and equipment for our laboratory. Our offices and laboratory facilities are
      in
      good condition and are sufficient to conduct our operations.






We
      do not
      own real estate at this time and we have no agreements to acquire any
      properties.




**ITEM
              3.**
            **LEGAL
              PROCEEDINGS**






We
      are
      subject to disputes and litigation in the ordinary course of our business.
      None
      of these matters, in the opinion of management, is material or likely to result
      in a material adverse effect on us based upon information available to us at
      this time.




**ITEM
              4.**
            **SUBMISSION
              OF MATTERS TO A VOTE OF SECURITY
              HOLDERS**




Not
      applicable, as no matters were submitted to a vote of our security holders
      during the fourth quarter of the fiscal year 2007.








-16-
 Index







**PART
      II**




**ITEM
              5.**
            **MARKET
              FOR COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS**


**Market
      Information**




Our
      common stock began trading on September 4, 2002 on the OTC Bulletin Board under
      the symbol QMDT. The following table sets forth the range of high and low
      closing sale price per share obtained from www.stockwatch.com as reported by
      the
      OTC Bulletin Board for our common stock for the fiscal quarters indicated.
      The
      OTC Bulletin Board quotations


represent
      quotations between dealers without adjustment for retail mark-up, markdowns
      or
      commissions and may not represent actual transactions.






Year
                Ended
                2007**High**
            **Low**Fourth
                Quarter
            $1.01
            $0.60Third
                Quarter
            $1.35
            $0.70Second
                Quarter
            $1.70
            $0.80First
                Quarter
            $1.50
            $0.70








Year
                Ended
                2006**High**
            **Low**Fourth
                Quarter
            $2.35
            $1.15Third
                Quarter
            $2.55
            $0.66Second
                Quarter
            $1.08
            $1.11First
                Quarter
            $1.11
            $0.75







**Holders**




As
      of
      June 30, 2007, there were 65 holders of record of our common stock. We have
      one
      class of common stock, $0.0001 par value, outstanding.




**Dividends**




We
      have
      not declared or paid any cash dividends on our common stock since inception.
      We
      intend to retain our future earnings, if any, in order to finance the expansion
      of our business and we do not anticipate that any cash dividends will be paid
      in
      the foreseeable future. Our future dividend policy will depend on our earnings,
      capital requirements, expansion plans, financial condition and other relevant
      factors.




**Penny
      Stock Considerations**




Our
      shares are "penny stocks" which term is generally defined in the Securities
      Exchange Act of 1934 as equity securities with a price of less than $5.00.
      Our
      shares may be subject to rules that impose sales practice and disclosure
      requirements on broker-dealers who engage in certain transactions involving
      a
      penny stock.






-17-
 Index




Under
      the
      penny stock regulations, a broker-dealer selling a penny stock to anyone other
      than an established customer or "accredited investor" must make a special
      suitability determination regarding the purchaser and must receive the
      purchaser's written consent to the transaction prior to the sale, unless the
      broker-dealer is otherwise exempt. Generally, an individual with a net worth
      in
      excess of $1,000,000 or annual income exceeding $200,000 individually or
      $300,000 together with his or her spouse is considered an accredited investor.
      In addition, under the penny stock regulations the broker-dealer is required
      to:




§
            Deliver,
                prior to any transaction involving a penny stock, a disclosure schedule
                prepared by the Securities and Exchange Commission relating to the
                penny
                stock market, unless the broker-dealer or the transaction is otherwise
                exempt;




§
            Disclose
                commissions payable to the broker-dealer and its registered
                representatives and current bid and offer quotations for the
                securities;




§
            Send
                monthly statements disclosing recent price information pertaining
                to the
                penny stock held in a customer's account, the account's value, and
                information regarding the limited market in penny stocks;
                and




§
            Make
                a special written determination that the penny stock is a suitable
                investment for the purchaser and receive the purchaser's written
                agreement
                to the transaction, prior to conducting any penny stock transaction
                in the
                customer's account.




Because
      of these regulations, broker-dealers may encounter difficulties in their attempt
      to sell shares of our common stock, which may affect the ability of selling
      stockholders or other holders to sell their shares in the secondary market
      and
      have the effect of reducing the level of trading activity in the secondary
      market. These additional sales practices and disclosure requirements could
      impede the sale of our securities. In addition, the liquidity for our securities
      may be adversely affected, with a corresponding decrease in the price of our
      securities. Our shares are currently subject to such penny stock rules and
      our
      stockholders will, in all likelihood, find it difficult to sell their
      securities.




**Recent
      Sales of Unregistered Securities**




On April
      30, 2007, we issued 1,485 shares of our common stock to Ms. Sally MacKay in
      exchange for $1,381 worth of services rendered to us. The shares granted to
      Ms.
      MacKay were valued at price of $0.93 per share, for an aggregate price of
      approximately $1,381. We relied upon Section 4(2) of the Securities Act of
      1933,
      as amended (the “Securities Act”) for the offer and sale. We believed that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the stock certificate
      representing the shares issued to Ms. MacKay stating that the securities were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.




On
      May
      17, 2007, we sold 50,000 shares of common stock to Mr. Richard Eiferman for
      a
      price of $0.79 per share or in aggregate of $39,500 in cash. We relied upon
      Section 4(2) of the Securities Act for the offer and sale. We believed that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was no general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these securities issued to Mr. Richard Eiferman stating that the
      securities were not registered under the Securities Act and are subject to
      restrictions on their transferability and resale.




On June
      30, 2007, we issued 2,144 shares of our common stock to Ms. Sally MacKay in
      exchange for $1,544 worth of services rendered to us. The shares granted to
      Ms.
      MacKay were valued at price of $0.72 per share, for an aggregate price of
      approximately $1,544.  We relied upon Section 4(2) of the Securities Act
      for the offer and sale. We believed that Section 4(2) was available because
      the
      offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the stock certificate representing the shares issued
      to
      Ms. MacKay stating that the securities were not registered under the Securities
      Act and are subject to restrictions on their transferability and
      resale.




On June
        30, 2007, we issued warrants for the periods of April, May and June 2007
        to GSP
        Consulting, Inc. (“GSP”) entitling GSP to acquire up to 11,289 shares of common
        stock at exercise prices ranging from $0.72 to $0.93 per share, the then-current
        average market value of our common stock during these periods. This warrant
        was
        issued to GSP as partial payment for services rendered to us by GSP
        from April to June 2007. We relied upon Section 4(2) of the Securities
        Act for the offer and sale. We believed that Section 4(2) was available because
        the offer and sale did not involve a public offering and there was not general
        solicitation or general advertising involved in the offer or sale. We placed
        restrictive legends on the warrant certificate representing the warrant issued
        to GSP stating that the securities were not registered under the Securities
        Act
        and are subject to restrictions on their transferability and
        resale.






-18-
 Index




On July
      31, 2007, we issued 5,141 shares of our common stock to Ms. Sally MacKay in
      exchange for $3,136 worth of services rendered to us. The shares granted to
      Ms.
      MacKay were valued at price of $0.61 per share, for an aggregate price of
      approximately $3,136.  We relied upon Section 4(2) of the Securities Act
      for the offer and sale. We believed that Section 4(2) was available because
      the
      offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the stock certificate representing the shares issued
      to
      Ms. MacKay stating that the securities were not registered under the Securities
      Act and are subject to restrictions on their transferability and
      resale.




On August
      6, 2007, we granted an option to acquire 484,056 shares of common stock at
      an
      exercise price of $0.74 per share, the then current market value of our common
      stock to Mr. J Ladd Greeno as part of his employment compensation as our Chief
      Executive Officer and Director.  We relied upon Section 4(2) of the
      Securities Act for the offer and sale. We believed that Section 4(2) was
      available because the offer and sale did not involve a public offering and
      there
      was not general solicitation or general advertising involved in the offer or
      sale. We placed restrictive legends on the stock certificate representing the
      stock options issued to Mr. Greeno stating that the securities were not
      registered under the Securities Act and are subject to restrictions on their
      transferability and resale.




On September
      25, 2007, we granted an option to acquire 1,452,167 shares of common stock
      at an
      exercise price of $0.75 per share, the then current market value of our common
      stock to Mr. J. Ladd Greeno as part of his employment compensation as our Chief
      Executive Officer and Director.  We relied upon Section 4(2) of the
      Securities Act for the offer and sale. We believed that Section 4(2) was
      available because the offer and sale did not involve a public offering and
      there
      was not general solicitation or general advertising involved in the offer or
      sale. We placed restrictive legends on the stock certificate representing the
      stock options issued to Mr. Greeno stating that the securities were not
      registered under the Securities Act and are subject to restrictions on their
      transferability and resale.




**Securities
      Authorized for Issuance Under Equity Incentive Plans**




The
      following table sets forth information regarding awards made through
      compensation plans or arrangements through June 30, 2007, our most recently
      completed fiscal year.






Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted
                average exercise price of outstanding options, warrants and
                rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding outstanding securities shown
                herein)Equity
                compensation plans approved by security holders
            3,611,378
            $0.60
            1,034,396Equity
                compensation plans not approved by security holders
            N/A
            N/A
            N/ATotal
            3,611,378
            $0.60
            1,034,396




Our
      2001
      Equity Incentive Plan (The “Plan”) authorizes the issuance of options, right to
      purchase Common Stock and stock bonuses to officers, employees, directors and
      consultants. The Plan was amended and restated to increase the total number
      of
      shares available to 4,000,000 shares. We reserved 4,000,000 shares of our common
      stock for awards to be made under the 2001 Plan. The 2001 Plan is administered
      by a committee comprised of two or more members of the Board of Directors or,
      if
      no committee is appointed, then by the Board of Directors. The 2001 Plan allows
      for the issuance of incentive stock options (which can only be granted to
      employees), non-qualified stock options, stock awards, or stock bonuses. The
      committee, or the Board of Directors if there is no committee, determines the
      type of award granted, the exercise price, the option term, which may be no
      more
      than ten years, terms and conditions of 2001 and methods of exercise. Options
      must vest within ten years. The Plan description and its activities up to the
      fiscal year ended are disclosed in our financial statements for the fiscal
      year
      ended contained herein. The number of options under the 2001 Plan available
      for
      grant at June 30, 2007 was 1,034,396.




During
      the fiscal years ended, we also issued common stock warrants to the service
      providers including the consultants for their services rendered as part of
      their
      service agreements.  The terms of the warrants are similar to those of
      the stock options in terms of the exercise price, the warrant term, which may
      be
      no more than ten years.  Terms and conditions of these warrants are
      determined in the warrant agreements.




-19-
 Index




**ITEM
      6.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




The
      following discussion should be read in conjunction with our audited financial
      statements and related notes included therein. The terms "the Company," "we,"
      "our" or "us" refer to Quick-Med Technologies, Inc.  This discussion
      contains forward-looking statements based on our current expectations,
      assumptions, and estimates. The words or phrases "believe," "expect," "may,"
      "anticipates," or similar expressions are intended to identify "forward-looking
      statements." Actual results could differ materially from those projected in
      the
      forward-looking statements as a result of a number of risks and uncertainties
      pertaining to our business, including: (a) because we have a limited operating
      history and our technologies are still evolving, we may not be able to
      successfully manage our business or achieve profitability; (b) our technology
      and product development processes, which include substantial regulatory
      approvals, are lengthy and expensive and there is no assurance that we will
      have
      sufficient resources to complete development related to these processes; (c)
      our
      history of losses make it difficult for you to evaluate our current and future
      business and prospects and future financial results; (d) we have negative cash
      flow from operations and an accumulated deficit that raises substantial doubt
      about our ability to continue as a going concern; (e) our future business is
      dependent upon third parties to market, manufacture, and distribute our
      technologies and/or products or jointly developed products; (f) there is no
      assurance that our technologies or products that employ our technologies will
      be
      accepted in the marketplace; (g) we do not currently carry product liability
      insurance and should we be subject to product liability claims, our financial
      condition may be adversely affected; (h) our operations are currently funded
      by
      the revenues and our debt and equity financings, however, there are no
      assurances that such financings will be sufficient to ensure our future
      financial performance; (i) we have substantial debt obligations due to our
      Chairman of the Board and a major shareholder, who have funded our operations,
      debt obligations of which are secured by our assets and revenues and which
      are
      senior obligations; (k) there is no assurance that we will be able to attract
      and retain highly skilled scientific, technical and management personnel, who
      are critical to our success and (l) other risk factors discussed in our periodic
      filings, which may be accessed at http://www.sec.gov.  Statements made
      herein are as of the date of the filing of this Form 10-KSB/A with the
      Securities and Exchange Commission and should not be relied upon as of any
      subsequent date. Unless otherwise required by applicable law, we do not
      undertake, and we specifically disclaim any obligation, to update any
      forward-looking statements to reflect occurrences, developments, unanticipated
      events or circumstances after the date of such statement.




**Overview**




Quick-Med
      is a life sciences company focused on developing proprietary, broad-based
      technologies in the consumer, healthcare, and industrial markets. We call one
      of
      these technologies, “NIMBUS”, which stands for “Novel Intrinsically MicroBonded
      Utility Substrate”. NIMBUS is a family of advanced polymers that are
      bio-engineered to have antimicrobial, super-absorbent, hemostatic or other
      properties with applications across the medical device and consumer health
      care
      related products markets. Our other leading technology is called “MultiStatTM”,
      a family of advanced patent methods and compounds, which we believe may be
      highly effective in skin care therapy applications.




Our
      strategy is to further develop our core technologies as well as develop future
      technologies. We will attempt to commercialize these technologies through
      strategic licensing partnership agreements, joint ventures, or co-development
      agreements. We do not intend to manufacture or distribute final products;
      instead, we will seek partnership arrangements and/or license agreements with
      third parties to develop products that use our technologies and who will perform
      the manufacturing, marketing, and distribution functions associated with our
      technologies.




Our
      business model has attempted and will continue to attempt to develop the
      following revenue segments:




·
            License
                fees;


·
            Profit
                sharing revenues;


·
            Research
                and development fees paid to us in connection with joint development
                agreements; and


·
            Government
                research and development grants.




Our
      potential revenues will be derived from government agencies and the following
      types of companies in connection with our NIMBUS and MultiStatTM
technologies:




·
            Healthcare
                and medical;


·
            Apparel;


·
            Cosmetic;


·
            Personal
                care companies; and


·
            Building
                materials industry.








-20-
 Index




Uncertainties
      and Trends




Our
      revenues are dependent now and in the future upon the following factors:




·
            Acceptance
                of our products or future products in the marketplace;


·
            Our
                partner’s ability to develop, market and distribute our technologies under
                a strategic partnership agreement;


·
            Demand
                for products or future products that utilize our
                technologies;


·
            Our
                ability to secure license or profit sharing related agreements and
                secure
                government research and development grants;


·
            Our
                ability to market our services to health care, apparel, cosmetic,
                and
                personal care companies;


·
            Our
                ability to successfully conduct laboratory and clinical testing of
                our
                potential products; and


·
            Our
                ability to obtain regulatory approval of our future
                products.




Uncertainties
      or trends that may affect our business also include the possibility that known
      or unknown competitors may develop products with similar applications to our
      proposed products, which may prove to be superior in performance and/or price
      to
      our products.




**Capital
      Expenditures and Requirements**





From
      2000
      to 2007, we have spent approximately $720,000 on the acquisition of patents
      and
      exclusive license agreements. We owe an additional $160,000 to Dr. Richard
      Galardy which is due when certain milestones are met in connection with a
      September 2000 license agreement we have with Dr. Galardy and Dr. Damian
      Grobeiny. This license agreement provides that we compensate Dr. Galardy and
      Dr.
      Grobeny with our common stock and cash for the exclusive license of the
      Ilomastat technology invented by them.





We
      do not
      expect any significant additions to property, plant and equipment.





**Critical
      Accounting Policies and Estimates**




The
      preparation of our financial statements requires us to make estimates and
      assumptions that affect the reported amounts. The estimates and assumptions
      are
      evaluated on an on-going basis and are based on historical experience and on
      various other factors that are believed to be reasonable. Estimates and
      assumptions include, but are not limited to economic useful lives of fixed
      and
      intangible assets, income taxes, valuation of options and warrants granted
      and
      contingencies. We base our estimates on historical experience and on various
      other assumptions that are believed to be reasonable under the circumstances,
      the results of which form the basis for making judgments about the carrying
      values of assets and liabilities that are not readily apparent from other
      sources. Actual results may differ from these estimates under different
      assumptions or conditions. We believe the following critical accounting policies
      affect its more significant judgments and estimates used in the preparation
      of
      the financial statements. Our accounting for stock compensation requires us
      to
      estimate the value of the  shares
      issued and the value of intangible assets require us to continually assess
      whether such assets are impaired.






**Results
      of Operations**




***Comparison
      of Years Ended June 30, 2007 and 2006***





Revenues.  During
      the year ended June 30, 2007 we had revenues of $1,952,758, compared to
      $1,230,441 of revenues for the year ended June 30, 2006, representing a 59%
      increase in our revenues. Our
      revenues during the year ended June 30, 2007 consisted of: (a) $1,380,869,
      which
      represented our royalties from the product sales by a cosmetic and personal
      care
      division of BASF Catalysts, LLC, a wholly-owned subsidiary of BASF (“BASF”), in
      connection with a master agreement we have with BASF for product development,
      manufacturing and distribution (the “Master Agreement”); (b) $185,960 which
      represented the earned portion of the exclusive option fee, and the research
      and
      development fee from Hanesbrands
      Inc. (“HBI”) and the earned portion of the license fee from Derma Sciences,
      Inc.; and (c) $385,929, which represented the revenue earned from the small
      business innovation research program and the US Army research on the development
      of Ilomastat for treatment of sulfur mustard injuries on the eye and skin
      program (the “US Army research program”) .





Our
      revenues during the year ended June 30, 2006 consisted of: (a)
      $1,157,941, which represented our royalties from the product sales ($982,941)
      and the license fee for exclusivity ($175,000) by BASF
      Catalysts, LLC, a wholly-owned subsidiary of BASF ; 
      (b) $2,500 which represented a pro rata share of the fees related to a research
      agreement unrelated to our core technologies, which was completed in July 2005;
      and (c) $70,000 which represented the revenue earned from the small business
      innovation research program.





Effective
      April 23, 2007, we were awarded a $1 million military contract for research
      on
      the “Development of Ilomastat for Treatment of Sulfur Mustard Injuries to Eye
      and Skin.” The award was provided under the Department of Defense (“DoD”)
      Appropriation Act for Fiscal 2006 and was issued by U.S. Army Medical Research
      Acquisition Activity (“USAMRAA”), an agency of the DoD. The term of the contract
      is for one year from the effective date and the total amount of the contract,
      net of the overhead charged by USAMRAA, is approximately $880,000.





Effective
      February 1, 2007, we and HBI entered into a Development and Exclusive Option
      Agreement (the “Agreement”). Under the Agreement, we granted to HBI an exclusive
      option (the “Option”) for a period of six months (“Option Period”) to obtain an
      exclusive license to our technology relating to certain products produced by
      HBI
      (the “License Agreement”). In consideration for the Option, HBI is obligated to
      pay the Company $45,000 every three month period during the Option Period.
      During the Option Period, HBI will run and complete certain studies, and upon
      the conclusion of these studies, HBI will provide us with notice of the final
      decision with respect to entering into the License Agreement. In September
      2007,
      we were informed that HBI decided, for internal reasons unrelated to our
      technology, not to complete these studies and we and HBI mutually agreed
      not to extend the Option Period.




-21-
 Index




In
        August
        2006, we finalized a certain Letter of Intent (“LOI”) with BASF to amend the
        Master Agreement to grant BASF an exclusive license to develop and market
        our
        Ilomastat product for the field of over-the-counter anti-aging cosmetics
        and
        nonexclusive license for the field of over-the-counter acne treatments and
        skin
        moisturizers in the cosmetics market. In consideration for this license,
        as
        amended, we are entitled to receive certain minimum royalty payments through
        the
        LOI effective period of August 1, 2007. We are currently negotiating with
        BASF
        to complete a successor license agreement. Should we be unable to successfully
        complete the successor license agreement, our results of operations and
        financial condition would be materially affected.




Research
      and Development Expense. Research
      and development expense increased by $390,006 or 34% to $1,526,857 for the
      year
      ended June 30, 2007, from $1,136,851 for the year ended June 30, 2006. The
      increase in research and development expense is primarily attributable to the
      expenses related to the US Army research program, an addition of two (2)
      scientists, increased compensation to our head of research and development
      department and research team, increased research projects, and increased usage
      of scientific consulting services.





General
      and Administrative Expense .
      General
      and administrative expense increased by $168,924 or 14% to $1,342,072 for the
      year ended June 30, 2007, from $1,173,148 for the year ended June 30, 2006. This
      increase in our general and administrative expenses is primarily attributed
      to
      an increase of $217,534 in financing related expenses, and personnel recruiting
      fees. Further, there were additional consulting expenses incurred in 2007,
      increased promotional and sales expenses related to product sales under the
      master agreement for product development, manufacturing and distribution as
      mentioned above offset by a reduction in other operating expenses.





Licensing
      and Patent Expense .
      Licensing and patent expense increased modestly by $1,303 or 0.4% to $321,263
      for the year ended June 30, 2007 from $319,960 for the year ended June 30,
      2006.
      This very slight increase was primarily due to the level of utilization of
      the
      consulting legal patent services and legal licensing services including
      licensing negotiation during the period.





Other
      Income. During
      the year ended June 30, 2007, we had $166,500 in other income, which represented
      a payment from a
      cosmetic and personal care division of BASF Catalysts, LLC, for the
      transfer of all
      right, title and interest of the formulations utilized our proprietary compound,
      that were customized by BASF for the customers held by us back to BASF. However,
      we did not transfer the intellectual property rights of our proprietary
      compound. There was no such transaction during the year ended June30,
      2006.





Interest
      Income. During
      the year ended June 30, 2007, we had $935 in interest income , a
      decrease of $10,703 or 92% from $11,638 for the year ended June 30, 2006. The
      amounts represented interest earned on our certificate of deposits and money
      market account funded by the revenues and or equity financings during the
      periods.





Interest
      Expense. Interest
      expense for the year ended June 30, 2007 increased $20,363 or 27% to $96,368
      compared to $76,005 the year ended June 30, 2006. This increase was due to
      an
      increase of approximately $210,000 or 15% in the average outstanding loan
      balance due to our Chairman and a major stockholder, to approximately
      $1,610,000, compared to approximately $1,400,000 average outstanding balance
      for
      the comparable 2006 period.





Net
      Loss. Net loss
      for the year ended June 30, 2007 was $1,506,018 or $0.05 per share compared
      to
      $1,701,064 or $0.06 per share for the year ended June 30, 2006. This decrease
      is
      primarily attributable to an increase in revenues, a one-time payment for the
      transfer of the intellectual property as described above, offset by the
      increases in research and development expenses, general and administrative
      expenses, and licensing and patent expenses.






-22-
 Index




**Liquidity
      and Capital Resources**




Our
      auditors have issued a going concern opinion on our audited financial statements
      for the fiscal years ended June 30, 2007 and 2006 as we have experienced
      recurring losses and negative cash flows from operations in these periods.
      In
      addition, we have a net capital deficiency. These matters raise substantial
      doubt about our ability to continue as a going concern.





Total
      cash on hand at June 30, 2007 was $115,719 as compared with $56,174 at March
      31,
      2007. Further, we collected approximately $320,000 of the $385,596 in
      outstanding receivable balance at June 30, 2007 and the remainder is due within
      a short period of time. On June 14, 2007, we received commitment of a total
      of
      $750,000 in funding from our Chairman and a major stockholder ($375,000 each),
      of which approximately $250,000 are allocated to pay for the Chief Executive
      Officer salary for the next twelve months. As of June 30, 2007, we received
      approximately $450,000, of which approximately $278,000 were used to pay our
      liabilities in the fourth quarter ended June 30, 2007. On July 30, 2007, we
      received an additional $75,000 from our Chairman. The remainder $250,000 is
      to
      be funded by a major stockholder. As of September 10, 2007, we received
      approximately $46,000 in cash as part of the SBIR Phase II grant.





In
      September 2006, we received the SBIR Phase II grant, which included including
      the option of SBIR Phase I, totaling approximately $840,000 over the next two
      years and we expect the cash outflows related to this grant of approximately
      $390,000 to subcontractors and other direct expenses. To date, we received
      approximately $178,000 and incurred approximately $42,000 in expenses to
      subcontractors and other direct expenses. Effective April 23, 2007, we were
      awarded a twelve month military contract of approximately $880,000, net of
      overhead charged by USAMRAA. The expected cash outflows during the term of
      this
      military award will be approximately $610,000 for scientific experiments and
      other direct expenses. In addition, our current joint development and exclusive
      option agreement and license agreements with our clients provided for minimum
      contractual payments to us of approximately $140,000 in the next six months
      period, while the related cash outflows will be approximately $20,000 during
      the
      same period. While we expect to receive royalties in the next twelve to twenty
      four months from these agreements subject to certain contractual terms, we
      need
      cash in order to maintain and grow our businesses. See the section below for
      further discussion of our cash requirements and related strategies to meet
      these
      needs.




Equity
      Financing and our Cash Requirements




On
      November 30, 2004, we completed an agreement to sell 5,000,000 shares of our
      restricted common stock to Phronesis Partners, L.P. (“Phronesis”), a Delaware
      limited partnership, for $1,000,000 before commission and expenses (the ”Stock
      Purchase Agreement”). On November 30, 2004, we received $880,000 net of
      commission and expenses of $120,000. In connection with the Stock Purchase
      Agreement, our Chairman of the Board, Mr. Granito, converted $500,000 of the
      convertible debt we owed to him into 1,315,790 shares of our restricted common
      stock at a conversion price applicable to the convertible debt of $0.38 per
      share. In connection with the Stock Purchase Agreement, we completed a Warrant
      Agreement with Phronesis, in which we granted Phronesis certain warrants to
      purchase shares of our restricted common stock at an exercise price as defined
      in the Warrant Agreement. The Warrant Agreement expired on February 5, 2005
      and
      provided for a maximum investment of $1,000,000 by Phronesis through the
      exercise of warrants. On December 31, 2004, Phronesis and we agreed to amend
      the
      exercise price for the warrant price to $0.46 per share. All other terms of
      the
      Stock Purchase Agreement and the Warrant Agreement remained the same. On the
      same date, Phronesis exercised its warrant to purchase 2,173,913 shares of
      our
      restricted common stock at a per share price of $0.46, or an aggregate purchase
      price of $1,000,000 before commission of $70,000.





In
      connection with the exercise of the warrant and in accordance with the terms
      of
      the Stock Purchase Agreement, Mr. Granito, our Chairman of the Board,
      immediately converted $826,087 of his convertible debt owed by us into 2,173,913
      shares of our restricted common stock (equal to the number of shares acquired
      by
      Phronesis) at a conversion price applicable to the convertible debt of $0.38
      per
      share.





In
      July
      2005, we issued 40,322 shares of restricted common stock for an aggregate
      purchase price of $25,000 in cash.




In
      August
      2005, we issued 13,795 shares of restricted common stock for an aggregate
      purchase price of $8,553 in cash.




In
      August
      2005, we issued 175,000 shares of restricted common stock for an aggregate
      exercise price of $29,750 in cash from an exercise of a stock
      option.




In
      February 2006, we issued 80,000 shares of restricted common stock for an
      aggregate purchase price of $80,000 in cash.





In
      September 2006, we issued 33,334 shares of common stock for aggregate exercise
      price of $5,000 in cash from an exercise of an employee stock
      option.






-23-
 Index




In
      February 2007, we issued 30,000 shares of common stock for an aggregate exercise
      price of $6,000 in cash from an exercise of a warrant by an
      officer.





In
      May
      2007, we issued 100,000 shares of restricted common stock for an aggregate
      purchase price of $79,000 in cash.





In
      June
      2007, we issued 67,500 shares of common stock for an aggregate exercise price
      of
      $12,150 , of which $12,000 was a settlment of payable and $150 in cash from
      an
      exercise of a warrant.




Based
      on
      our cash position at June 30, 2007, we cannot continue to satisfy our
      current cash requirements for a period of twelve (12) months through our
      existing capital. We anticipate total estimated patent related legal fees,
      operating and research and development expenditures of approximately $176,000
      per month or an aggregate of approximately $2,122,000 over the next twelve
      (12)
      months, in the following areas:





·
            Research
                and development expenditures of approximately $81,000 per month or
                an
                aggregate $972,000 over the next twelve (12) months, which will consist
                of
                the following estimated monthly expenditures: (a) $56,000 in payroll
                for
                scientists; (b) $10,000 for outside research and development expenditures;
                and (c) $15,000 for chemical supplies, and laboratory operating expenses,
                including rent expense;




·
            Patent
                related legal fees of approximately $20,000 per month or an aggregate
                $240,000 annually; and





·
            Operating
                expenses of approximately $75,000 per month or an aggregate $900,000
                over
                the next twelve (12) months, including personnel costs, officer and
                director insurance, general liability insurance, rent, consulting
                fees,
                utilities, legal and accounting fees, and payroll.





Our
      current cash balance of $115,719 as of June 30, 2007, coupled with
      collection on accounts receivable of approximately $385,596, of which
      approximately $200,000 are allocated to payment of certain expenses including
      salary, the receipt of $75,000 in July 2007 and the availability of
      approximately $125,000 out of the bridge funding commitment of approximately
      $750,000 from our Chairman and a major stockholder, and the receipt of
      approximately of $46,000 from the research grant will satisfy our cash
      requirements for approximately less than three (3) months assuming no
      further receipt of revenues. If we are unable to satisfy the remainder of these
      obligations by equity and or debt financing, we will be unable to satisfy our
      cash requirements beyond approximately three (3) months assuming no further
      receipts of revenues.




If
      needed, we intend to raise additional cash by means of equity and or debt
      financing. Additionally, we plan to implement cash conservation strategy by
      extinguishing obligations through share-based payments and reducing our use
      of
      consulting services. There are no assurances that any planned equity offering
      and/or debt financing will be successful or sufficient to meet our cash
      requirements if that our cash conservation strategy will be
      successful.





As
      of
      June 30, 2007, we have three senior convertible notes payable outstanding to
      our
      Chairman totaling $1,818,147 including accrued interest with interest rates
      ranging from 6% to 8% per annum and a maturity date of June 2010. These notes
      are convertible at conversion prices ranging from $0.38 to $$0.74 per share
      and
      are secured by our revenues and assets. We also have a $375,000 senior
      convertible note payable to a major stockholder, of which $125,000 has been
      funded as of June 30, 2007 and the balance was funded on or about September
      28,
      2007. The senior convertible note has 8% interest rate per annum with a
      conversion price of $0.74 per share and a maturity date of 2010, and is secured
      by our revenues and assets.






-24-
 Index




If
      we are
      unable to successfully repay our loans to our Chairman and a major stockholder,
      we may have to liquidate our business and undertake any or all the steps
      outlined below.




·
            Significantly
                reduce, eliminate or curtail our business, operating and research
                and
                development activities so as to reduce operating costs;


·
            Sell,
                assign or otherwise dispose of our assets, if any, to raise cash
                or to
                settle claims by creditors, including our Chairman of the
                Board;


·
            Pay
                our liabilities in order of priority, if we have available cash to
                pay
                such liabilities;


·
            If
                any cash remains after we satisfy amounts due to our creditors, distribute
                any remaining cash to our shareholders in an amount equal to the
                net
                market value of our net assets;


·
            File
                a Certificate of Dissolution with the State of Nevada to dissolve
                our
                corporation and close our business;


·
            Make
                the appropriate filings with the Securities and Exchange Commission
                so
                that we will no longer be required to file periodic and other required
                reports with the Securities and Exchange Commission, if, in fact,
                we are a
                reporting company at that time; and


·
            Make
                the appropriate filings with the National Association of Security
                Dealers
                to affect a delisting of our stock.




Based
      upon our cash requirements for our Plan of Operations and our current dividend
      policy of investing any available cash to our operations, however, we do not
      plan to distribute any cash to our stockholders.




At June
      30, 2007, we had a negative working capital of $369,882 that primarily consists
      of: (a) cash of $115,719; (b) accounts receivable of $385,596; (c) accounts
      payable of $766,685, (d) accrued expenses of $16,298, and (e) unearned revenue
      of $88,214.  At June 30, 2007, we had a stockholders’ deficit of
      $2,011,261, a substantial portion of which is due to non-cash stock compensation
      expense and non-cash interest expense from the notes payable conversions.





Cash
      used
      in operating activities was $427,215 for the year ended June 30, 2007.
      Net cash used in investing activities was $228,658.  Net cash provided by
      financing activities was $587,450, of which $79,000 was from the sale of our
      restricted common stock, $23,150 from the exercise of 130,834 stock options
      and
      warrants, the borrowings and repayments of $19,500 to an officer, and $303,600
      from our Chairman as part of the $375,000 senior convertible note and $125,000
      from a major stockholder as partial funding of the $375,000 senior convertible
      note.





During
      the year ended June 30, 2006, we received (a) $113,553 from the sale of our
      restricted common stock; (b) $29,750 from the exercise of the 175,000 stock
      options; and (c) $132,950 from our Chairman under a long-term note
      payable.




During
      the period from April 1, 2006 to June 30, 2006, approximately $4,550 of accounts
      payable was settled through the issuance of 2,910 shares of restricted common
      stock.






-25-
 Index




**Contractual
      Obligations And Commercial Commitments**




The
      following table summarizes our contractual obligations and commercial
      commitments as of June 30, 2007:




Significant
                Obligations
            Total
            Within
                1 Year
            2-3
                Years
            4-5
                Years
            After
                5 YearsCapital
                Leases
            $-Operating
                Leases
            $40,598
            $18,384
            $22,214
            $-
            $-







We
      are
      committed under lease for our Gainesville, Florida office and laboratory
      facilities. This lease expires in March 2009. We do not have any capital
      leases.






**ITEM
      7.**  **FINANCIAL
      STATEMENTS**




The
      information required by this item is included in pages F-1 to F-17 attached
      hereto and incorporated herein by reference. The index to our annual financial
      statements as of and for the years ended June 30, 2007 and 2006 can be found
      on
      pages F-1.






**ITEM
      8.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**






None.






**ITEM
      8A.**  **Controls
      and Procedures**







*Evaluation
      of Disclosure Controls and Procedures*




Based
      on
      our management’s evaluation, with the participation of our principal executive
      officer and Chief Financial Officer, of our disclosure controls and procedures
      (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
      "Exchange Act")), our principal executive officer and our Chief Financial
      Officer have concluded that as of June 30, 2007, the end of the period covered
      by this amendment no. 1 to the Annual Report on Form 10-KSB/A, such disclosure
      controls and procedures are effective to ensure that information required to
      be
      disclosed by us in reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in Securities and Exchange Commission rules and forms.




*Changes
      in Internal Controls over Financial Reporting*




As
      of the
      end of our fiscal year ended June 30, 2007, there was no change in our internal
      controls over financial reporting that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.







**ITEM
      8B.**  **Other
      Information**





Michael
      Granito and we agreed to extend the maturity date of our note for an outstanding
      amount of approximately $1.27 million originally dated September 30, 2003 to
      July 13, 2010.





We
      also
      issued two 8% secured convertible promissory notes to each of Michael Granito
      and Phronesis Partners, L.P., a major stockholder, each in the principal amount
      of $375,000. The notes expire on July 13, 2010 and June 27, 2010 and are secured
      by our revenues and assets. The notes are convertible into our common stock
      based on the fair market value of our stock on the date that the purchase price
      for the notes were delivered to us. We also entered into an intercreditor
      agreement with the lenders regarding the rights among the lenders.








-26-
 Index







**PART
      III**






**ITEM
              9.**
            **DIRECTORS, EXECUTIVE OFFICERS,
              PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
              EXCHANGE ACT**




The
      following table sets forth the names, ages and positions held for our directors,
      executive officers and significant employees.




Our
        executive officers, key employees and directors are as follows:
 
 **Name**
              **Age**
              **Position**Michael
                  R. Granito
              56
              Chairman
                  of the BoardJ.
                Ladd Greeno
              58
              Chief
                  Executive Officer and DirectorDavid
                  S. Lerner
              54
              Founder,
                  President, and DirectorGeorge
                  E. Friel
              65
              Vice
                  President, Chemical & Biological Affairs, and
                  DirectorPaul
                  G. Cerjan
              69
              Vice
                  President, Worldwide Military Affairs, and DirectorGerald
                  M. Olderman
              74
              Vice
                  President, Research & Development and Commercialization, and
                  DirectorGregory
                  S. Schultz
              57
              Vice
                  President, Laboratory & Clinical Research, and
                  DirectorRichard
                  F. Caffrey
                Cheryl
                  L. Turnbull
              65
                47
              Director
                DirectorNam
                  H. Nguyen
              50
              Chief
                  Financial OfficerNatasha
                  A. Sorobey
              38
              Corporate
                  Secretary, and Corporate & Investor
                  Relations








**Mr.
      Granito** has
      served as our Chairman since July 2000. In September 2003, Mr. Granito joined
      Federated Investors, Inc. as senior vice president and head of capital market
      research.  From July 1979 to December 2002, Mr. Granito was the managing
      director and head of capital market research of J.P. Morgan Fleming Asset
      Investment Management located in New York City. From 1984 through 1996 he served
      as an adjunct Professor of Finance at Yale University and New York University.
      Mr. Granito has authored a book and 14 papers on finance and foreign exchange
      topics. In 1973, Mr. Granito earned a B.S. and a B.A. in Economics from the
      University of Pennsylvania.




**Mr.
        Greeno** has
        served as our Chief Executive Officer since August 2007 and as our Director
        since September 2007. From 2003 to 2006, Mr. Greeno was President and Chief
        Executive Officer of Agion Technologies, a leading provider of ionic silver
        antimicrobials. Before joining Agion, Mr. Greeno held a number of senior
        management positions at the global management and technology consulting firm,
        Arthur D. Little, Inc., (ADL) including Chief Operating Officer and senior
        vice
        president in charge of the firm’s North American Management Consulting business.
        Mr. Greeno began his consulting career in ADL’s Strategy & Organization
        practice and then moved into leadership roles successfully building ADL’s
        worldwide Environmental, Health, and Safety Consulting business. Mr. Greeno
        received an M.B.A. from Harvard Business School and a B.B.A from the University
        of Oklahoma.






-27-
 Index






**Mr.
      Lerner** has
      served as our President and Director since December 1997 and has been engaged
      in
      the formation and development of our Company since 1995. Mr. Lerner has 20
      years
      experience in international and domestic manufacturing, marketing, sales, and
      business development in Asia, Europe, South America, and Mexico. He has
      successfully managed export financing activities, including letter of credit
      and
      manufacturing arrangements. Mr. Lerner earned his B.A. in 1976 from Queens
      College of the City University of New York.




**Major
      General Friel (Ret.)** has
      served as our director from July 2000. MG. Friel has been self-employed as
      a
      consultant to various organizations in the defense industry since September
      1998. MG. Friel served in the U.S. Army from 1960 to 1998. He was the commanding
      general of the U.S. Army Chemical and Biological Defense Command, at the
      Aberdeen Proving Ground in Maryland from August 1992 to August 1998 and deputy
      chief of staff for Chemical and Biological Matters of the Army Material Command
      in Virginia, during the same time. MG. Friel was also responsible for a $600
      million annual budget for the Nuclear, Biological, and Chemical Defense Command
      for six years and directed over 1,100 scientists and engineers. MG. Friel has
      also served as chairman of the boards of the Nuclear, Biological, and Chemical
      Defense Enterprise at the Edgewood Arsenal in Maryland and the U.S. Army
      Material Command, Acquisition and Procurement Enterprise. MG. Friel earned
      an
      M.B.A. from Northwest Missouri State University and a B.S. from the University
      of Nebraska. He is a graduate from the U.S. Army Chemical School, The Army
      Command and General Staff College and The Industrial College of the Armed
      Forces. He was a director for Engineer Support Systems, Inc from September
      1998
      until January 2006.




**Lieutenant
      General Cerjan**  **(Ret.)** has
      served as our
      director since
      July 2000. Lt.G. Cerjan is currently President of L-3 Government Services,
      Inc.
      (L-3 GSI). Prior to joining L-3 GSI, Lt.G. Cerjan was vice president, program
      manager of KBR, a subsidiary of Halliburton Company, responsible for LOGCAP
      III
      Middle East/Central Asia. LOGCAP III ME/CA operates in eight countries with
      approximately 53,000 employees and subcontractors and has an annual operating
      budget of approximately $10 billion. From July 2002 until June 2004, Lt.G.
      Cerjan was President and CEO of the National Defense University Foundation
      and
      from December 1997 to September 2000, President of Regent University in
      Virginia. Prior to 1997, Lt.G. Cerjan served as Director of Intelligent
      Transportation Systems for Lockheed Martin Corporation from August 1994 to
      October 1997. He was in the U.S. Army from 1960 to 1994. Key military
      assignments included servicing as the Deputy Commander in Chief, U.S. Army,
      Europe and Seventh Army; Commander, 21 st Theater
      Army Area Command, U.S. Army, Europe; President of the National Defense
      University and Commandant of the Army War College. Lt.G. Cerjan has an M.S.
      degree in construction management from Oklahoma State University, and a B.S
      in
      engineering from the U.S. Military Academy at West Point. He is a registered
      professional engineer in the state of  Virginia.
      Lt.G. Cerjan is a member of the board of directors of the Army Engineer
      Association; a member of the advisory board for NATO Political/Military
      Workshop; a member of the Council on Foreign Relations; and a member of the
      advisory board of JINSA.




**Mr.
      Olderman** has
      served as our Vice President, Research & Development and Commercialization
      since July 1997, and as our Director since July 2000. Mr. Olderman brings 35
      years of healthcare experience, 31 years of technical management experience,
      and
      25 years serving as the head of research and development activities for fortune
      500 companies. Since November 1996, Mr. Olderman was Vice President and
      Associate of R.F. Caffrey & Associates Inc., a management consultant to
      medical device companies and suppliers. Prior to joining R.F. Caffrey &
Associates, Mr. Olderman served as Director and head of research and development
      for C.R. Bard, Inc.'s Cardiopulmonary Division, where he organized a new product
      development process in which 19 new medical devices were developed. Mr. Olderman
      also served as Vice President for domestic and international research and
      development for the Pharmaceutical Division of Baxter Healthcare Corp.
      and Vice President for research and development for the Converters, a division
      of American Hospital Supply Corporation prior to its acquisition by Baxter
      Healthcare Corporation, where he led product development and made material
      changes that helped increase market share from 30% to 45% within a $750 million
      market. Mr. Olderman has also served as Vice President for research and
      development and as a director for Surgikos, Inc. a subsidiary of Johnson &
Johnson. Mr. Olderman received a B.S in Chemistry from Rensselaer Polytechnic
      Institute in New York. He also holds an M.S. in Physical Chemistry and a Ph.D.
      in Physical Chemistry from Seton Hall University in New Jersey.






-28-
 Index




**Mr.
      Schultz** has
      served as our Vice President, Laboratory and Clinical Research and Director
      since July 2000. From 1999 through 2001, Mr. Schultz served as the President
      of
      the Wound Healing Society, and has worked as a consultant for 12 major
      biotechnology companies.  In 1989, he was appointed Professor of
      Obstetrics/Gynecology and Director of the Institute for Wound Research in the
      College of Medicine at the University of Florida at Gainesville, Florida. 
He has published over 200 research articles and book chapters that have been
      cited over 4,000 times.  He has been continuously funded by major grants
      from the National Institutes of Health and supported by grants from the U.S.
      Army grant on treatment of burns with growth factors.  Mr. Schultz earned a
      doctorate in biochemistry from Oklahoma State University and postdoctoral
      fellowship in cell biology at Yale University in Connecticut .




**Mr.
      Caffrey** has
      served as our Director since March 2004. Mr. Caffrey has more than twenty years
      of corporate experience, including marketing research, strategic planning,
      business development and management recruiting, in both senior-line and
      senior-staff positions. Mr. Caffrey is currently the president of R.F. Caffrey
      & Associates, Inc., a full service marketing consulting practice that offers
      assistance to participants in the healthcare, industrial, and consumer related
      markets. Previously, Mr. Caffrey was vice president of John R. Starr, Inc.,
      a
      management consulting firm; president, and chief operating officer of CPM Inc.,
      a New England based specialty paper company; vice president of sales and
      marketing of Codman & Shurtleff, Inc. (subsidiary of Johnson & Johnson
      Company), a surgical instruments and equipment company; group product director
      of Surgikos, Inc. (subsidiary of Johnson & Johnson Company), a marketer of
      medical products and supplies; vice president, business development of Chicopee
      (subsidiary of Polymer Group, Inc. whose major holdings are controlled by
      InterTech Group), a non-woven fabrics supplier; and marketing research manager
      of Sealtest Foods. He holds both B.S. and M.B.A. degrees in Business
      Administration from Seton Hall University.




**Ms.
      Turnbull** has
      served as our Director since January 2006. Ms. Turnbull has 20+ years of
      experience encompassing private equity investments, mergers and acquisitions,
      corporate finance, and strategic advisory services. Ms. Turnbull is a Special
      Limited Partner at Phronesis Partners LP, a Columbus, Ohio-based hedge fund,
      since January 2005. From 1996 to 2003, Ms. Turnbull was responsible for the
      mezzanine investment functions of various units of Banc One Corporation. Prior
      to that time, Ms. Turnbull was a Managing Director of Aston Limited Partners,
      LP, a financial restructuring firm between 1992 and 1995. Between 1990 and
      1991,
      Ms. Turnbull was Vice President of Prudential Bache Interfunding, a private
      equity fund and, from 1987 to 1990, an Associate in the Mergers &
Acquisitions department of Prudential Securities. Ms. Turnbull began her career
      as an Analyst in the Corporate Finance Division at Continental Illinois National
      Bank & Trust Co. Ms. Turnbull received her MM from the J.L. Kellogg Graduate
      School of Management at Northwestern University, and is a graduate of Miami
      University.




**Mr.
      Nguyen** has been
      our Chief Financial Officer since August 2004. Since January 2003, he has
      provided accounting services through his professional firm. From November 2003
      until July 2004, Mr. Nguyen served as acting Secretary. Mr. Nguyen is currently
      president of his public accounting firm, Nam H. Nguyen, CPA, P.A. Mr. Nguyen
      was
      a Manager of Financial Controls of W. R. Grace & Co., responsible for its
      risk-based global audit plan for its worldwide operations. He was Vice President
      of Financial Reporting of John Alden Financial Corporation with responsibilities
      for the SEC filings and state insurance filings in the United States. A
      certified public accountant, who has worked for PricewaterhouseCoopers LLP,
      as a
      senior manager, Mr. Nguyen specialized in the insurance and health care business
      in both the United States and Europe. Mr. Nguyen is also a Certified Internal
      Auditor.




**Ms.
      Sorobey** joined
      us in September 2003 to assist with Corporate and Investor Relations. In August
      2004, Ms. Sorobey was appointed as Corporate Secretary. Ms. Sorobey’s
      responsibilities include corporate governance and investor relations. From
      September 1996 to April 2001, Ms. Sorobey was Corporate Secretary and investor
      relations representative for Centrinity Inc., a leading provider of Unified
      Communications and collaborative software solutions.




The
      above
      listed officers and directors will serve until the next annual meeting of the
      stockholders or until their death, resignation, retirement, removal, or
      disqualification, or until their successors have been duly elected and
      qualified. Vacancies in the existing board are filled by majority vote of the
      remaining directors. Our officers serve at the will of the board. There are
      no
      family relationships between any of the executive officers and directors.




No
        officer, director, or persons nominated for such positions, promoter or
        significant employee has been involved in legal proceedings that would be
        material to an evaluation of our management.




-29-
 Index




Our
      directors, executive officers and control persons have not been involved in
      any
      of the following events during the past five years:




1.
            any
                bankruptcy petition filed by or against any business of which such
                person
                was a general partner or executive officer either at the time of
                the
                bankruptcy or within two years prior to that
                time;




2.
            any
                conviction in a criminal proceeding or being subject to a pending
                criminal
                proceeding (excluding traffic violations and other minor
                offenses);




3.
            being
                subject to any order, judgment, or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities or banking activities;
                or




4.
            being
                found by a court of competent jurisdiction (in a civil action),the
                Commission or the Commodity Futures Trading Commission to have violated
                a
                federal or state securities or commodities law, and the judgment
                has not
                been reversed, suspended, or
                vacated.




**Committees
      of the Board of Directors**




*Executive
      Committee* .
      Our
      Executive Committee is composed of Michael R. Granito, our Chairman of the
      Board, David S. Lerner, our President, and Directors Paul G. Cerjan and George
      E. Friel. This committee’s chairman is Paul G. Cerjan. This committee acts for
      our Board of Directors when a meeting of the full board is not
      practical.




*Compensation
      Committee* .
      The
      Compensation Committee is composed of George E. Friel, Gerald M. Olderman,
      and
      Paul G. Cerjan and is chaired by Paul G. Cerjan. This committee approves,
      administers and interprets our compensation and health benefits, including
      our
      executive incentive programs. Additionally, this committee reviews and makes
      recommendations to our Board of Directors to ensure that our compensation and
      benefit policies are consistent with our compensation philosophy and corporate
      governance principles. This committee is also responsible for establishing
      our
      Chief Executive Officer or principal executive officer’s
      compensation.




*Audit
      Committee* .
      The
      Audit Committee is composed of George E. Friel, Michael R. Granito, Richard
      F.
      Caffrey, and Cheryl L. Turnbull and is chaired by George E. Friel. This
      committee has general responsibility for the oversight and surveillance of
      our
      accounting, reporting and financial control practices. Among other functions,
      the committee retains our independent public accountants.




*Licensing
      Committee* .
      The
      Licensing Committee is composed of Cheryl L. Turnbull, Michael R. Granito,
      David
      Lerner and Richard F. Caffrey and is chaired by Richard F. Caffrey. This
      committee has general responsibility for the review of the licensing terms
      and
      agreements with our business partners and to recommend them to the Board of
      Directors for approval as appropriate.




**Audit
      Committee Financial Expert**




Currently,
      we do not have an Audit Committee “financial expert”.  No
      individual on our Board of Directors possesses all of the attributes of an
      audit
      committee financial expert and no one on our Board of Directors is deemed to
      be
      an audit committee financial expert. In forming our Board of Directors, we
      sought out individuals who would be able to guide our operations based on their
      business experience, both past and present, or their education. Our business
      model is not complex and our accounting issues are straightforward.
      Responsibility for our operations is centralized within management, which is
      comprised of four people. We rely on the assistance of others, such as our
      accountant, to help us with the preparation of our financial information. We
      recognize that having a person who possesses all of the attributes of an audit
      committee financial expert would be a valuable addition to our Board of
      Directors, however, we are not, at this time, able to compensate such a person
      therefore, we may find it difficult to attract such a candidate.




**Code
      of Ethics**




We
      have
      adopted a Code of Ethics for our board members, our principal executive and
      senior financial officers, our other officers and our employees. A copy of
      this
      Code of Ethics is located on our website at www.quickmedtech.com .
      We
      intend to post any waivers of or amendments to our Code of Ethics on our
      website.




**Compliance
        with Section 16(a) of the Securities Exchange Act of 1934**
  Under
        United States securities laws, our directors, executive officers and any
        persons
        holding more than 10% of our issued and outstanding common stock are required
        to
        report their ownership of common stock (or securities convertible into common
        stock) to the Securities and Exchange Commission. Due dates for these reports
        have been set by the Commission and we are required to report any failure
        to
        file by those deadlines. To our knowledge, based solely on a review of the
        copies of such reports furnished to us by those persons and on representations
        from those persons that no other reports were required, all reports were
        timely
        filed as required under Section 16(a) of the Securities Exchange Act of 1934
        by
        all such persons during the fiscal year ended June 30, 2007.






-30-
 Index




**ITEM
              10.**
            **EXECUTIVE
              COMPENSATION**




David
      S.
      Lerner, President, currently receives an annual salary of $125,000. Gerald
      M.
      Olderman, Vice President of R&D and Commercialization, signed an employment
      agreement effective November 2006, with an annual salary of $132,000. Our other
      officers have agreed to act without cash compensation, except those with
      consulting agreements, until authorized by our Board of Directors, which is
      not
      expected to occur until we have generated sufficient revenues from operations
      or
      we have obtained sufficient financing. The officers or directors are not
      otherwise accruing any compensation under any agreement with us. The officers
      and directors have been granted stock options for past services, as set forth
      below.







**Summary
      Compensation Table**





Name
                and principal position
            
            Year
            
            Salary($)
            
            Bonus
                ($)
            
            Stock
                Awards
              ($)(2)
            
            OptionAwards($)(2)
            
            Non-Equity
                Incentive Plan Compen-sation($)
            
            Nonquali-fied
                Deferred Compen-sation Earnings($)
            
            All
                Other Compen-sation
                ($)
            
            Total
                ($)David
                S. Lerner,
              President
            
            
            2007
            
            $
            125,000
            
            
            —
            
            
            —
            
            $29,325
            
            
            
            —
            
            
            —
            
            $
            10,197(1)
            
            $
            164,5222006
            
            $
            125,000
            
            
            
            
            $
            21,000
            
            66,000
            
            
            
            
            
            
            
            
            
            9,591(1)
            
            
            221,591Gerard
                M. Olderman, Vice
              President
                of R & D and
              Commercialization
            
            
            2007
            
            
            132,000
            
            
            
            
            $
            45,000
            
            26,008
            
            
            
            
            
            
            
            
            
            
            
            
            203,008




(1)
      Includes $10,197, and $9,591 for reimbursements of automobile expenses in 2007,
      and 2006, respectively.





(2)
      Reflects dollar amount expensed by us during applicable fiscal years for
      financial statement reporting purposes pursuant to FAS 123R. FAS 123R requires
      us to determine the overall value of the options as of the date of grant based
      upon the Black-Scholes method of valuation, and to then expense that value
      over
      the service period over which the options become exercisable (vest). As a
      general rule, for time in service based options, we will immediately expense
      any
      option or portion thereof which is vested upon grant, while expensing the
      balance on a pro rata basis over the remaining vesting term of the option.
      See
      the assumptions made in the valuation of the stock options in the footnotes
      of
      our financial statements on pages F-1 to F-20 attached hereto and incorporated
      by reference. During the years ended June 30, 2007 and 2006, Mr. Lerner was
      granted 50,000 stock options and 25,000 shares of restricted common stock,
      respectively for his services as a director, and 35,000 and 150,000,
      respectively stock options as the President. The stock options were vested
      on
      the grant dates and one-third is vested every twelve (12) months thereafter.
      We
      recognized approximately $29,325 and $87,000 of share-based expenses for the
      fiscal years ended June 30, 2007 and 2006 for Mr. Lerner services. During the
      year ended June 30, 2007, we entered into an employment agreement with Mr.
      Olderman and granted him 45,000 shares of restricted common stock. In addition,
      we granted Mr. Olderman 45,385 stock options for his services as a director
      and
      30,000 stock options as Vice President of R &D and Commercialization. These
      stock options were vested one-third at the grant date and one-third to be vested
      at every twelve months thereafter. We recognized $26,008 in share-based expense
      for the fiscal year ended June 30, 2007.




No
      retirement, pension or insurance programs or other similar programs have been
      adopted for our employees or consultants. A stock option plan has been approved
      by our board. On December 13, 2004, our shareholders approved our amended and
      restated 2001 equity incentive plan to increase the total number of shares
      of
      common stock to 4,000,000 from 3,000,000. Options to purchase 1,140,000 shares
      of common stock have been granted to officers, directors, employees and
      consultants under the plan in 2002. All 2002 stock options have an exercise
      price equal to 75% of the closing bid price for the first 30 days of trading
      in
      the common stock, which commenced September 6, 2002, with the exception of
      Peter
      Barton Hutt, whose stock options are at 25% of such price. Options to purchase
      a
      total of 840,000 shares of common stock were issued in 1999, 2000 and 2001
      to
      officers, directors, employees and consultants. On August 16, 2005, all 840,000
      options were expired. In July 2003, the Board of Directors have authorized
      the
      issuance of options to acquire up to approximately 1,300,000 shares of common
      stock and the grant of 250,000 shares of restricted common stock to officers,
      directors, employees and consultants. In July 2004, the Board of Directors
      approved the issuance up to 500,000 shares of restricted common stock and
      options to acquire approximately 600,000 shares of common stock to be granted
      to
      officers, directors, employees and consultants. In September 2005, the Board
      of
      Directors approved the issuance of 130,000 shares of restricted common stock
      and
      options and warrants to acquire approximately 885,000 to employees, directors,
      officers and consultants. In December 2006, the Board of Directors approved
      the
      issuance of stock options to acquire approximately 790,770 to employees,
      directors, officers and consultants.






-31-
 Index





The
      following table summarizes the amount of our executive officers’ equity-based
      compensation outstanding at the fiscal year ended June 30, 2007:





**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END**




**OPTION
                AWARDS**
            
            **STOCK
                AWARDS**Name
            
            Number
                of securities underlying unexercised options (#)
                Exercisable
            
            Number
                of
              securities
                underlying unexercised options (#)
              Unexercis-
              able
            
            Equity
                Incentive Plan Awards: Number of Securities underlying unexercised
                unearned options (#)
            
            Option
                exercise price ($)
            
            Option
                expiration date
            
            Number
                of shares or units of stock that have not vested (#)
            
            Market
                value of shares or units of stock that have not vested ($)
            
            Equity
                incentive plan awards: number of unearned shares, units or other
                rights
                that have not vested (#)
            
            Equity
                incentive plan awards: Market or payout value of unearned shares,
                units or
                other rights that have not vested (#)David
                S. Lerner
              President
            
            28,333
            (1)
            
            
            56,667
            
            
            56,667
            
            
            1.05
            
            
            12/19/2011
            
            
            0
            
            
            0
            
            
            0
            
            
            0150,000
            (2)
            
            
            0
            
            
            0
            
            
            0.80
            
            
            09/09/2010175,000
            (3)
            
            
            0
            
            
            0
            
            
            0.17
            
            
            07/01/2009113,000
            (4)
            
            
            0
            
            
            0
            
            
            0.55
            
            
            07/23/2008Gerard
                M. Olderman
            
            25,128
            (1)
            
            
            50,257
            
            
            50,257
            
            
            1.05
            
            
            12/19/2011
            
            
            0
            
            
            0
            
            
            0
            
            
            0Vice
                President
            
            150,000
            (2)
            
            
            0
            
            
            0
            
            
            0.80
            
            
            09/09/2010R&D
                and
              Commercialization
            
            149,000
            (4)
            
            
            0
            
            
            0
            
            
            0.55
            
            
            07/23/2008







(1)
            These
                stock options were granted under our amended and restated 2001 Equity
                Incentive Plan with the vested dates as follows: One-third vested
                at the
                grant date of December 20, 2006; one-third to be vested at December
                20,
                2007; and the remaining one-third to be vested at December 20,
                2008.


(2)
            These
                stock options were granted under our amended and restated 2001 Equity
                Incentive Plan with the vested dates as follows: One-third vested
                at the
                grant date of September 9, 2005; one-third vested at September 9,
                2006;
                and the remaining vested at September 9,
                2007.


(3)
            These
                stock options were granted under our amended and restated 2001 Equity
                Incentive Plan with the vested dates as follows: One-third vested
                at the
                grant date of July 1, 2004; one-third vested at July 1, 2005; and
                the
                remaining vested at July 1, 2006.


(4)
            These
                stock options were granted under our amended and restated 2001 Equity
                Incentive Plan with the vested dates as follows: One-third vested
                at the
                grant date of July 23, 2003; one-third vested at July 23, 2004; and
                the
                remaining vested at July 23, 2005.







-32-
 Index







**Compensation
      of Directors**





The
      following director compensation disclosure reflects all compensation awarded
      to,
      earned by or paid to the directors below for the fiscal year ended June 30,
      2007.







**DIRECTOR
      COMPENSATION**


Non-Fees
                Earned
            
            
            
            
            
            
            
            
            
            
            Equity
              Incentive
            
            
            Nonqualifiedor
                Paid in
            
            
            Stock
            
            
            Option
            
            
            Plan
              Compen-
            
            
            Deferred
              Compensation
            
            
            All
                OtherCash
            
            
            Awards
            
            
            Awards
            
            
            sation
            
            
            Earnings
            
            
            Compensation
            
            
            TotalName
            
            ($)
            
            
            ($)
            
            
            ($)(1)
            
            
            ($)
            
            
            ($)
            
            
            ($)(8)
            
            
            ($)Michael
                Granito
            
            
            0
            
            
            
            0
            
            
            
            $6,281
            (2)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $6,281Paul
                Cerjan
            
            
            0
            
            
            
            0
            
            
            
            5,750
            (3)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            5,750George
                Friel
            
            
            0
            
            
            
            0
            
            
            
            6,281
            (4)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            6,281Gregory
                Schultz
            
            
            0
            
            
            
            0
            
            
            
            9,377
            (5)
            
            
            0
            
            
            
            0
            
            
            
            15,000
            
            
            24,377Rich
                Caffrey
            
            
            0
            
            
            
            0
            
            
            
            11,500
            (6)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            11,500Cheryl
                Turnbull
            
            
            0
            
            
            
            0
            
            
            
            9,731
            (7)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            9,731





(1)
            Reflects
                dollar amount expensed by the company during applicable fiscal year
                for
                financial statement reporting purposes pursuant to FAS 123R. FAS
                123R
                requires the company to determine the overall value of the options
                as of
                the date of grant based upon the Black-Scholes method of valuation,
                and to
                then expense that value over the service period over which the options
                become exercisable (vest). As a general rule, for time in service
                based
                options, the company will immediately expense any option or portion
                thereof which is vested upon grant, while expensing the balance on
                a pro
                rata basis over the remaining vesting term of the
                option.


(2)
            At
                fiscal year ended June 30, 2007, Mr. Granito had a total of 413,615
                stock
                options outstanding.


(3)
            At
                fiscal year ended June 30, 2007, Mr. Cerjan had a total of 167,000
                stock
                options outstanding.


(4)
            At
                fiscal year ended June 30, 2007, Mr. Friel had a total of 142,115
                stock
                options outstanding.


(5)
            At
                fiscal year ended June 30, 2007, Mr. Schultz had a total of 407,540
                stock
                options outstanding.


(6)
            At
                fiscal year ended June 30, 2007, Mr. Caffrey had a total of 110,000
                stock
                options outstanding.


(7)
            At
                fiscal year ended June 30, 2007, Ms. Turnbull had a total of 84,615
                stock
                options outstanding.


(8)
            Effective
                January 2007, we have a consulting agreement with Mr. Schultz for
                his
                scientific advisory services with a monthly fee of
                $2,500.






**Employment
      Contracts and Termination of Employment and Change in Control Arrangements**




On
      August
      6, 2007 (the “Effective Date”), we entered into an employment agreement with J.
      Ladd Greeno to serve as our Chief Executive Officer (the “Agreement”). Mr.
      Greeno began employment with us on June 11, 2007 (the “Start Date”). Mr. Greeno
      will report to our Board of Directors (the “Board”) and will render such
      business and professional services in the performance of his duties, consistent
      with his position as our Chief Executive Officer, as will reasonably be assigned
      to him by the Board.




We
      will
      pay Mr. Greeno a base salary of $250,000 per year (the “Base Salary”), subject
      to review by the Board on an annual basis and subject to increase in the
      Registrant’s discretion. Mr. Greeno will be eligible to receive an annual bonus
      (the “Annual Bonus”) of up to fifty percent (50%) of the Base Salary upon the
      achievement of performance objectives that will be reasonably determined by
      the
      Board or the Board’s Compensation Committee in consultation with Mr. Greeno
      within forty-five (45) days after the Effective Date, and annually thereafter
      as
      part of our annual planning process. Mr. Greeno will also be eligible to receive
      awards of stock options, restricted stock or other equity awards pursuant to
      any
      plans or arrangements we may have in effect from time to time.






-33-
 Index




Subject
      to the Board’s approval, we will grant Mr. Greeno two options (each, an
“Option,” and together, the “Options”) to purchase that number of shares of the
      Registrant’s common stock equal to five percent (5%) of the Registrant’s
      outstanding equity on the date of grant, calculated on a diluted basis and
      taking into account any equity commitments to other employees that were made
      as
      of the Start Date and which remain outstanding as of the grant date (the “Share
      Number”). The first Option will be granted, subject to Board approval, on the
      Effective Date with respect to twenty-five percent (25%) of the Share Number
      at
      an exercise price of $0.75 per share and will be fully vested and immediately
      exercisable on the date of grant. The second Option will be granted, subject
      to
      Board approval, at a date determined by the Board, but no later than October
      1,
      2007, and will be granted with respect to seventy-five percent (75%) of the
      Share Number. The second Option will vest and become exercisable as to
      1/16 th of the
      shares subject to the Option on each three (3)-month anniversary of the Start
      Date, subject to Mr. Greeno’s continued service with the Registrant through each
      such date. Each Option will have a maximum term of five (5) years. The second
      Option will have an exercise price equal to the fair market value of the
      underlying shares as of the date of grant of the relevant Option, calculated
      in
      a manner intended to comply with Section 409A of the Internal Revenue Code
      of
      1986, as amended (the “Code”). Each Option will be subject to the terms and
      conditions of the equity award grant agreements between us and Mr. Greeno.
      Notwithstanding the foregoing or anything in the Agreement to the contrary,
      except in the event of a “change of control” (as defined in the Agreement), if
      before the one (1) year anniversary of the Start Date (A) we terminate Mr.
      Greeno’s employment with the Registrant for “cause” (as defined in the
      Agreement) or (B) Mr. Greeno voluntarily resigns from his employment with us
      for
      any or no reason except “good reason” (as defined in the Agreement), the vested
      shares subject to the Options will be held in escrow until the one (1) year
      anniversary of the Start Date.




Mr.
      Greeno will be eligible to participate in accordance with the terms of all
      our
      employee benefit plans, policies and arrangements that are applicable to our
      other senior executive officers, as such plans, policies and arrangements may
      exist from time to time. Mr. Greeno will be entitled to paid vacation of four
      (4) weeks per year in accordance with our vacation policy, prorated for calendar
      year 2007. The timing and duration of specific vacations will be mutually and
      reasonably agreed to by us and Mr. Greeno. We will reimburse Mr. Greeno for
      reasonable travel, entertainment and other expenses incurred by Mr. Greeno
      in
      the furtherance of the performance of his duties under the Agreement, in
      accordance with our expense reimbursement policy as in effect from time to
      time.




In
      the
      event Mr. Greeno’s employment with us terminates for any reason, Mr. Greeno will
      be entitled to any (a) unpaid Base Salary accrued up to the effective date
      of
      the termination, (b) unpaid, but earned and accrued Annual Bonus for any
      completed fiscal year as of his termination of employment, provided Mr. Greeno
      was not terminated for “cause” (as defined in the Agreement) that was
      attributable to conduct during the performance period, (c) pay for accrued
      but
      unused vacation, (d) benefits or compensation as provided under the terms of
      any
      employee benefit and compensation agreements or plans applicable to Mr. Greeno,
      (e) unreimbursed expenses required to be reimbursed to Mr. Greeno, and (f)
      rights to indemnification Mr. Greeno may have under our Articles of
      Incorporation, Bylaws, the Agreement, or separate indemnification agreement,
      as
      applicable.




If
      (i) we
      terminate Mr. Greeno’s employment without “cause” (as defined in the Agreement),
      (ii) Mr. Greeno resigns from his employment with us for “good reason” (as
      defined in the Agreement), or (iii) Mr. Greeno resigns from his employment
      with
      us for any or no reason within one hundred eighty (180) days following a “change
      of control” (as defined in the Agreement), then subject to other provisions in
      the Agreement, Mr. Greeno will receive: (i) continuing payments of severance
      pay
      at a rate equal to his Base Salary as then in effect for twelve (12) months
      form
      the date of such termination, (ii) the Annual Bonus for the fiscal year in
      which
      Mr. Greeno’s employment under the Agreement terminated, which shall be prorated
      to reflect the number of days of the fiscal year during which Mr. Greeno was
      employed by us, and (iii) the same level of health (i.e. medical, vision and
      dental) coverage and other benefits as in effect for Mr. Greeno, and, if
      applicable, Mr. Greeno’s dependents, on the day immediately preceding Mr.
      Greeno’s termination at the same costs to him as was in effect on the day prior
      to his separation from service; provided, however, that (1) Mr. Greeno
      constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the
      Code, and (2) Mr. Greeno elects continuation coverage pursuant to the
      Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
      within the time period prescribed pursuant to COBRA. We will reimburse Mr.
      Greeno’s COBRA premiums until the earlier of (A) twelve (12) months from Mr.
      Greeno’s termination, or (B) until Mr. Greeno obtains substantially similar
      coverage under another employer’s group insurance plan.




If
      (i) we
      terminate Mr. Greeno’s employment for “cause”, (ii) Mr. Greeno’s employment
      terminates due to death or “disability” (as defined in the Agreement), or (iii)
      Mr. Greeno resigns his employment with us without “good reason” (other than a
      resignation that is within one hundred eighty (180) days following a “change of
      control”, then (1) all vesting will terminate immediately with respect to Mr.
      Greeno’s outstanding equity awards, (2) all payments of compensation by us to
      Mr. Greeno hereunder will terminate immediately (except as to amounts already
      earned, including unused and accrued vacation), and (3) Mr. Greeno will not
      be
      eligible for severance or other benefits, except in accordance with any
      generally applicable Registrant plans or policies as are then in
      effect.




If
      we
      undergo a “change of control” before the one (1) year anniversary of the Start
      Date, fifty percent (50%) of the unvested shares subject to Mr. Greeno’s
      outstanding equity awards will immediately vest and become exercisable or
      released from our repurchase or reacquisition right. If we undergo a “change of
      control” on or after the one (1) year anniversary of the Start Date, one hundred
      percent (100%) of the unvested shares subject to Mr. Greeno’s outstanding equity
      awards will immediately vest and become exercisable or released from our
      repurchase or reacquisition right.




If
      in the
      course of Mr. Greeno’s employment with us, he incorporates into any invention,
      improvement, development, product, copyrightable material or trade secret any
      invention, improvement, development, concept, discovery or other proprietary
      information owned by him or in which he has an interest, we are granted and
      shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
      license to make, have made, modify, use and sell such item as part of in
      connection with such product, process or machine. Mr. Greeno agrees that he
      will
      promptly make full written disclosure to us, will hold in trust for our sole
      right and benefit, and assign to us, or its designee, all his right, title,
      and
      interest in and to any and all inventions, original works of authorship,
      developments, concepts, improvements or trade secrets, whether or not patentable
      or registrable under copyright or similar laws, which Mr. Greeno may solely
      or
      jointly conceive or develop or reduce to practice, or cause to be conceived
      or
      developed or reduced to practice, during the period of time Mr. Greeno is in
      our
      employ.




Mr.
      Greeno agreed to the confidentiality, non-competition and non-solicitation
      provisions of the Agreement.






-34-
 Index




On
      November 1, 2006, we entered into an employment agreement with Gerald Olderman,
      its Vice President of R & D and Commercialization. Mr. Olderman has an
      annual salary of $132,000 per year, subject to adjustment by the Compensation
      Committee of the Board of Directors (“Board”) based on new revenue streams and
      increases in our shareholder value. Mr. Olderman will receive a signing bonus
      of
      $100,000 in cash. This signing bonus will vest as follows, $25,000 will vest
      immediately, $25,000 will vest upon service through February 1, 2007, $25,000
      will vest upon service through May 1, 2007, and $25,000 will vest upon service
      through August 1, 2007. We have the option of paying the signing bonus any
      time
      up to the 24 months from the effective date of the agreement based on our cash
      flows. We also granted Mr. Olderman 45,000 shares of restricted common stock.
      Mr. Olderman will be entitled to 4 weeks of paid vacation and three additional
      days for every additional year of employment. The Board of Directors may not
      approve any change of control unless the acquiring corporation assumes
      responsibility for this Agreement and all payments due hereunder. In addition,
      all options, warrants and common stock under this Agreement shall become
      immediately vested upon such change of control. The agreement has a term of
      one
      year and shall automatically renew unless the Board of Directors acts to
      terminate the Agreement. Mr. Olderman may terminate this agreement by giving
      us
      one month’s notice. We may terminate the Agreement without just cause provided
      that it pays Mr. Olderman a settlement payment of 12 months of monthly
      compensation plus immediate vesting of all stock options previously granted.
      Mr.
      Olderman will be deemed to be terminated without just cause if we unilaterally
      changes his level of responsibility and compensation or if we appoints any
      individual other than Mr. Olderman to the position of Vice President of R &
D and Commercialization. Mr. Olderman agrees to tender his resignation and
      release us from all obligations to pay any further amounts in consideration
      of
      the settlement payment. We are entitled to terminate the agreement and Mr.
      Olderman’s employment for just cause without any notice.




Prior
      to
      November 1, 2006, Mr. Olderman served in the same capacity as
      our
      Vice President of Research and Development and Commercialization under a
      consulting agreement with a monthly compensation of $10,000 since July 2005.
      Mr.
      Olderman has served this capacity since July 2000.




In
      January 2004, we entered into a formal consulting agreement with Nam H. Nguyen
      to serve as a consulting accounting advisor. In August 2004, Mr. Nguyen was
      appointed as our Chief Financial Officer under the same agreement. Beginning in
      July 2004, his compensation is set at $8,000 monthly base compensation with
      a
      monthly $2,500 minimum cash payment and the remainder may be paid in shares
      of
      restricted common stock. In addition, he has also received 400,000 shares of
      common stock plus warrants to acquire 300,000 shares of common stock at $0.20
      per share in accordance with a vesting schedule. Effective July 1, 2005, his
      compensation increased to $10,000 monthly base compensation as approved by
      the
      Compensation Committee and the Board of Directors.




In
      September 2003, we entered into a consulting agreement with Natasha A. Sorobey
      to provide investor relations services, In August 2004, Ms. Sorobey assumed
      the
      position of Corporate Secretary, while continuing her corporate and investor
      relations responsibilities. Her contract provides her with base compensation
      of
      $60,000 per annum. In addition, she has also received 400,000 shares of common
      stock plus warrants to acquire 200,000 shares of common stock at $0.18 per
      share
      in accordance with a vesting schedule with one-third vested immediately,
      one-third vested on the anniversary date and the remaining one-third vested
      on
      the subsequent 12 months.






-35-
 Index




**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**


The
      following table sets forth, as of September 19, 2007, certain information with
      respect to the beneficial ownership of our common stock by each stockholder
      known by us to be the beneficial owner of more than 5% of our common stock
      and
      by each of our current directors and executive officers. Each person has sole
      voting and investment power with respect to the shares of common stock, except
      as otherwise indicated. Information relating to beneficial ownership of common
      stock by our principal stockholders and management is based upon information
      furnished by each person using "beneficial ownership" concepts under the rules
      of the Securities and Exchange Commission. Under these rules, a person is deemed
      to be a beneficial owner of a security if that person has or shares voting
      power, which includes the power to vote or direct the voting of the security,
      or
      investment power, which includes the power to vote or direct the voting of
      the
      security. The person is also deemed to be a beneficial owner of any security
      of
      which that person has a right to acquire beneficial ownership within 60 days.
      Under the Securities and Exchange Commission rules, more than one person may
      be
      deemed to be a beneficial owner of the same securities, and a person may be
      deemed to be a beneficial owner of securities as to which he or she may not
      have
      any pecuniary beneficial interest. We are unaware of any contract or
      arrangement, which could result in a change in our control.





The
      following table assumes, based on our stock records, that there are 30,608,401
      shares issued and outstanding as of September 19, 2007.





The
      following table sets forth the ownership of our common stock by:





§
            Each
                stockholder known by us to own beneficially more than 5% of our common
                stock;


§
            Each
                executive officer;


§
            Each
                director or nominee to become a director;
                and


§
            All
                directors and executive officers as a
                group.








**Name
                and Address of Beneficial Owner**(A)
            **Shares
                Beneficially Owned****Number**
            **Percent**Michael
                R. Granito, Chairman and Director
            14,186,466(1)
            36.0%Phronesis
                Partners, L.P.
              David
                S. Lerner, President and Director
            7,692,403(2)
              4,541,922(3)
            19.5%
              11.5%J.
                Ladd Greeno, Chief Executive Officer and Director
            574,816(4)
            1.5%Paul
                G. Cerjan, Director
            945,167(5)
            2.4%George
                E. Friel, Director
            552,205(6)
            1.4%Gerald
                M. Olderman, Director and Vice President
            953,128(7)
            2.4%Gregory
                S. Schultz, Director and Vice President
            1,131,680(8)
            2.9%Richard
                F. Caffrey, Director
            139,655(9)
            0.4%Cheryl
                L. Turnbull, Director
            28,205(10)
            0.1%Natasha
                A. Sorobey, Corporate Secretary
            744,547(11)
            1.9%Nam
                H. Nguyen, Chief Financial Officer
            1,087,590(12)
            2.8%All
                Quick-Med Directors and Officers as a Group
              (11persons)
            32,577,785
            82.7%




NOTES:
      (A) The address for each of the above is c/o Quick-Med Technologies, Inc.,
      3427
      SW 42 nd Way,
      Gainesville, Florida 32608.


(1) Includes 377,205 shares issuable upon the exercise of options exercisable
      and 4,108,058 shares issuable upon conversion of the convertible debts within
      60
      days.




(2) 
Includes
      504,695 shares
      issuable upon conversion of a convertible debt within 60 days. Phronesis
      Partners, L. P., Delaware Limited Partnership, is a hedge fund


and
      has
      sole voting and sole dispositive power over 7,187,708 shares. The address for
      Phronesis Partners, L.P. is 180 East Broad Street, Suite 1704, Columbus, OH
      43215.





(3)
      Includes 466,333 shares issuable upon the exercise of options exercisable within
      60 days.





(4)
      Includes 574,816 shares issuable upon the exercise of options exercisable within
      60 days.





(5)
      Includes 133,667 shares issuable upon the exercise of options exercisable within
      60 days.




(6)
      Includes 105,705 shares issuable upon the exercise of options exercisable within
      60 days.




(7)
      Includes 499,128 shares issuable upon the exercise of options exercisable within
      60 days.





-36-
 Index


(8)
      Includes 353,180 shares issuable upon the exercise of options exercisable within
      60 days.




(9)
      Includes 43,333 shares issuable upon the exercise of warrants exercisable within
      60 days.




(10)
      Includes 28,205 shares issuable upon the exercise of warrants exercisable within
      60 days.





(11)
      Includes 205,000
      shares issuable upon the exercise of warrants exercisable within 60 days.





(10)
      Includes 376,667 shares issuable upon the exercise of warrants exercisable
      within 60 days.





**ITEM
              12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS**




In
      June
      2007, we issued two 2007 senior convertible note payables to our Chairman and
      a
      major stockholder for $375,000 each. As of June 30, 2007, we received $303,160
      from our Chairman and the remaining $71,840 in July 2007 totaling $375,000.
      We
      also received $125,000 from a major stockholder and expects to receive the
      remainder in September 2007. These two senior convertible note payables are
      secured by our revenues and assets. When these notes are fully funded,
      approximately $250,000 are to be allocated and restricted for payment of the
      chief executive officer’s salary for the next twelve months. We may prepay the
      principal and interest upon meeting certain cash flow requirements and the
      approval of our board.





In
      addition, we combined our other outstanding note payables to our Chairman
      totaling $208,955 into a single note with the same annual interest rate and
      extended the maturity date to 2010. This senior convertible note is also secured
      by our revenues and assets with the same priority as the 2007 senior convertible
      notes.





In
      June
      2006, the Company issued a note payable to its Chairman for $132,950 with an
      8%
      interest rate per annum and a maturity date of October 1, 2007. This note was
      combined into a $208,955 single convertible note in June 2007 as described
      above.





In
      September 2003, the Company negotiated a successor agreement with its Chairman
      regarding the line of credit, which became a single convertible note for up
      to
      $1,500,000 excluding accrued interest, at an interest rate of 6% and due July
      1,
      2004. The convertible note is secured by the assets and revenues of the Company,
      which has the same priority as other senior convertible note payables. The
      note
      plus accrued interest will be convertible at a conversion rate of $0.38 per
      share. The conversion rate was determined as 15% above the average share price
      over the prior 20 trading days ($0.33 per share). The note has an anti-dilution
      provision in the event that the Company sells stock to other investors at less
      than $0.20 per share. During the year ended June 30, 2006, the maturity date
      of
      the note was extended until October 1, 2007. In January 2007, the Chairman
      agreed to extend the maturity date of the note until April 1, 2008. In June
      2007, the maturity date of the 2003 senior convertible note was extended to
      June
      2010.




During
      the period ended June 30, 2007, the Company paid accrued interest on the 2003
      senior convertible note for the three quarters by issuing the note payables
      for
      the interest amounts owed for the respective periods. For the fourth quarter
      of
      the year ended June 30, 2007, the interest was accrued to be paid at the
      maturity date extended to June 2010. These note payables were combined into
      a
      $208,955 single convertible note in June 2007 as describe above.





During
      the year ended June 30, 2006, the Company paid the accrued interest on the
      2003 senior convertible note of $94,887 in accordance with the Board of
      Directors written resolution (without the Chairman’s participation) to clarify
      and confirm the interest payment terms. Under the terms of the interest payment,
      the Company will pay the interest on the note for the previous quarter within
      10
      business days subsequent to the end of the quarter.  At June 30, 2006, the
      accrued interest on the long term convertible note to our Chairman was $18,864.
      On July 1, 2006, we issued a short term note to our Chairman for the accrued
      interest amount of $18,864 at the 8% interest rate per annum. This note was
      combined into a $208,955 single convertible note in June 2007 as described
      above.




At
      June
      30, 2007 and 2006, we paid $7,531 and $6,900, respectively on behalf of our
      President for the sub-lease of office space. The term of the sub-lease is a
      month to month period.




During
      the year ended June 30, 2007, the Company received several short-term loans
      at
      8% interest rate per annum totaling approximately $19,500 from an officer of
      the
      Company, which was repaid fully by June 30, 2007.




In
      August
      2006, we borrowed $7,000 from one of our officers under a short term note
      payable at a 8% interest rate per annum and we repaid it in September
      2006.




Messrs.
      Lerner and Granito are deemed to be our promoters. Mr. Lerner received 4,273,000
      shares and Mr. Granito received 2,930,000 shares of common stock for founding
      us. There have not been any other transactions with promoters.




Other
      than the relationships with The University of Florida at Gainesville, no officer
      or director has any relationship with any company or entity that will be working
      on developing our family of technologies or patents.




-37-
 Index




**ITEM
              13.**
            **EXHIBITS**


**(a)**  **Exhibits**




Exhibit
                  Number
              Description2.1
              Merger
                  Agreement dated March 19, 2001 between Above AverageInvestments
                  Ltd. and Quick-Med Technologies, Inc. (1)2.2
              Amendment
                  to Merger Agreement (1)3.1
              Articles
                  of Incorporation (1)3.2
              Bylaws
                  (1)10.1
              Quick-Med
                  Technologies MMP License Agreement (1)10.2
              Quick-Med
                  Technologies Stock Option Plan (1)10.3
              Cooperative
                  Research and Development Agreement with the U.S. Army Medical Research
                  Institute of Chemical Defense (1)10.4
              Financing
                  Agreement with Euro Atlantic Capital Corporation (1)10.5
              Consulting
                  Agreement - Gregory Schultz (1)10.5.1
              Consulting
                  Agreement - Christopher Batich (1)10.5.2
              Consulting
                  Agreement - Bruce Mast (1)10.5.3
              Consulting
                  Agreement - William Toreki (1)10.6
              Note
                  issued to Michael Granito by Quick-Med Technologies (1)10.6.1
              Note
                Senior Convertible Note issued to Michael Granito filed
                herewith10.6.2
              2007 Senior
                Convertible Note issued to Michael Granito filed herewith10.7
              2007
                Senior Convertible Note issued to Phronesis Partners, L.P. filed
                herewith.10.8
              License
                Agreement
                with University of Michigan filed herewith (Portions of the exhibit
                have
                been omitted pursuanta request
                of
                confidential treatment)10.9
              Employment
                  Agreement with Gerard Bencen (1)10.10
              Research
                  and Development Agreement with The Collaborative Group, Ltd.
                  (2)10.11
              Agreement
                  Between Noville and Quick-Med Technologies, Inc. (3)31.1
              Certification
                  of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a),
                  filed herewith.31.2
              Certification
                  of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a),
                  filed
                  herewith.32.1
              Certification
                  of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  filed
                  herewith.32.2
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.99.3
              Assignment
                  of Patent for Wound Care (1)99.4
              Assignment
                  of Patent for Mustard Gas (1)99.5
              Assignment
                  of Patent for Anti-wrinkle cream
                  (1)
 
 NOTES:
 (1)  Incorporated
        by reference to the Company's registration statement on Form SB-2 (file no.
        333-41672)
 
 (2)
              Incorporated
                  by reference to the Company’s Annual Report on Form 10-KSB for the year
                  ended September 30, 2002
 (3)
              Incorporated
                  by reference to the Company’s Quarterly Report on Form 10-QSB for the
                  three-month ended September 30,
                  2002
   -38-
 Index
  **ITEM
                14.**
              **PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES**





The
      following table sets forth fees billed to us by our auditors during the fiscal
      years ended June 30, 2007 and June 30, 2006 for: (i) services rendered for
      the
      audit of our annual financial statements and the review of our quarterly
      financial statements, (ii) services by our auditor that are reasonably related
      to the performance of the audit or review of our financial statements and that
      are not reported as Audit Fees, (iii) services rendered in connection with
      tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered including a review of SEC registration statement filing. "Audit Related
      Fees" consisted of consulting regarding accounting issues.







June
                30,
                2007
            June
                30,
                2006(i)
            Audit
                Fees
            $
                38,500
            $
                35,500(ii)
            Audit
                Related Fees
            $
                0
            $5,000(iii)
            Tax
                Fees
            $
                7,185
            $5,000(iv)
            All
                Other Fees
            $
                0
            $
                0






While
      we
      have established an audit committee of the Board of Directors, we have not
      established a pre-approval policy. All services provided by the auditors for
      fiscal 2007 were accepted by the audit committee and approved by the full Board
      of Directors.













-39-
 Index





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant certifies that it has caused this Amendment No. 1 to the Annual
      Report on Form 10-KSB/A to be signed on its behalf by the undersigned, thereunto
      duly authorized.







**QUICK-MED
      TECHNOLOGIES, INC.**





Date: October
      5, 2007   By:
      /s/
      J. Ladd Greeno


___________________________________


J.
      Ladd
      Greeno


Chief
      Executive Officer and P rincipal
      Executive Officer





In
        accordance with the Securities Exchange Act of 1934, the Amendment No. 1
        to
        the Annual Report on Form 10-KSB/A has been signed below by the following
        persons on behalf of the registrant in the capacities and on the dates
        indicated:
 
 **Signature**
              **Title**
              **Date**/s/
                  J. LADD GREENO
              Chief
                  Executive Officer and Director
              October
                  5, 2007J.
                  Ladd Greeno/s/
                  DAVID S. LERNER
              President
                  and Director
              October 5,
                  2007David
                  S. Lerner/s/
                  MICHAEL R. GRANITO
              Chairman
                  of the Board
              October 5,
                  2007Michael
                  R. Granito/s/
                  PAUL G. CERJAN
              Director
              October 5,
                  2007Paul
                  G. Cerjan/s/
                  GREGORY S. SCHULTZ
              Vice
                  President, Laboratory &
              October
                  5, 2007Gregory
                  S. Schultz
              Clinical
                  Research, and Director/s/
                  GEORGE E. FRIEL
              Director
              October 5,
                  2007George
                  E. Friel/s/
                  GERALD M. OLDERMAN
              Vice
                  President, Research
              October 5,
                  2007Gerald
                  M. Olderman
              &
                  Development andCommercialization,
                  and Director/s/
                  RICHARD CAFFREY
              Director
              October 5,
                  2007Richard
                  F. Caffrey/s/
                  CHERYL TURNBULL
              Director
              October 5,
                  2007Cheryl
                  L. Turnbull/s/
                  NAM H. NGUYEN
              Chief
                  Financial Officer
              October 5,
                  2007Nam
                  H. Nguyen
              (Principal
                  Financial and Accounting Officer)
 
 -40-
 Index






**TABLE
          OF CONTENTS**
 
  
 Report
                  ofIndependent Registered Public Accounting
                  Firm
                F-2Financial Statements:Balance
                  Sheets as of June 30, 2007 and 2006
                F-3Statements
                  of Operations for the years ended June 30, 2007 and 2006
                F-4Statements
                  of Changes in Stockholders’ Deficit for the years ended
                  June 30, 2007 and 2006
                F-5Statements
                  of Cash Flows for the years ended June 30, 2007 and
                  2006
                F-6Notes to Financial Statements
                F-7
                    - 17
    F-1
 
  **Report
          of Independent Registered Public Accounting Firm**
  
 
 To
          the
          Board of Directors and Stockholders
 Quick-Med
          Technologies, Inc.
 
 We
          have
          audited the accompanying balance sheets of Quick-Med Technologies, Inc.
          as of
          June 30, 2007 and 2006, and the related statements of operations, changes
          in
          stockholders’ deficit and cash flows for the years then ended. These financial
          statements are the responsibility of the Company’s management. Our
          responsibility is to express an opinion on these financial statements based
          on
          our audit.
  We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States).  Those standards require that
          we plan and perform the audit to obtain reasonable assurance about whether
          the
          financial statements are free of material misstatement.  The Company has
          determined that it is not required to have, nor were we engaged to perform,
          an
          audit of its internal control over financial reporting. Our audit included
          consideration of internal control over financial reporting as a basis for
          designing audit procedures that are appropriate in the circumstances, but
          not
          for the purpose of expressing an opinion on the effectiveness of the Company’s
          internal control over financial reporting. Accordingly, we express no such
          opinion.  An audit also includes examining, on a test basis, evidence
          supporting the amounts and disclosures in the financial statements, assessing
          the accounting principles used and significant estimates made by management,
          as
          well as evaluating the overall financial statement presentation.  We
          believe that our audit provides a reasonable basis for our opinion.
  In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of Quick-Med Technologies, Inc.,
          as of
          June 30, 2007 and 2006, and the results of its operations and its cash
          flows for
          the years then ended, in conformity with accounting principles generally
          accepted in the United States of America.
 
 The
          accompanying financial statements have been prepared assuming the Company
          will
          continue as a going concern. The Company has experienced recurring losses
          and
          negative cash flows from operations for the years ended June 30, 2007 and
          2006,
          and has a net capital deficiency. These matters raise substantial doubt
          about
          the Company’s ability to continue as a going concern. Management’s plans
          regarding those matters are described in the footnotes accompanying the
          financial statements. The financial statements do not include any adjustments
          that might result from the outcome of this uncertainty.
 
 /s/
          Daszkal Bolton LLP
 Boca
          Raton, Florida
 September
          28, 2007
      F-2
 **QUICK-MED
                  TECHNOLOGIES, INC.**
 **BALANCE
                  SHEETS**
 **AS
                  OF JUNE 30, 2007 AND 2006**
 
 **ASSETS****2007**
                  
                  
                  **2006**Current
                      assets:Cash
                      and cash equivalents
                  
                  $
                  115,719
                  
                  $
                  184,142Accounts
                      receivable
                  
                  
                  385,596
                  
                  
                  45,001Total
                      current assets
                  
                  
                  501,315
                  
                  
                  229,143Property
                      and equipment, net
                  
                  
                  30,711
                  
                  
                  15,804Other
                      assets:Prepaid
                      expenses
                  
                  
                  5,170
                  
                  
                  4,980Intangible
                      asset, net
                  
                  
                  427,695
                  
                  
                  275,766Total
                      other assets
                  
                  
                  432,865
                  
                  
                  280,746Total
                      assets
                  
                  $
                  964,891
                  
                  $
                  525,693**LIABILITIES
                      AND STOCKHOLDERS' DEFICIT**Current
                      liabilities:Accounts
                      payable
                  
                  $
                  766,685
                  
                  $
                  218,949Unearned
                      revenue
                  
                  
                  88,214
                  
                  
                  -Accrued
                      expenses
                  
                  
                  16,298
                  
                  
                  25,706Total
                      current liabilities
                  
                  
                  871,197
                  
                  
                  244,655License
                      payable
                  
                  
                  160,000
                  
                  
                  160,000Long-term
                      liability - convertible note payable - related party
                  
                  
                  126,808
                  
                  
                  132,950Long-term
                      liability - convertible note payable - director
                  
                  
                  1,818,147
                  
                  
                  1,268,625Total
                      liabilities
                  
                  
                  2,976,152
                  
                  
                  1,806,230Commitments
                      and contingenciesStockholders'
                      deficit:Common
                      stock, $0.0001 par value; 100,000,000authorized
                      shares; 30,603,483 and 30,221,215 shares issuedand
                      outstanding at June 30, 2007 and 2006, respectively
                  
                  
                  3,060
                  
                  
                  3,022Additional
                      paid-in capital
                  
                  
                  11,772,573
                  
                  
                  11,506,487Outstanding
                      stock options
                  
                  
                  1,909,129
                  
                  
                  1,399,959Accumulated
                      deficit
                  
                  
                  (15,696,023
                  )
                  
                  (14,190,005
                  )Total
                      stockholders' deficit
                  
                  
                  (2,011,261
                  )
                  
                  (1,280,537
                  )Total
                      liabilities and stockholders' deficit
                  
                  $
                  964,891
                  
                  $
                  525,693


See
              accompanying notes to financial statements.
 F-3
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **STATEMENTS
              OF OPERATIONS**
 **FOR
              THE YEARS ENDED JUNE 30, 2007 AND 2006**





**2007**
              
              
              
              
              
              **2006**RevenuesProduct
                  sales
              
              $
              1,380,869
              
              
              
              
              $
              982,941Research
                  and development service
              
              
              496,889
              
              
              
              
              
              72,500License
                  fees
              
              
              75,000
              
              
              
              
              
              175,0001,952,758
              
              
              
              
              
              1,230,441Expenses:Cost
                  of sales
              
              
              277,828
              
              
              
              
              
              187,158Research
                  and development
              
              
              1,526,857
              
              
              
              
              
              1,136,851General
                  and administrative expenses
              
              
              1,342,072
              
              
              
              
              
              1,173,148Licensing
                  and patent expenses
              
              
              321,263
              
              
              
              
              
              319,960Depreciation
                  and amortization
              
              
              61,823
              
              
              
              
              
              50,021Total
                  expenses
              
              
              3,529,843
              
              
              
              
              
              2,867,138Loss
                  from operations
              
              
              (1,577,085
              )
              
              
              
              
              (1,636,697
              )Other
                  income (expense):Interest
                  income
              
              
              935
              
              
              
              
              
              11,638Interest
                  expense
              
              
              (96,368
              )
              
              
              
              
              (76,005
              )Other
                  income
              
              
              166,500
              
              
              
              
              
              -Loss
                  before income taxes
              
              
              (1,506,018
              )
              
              
              
              
              (1,701,064
              )Provision
                  (benefit) for income taxes
              
              
              -
              
              
              
              
              
              -Net
                  loss
              
              $
              (1,506,018
              )
              
              
              
              $
              (1,701,064
              )Net
                  loss per share (basic and diluted)
              
              $
              (0.05
              )
              
              
              
              $
              (0.06
              )Weighted
                  average commonshares
                  outstanding (basic and diluted)
              
              
              30,361,210
              
              
              
              
              
              30,082,797












See
              accompanying notes to financial statements.
 F-4
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **STATEMENTS
              OF CHANGES IN STOCKHOLDERS’ DEFICIT**
 **FOR
              THE YEARS ENDED JUNE 30, 2007 AND 2006**





**Additional****Common
                  Stock**
              
              
              
              **Paid-In**
              
              **Accumulated**
              
              **Outstanding****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Stock
                  Options**
              
              **Total**Balance,
                  June 30, 2005
              29,730,519
              
              2,973
              
              $11,194,222
              
              $(12,488,941)
              
              $
                  939,537
              
              $
                  (352,209)Stock
                  issuance for cash
              154,118
              
              15
              
              113,538
              
              -
              
              -
              
              113,553Stock
                  options granted for services
              -
              
              -
              
              -
              
              -
              
              491,922
              
              491,922Stock
                  issued for services
              161,578
              
              17
              
              137,494
              
              -
              
              -
              
              137,511Exercise
                  of stock options
              175,000
              
              17
              
              61,233
              
              -
              
              (31,500)
              
              29,750Net
                  loss, July 1, 2005 to June 30, 2006
              -
              
              -
              
              -
              
              (1,701,064)
              
              -
              
              (1,701,064)Balance,
                  June 30, 2006
              30,221,215
              
              3,022
              
              $11,506,487
              
              $(14,190,005)
              
              $
                  1,399,959
              
              $(1,280,537)Stock
                  issued for cash
              100,000
              
              10
              
              78,990
              
              -
              
              -
              
              79,000Stock
                  options granted for services
              -
              
              -
              
              -
              
              -
              
              527,753
              
              527,753Stock
                  issued for services
              151,434
              
              15
              
              145,376
              
              -
              
              -
              
              145,391Exercise
                  of stock options and warrants
              130,834
              
              13
              
              41,720
              
              -
              
              (18,583)
              
              23,150Net
                  loss, July 1, 2006 to June 30, 2007
              -
              
              -
              
              -
              
              (1,506,018)
              
              -
              
              (1,506,018)Balance,
                  June 30, 2007
              30,603,483
              
              3,060
              
              $11,772,573
              
              $(15,696,023)
              
              $
                  1,909,129
              
              $(2,011,261)






















See
              accompanying notes to financial statements.
 F-5
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **STATEMENTS
              OF CASH FLOWS**
 **FOR
              THE YEARS ENDED JUNE 30, 2007 AND 2006**


**2007**
                
                
                **2006**Cash
                    flows from operating activities:Net
                    loss
                
                $
                (1,506,018
                )
                $
                (1,701,064
                )Adjustments
                    to reconcile net loss to netcash
                    provided by (used in) operating activities:Depreciation
                    and amortization
                
                
                61,823
                
                
                50,021Stock
                    granted for services
                
                
                145,391
                
                
                137,511Stock-based
                    compensation
                
                
                527,753
                
                
                491,922(Increase)
                    decrease in:Accounts
                    receivable
                
                
                (340,595
                )
                
                4,107Prepaid
                    expenses
                
                
                (189
                )
                
                7,456Increase
                    (decrease) in:Accounts
                    payable
                
                
                547,736
                
                
                112,509Accrued
                    interest
                
                
                39,215
                
                
                (18,882
                )Other
                    current liabilities
                
                
                97,669
                
                
                -Net
                    cash used in operating activities
                
                
                (427,215
                )
                
                (916,420
                )Cash
                    flows from investing activities:Purchase
                    of fixed assets
                
                
                (22,666
                )
                
                (9,813
                )Patents
                
                
                (205,992
                )
                
                (10,187
                )Net
                    cash used in investing activities
                
                
                (228,658
                )
                
                (20,000
                )Cash
                    flows from financing activities:Issuance
                    of common stock for cash, net
                
                
                79,000
                
                
                113,553Proceeds
                    from stock option exercise
                
                
                23,150
                
                
                29,750Proceeds
                    from note payable - officer
                
                
                19,500
                
                
                -Repayment
                    of note payable - officer
                
                
                (19,500
                )
                
                -Increase
                    in notes payable - related party
                
                
                125,000
                
                
                -Increase
                    in notes payable - director
                
                
                360,300
                
                
                132,950Net
                    cash provided by financing activities
                
                
                587,450
                
                
                276,253Net
                    decrease in cash and cash equivalents
                
                
                (68,423
                )
                
                (660,167
                )Cash
                    and cash equivalents at beginning of period
                
                
                184,142
                
                
                844,309Cash
                    and cash equivalents at end of period
                
                $
                115,719
                
                $
                184,142**Supplementary
                    Information:**Cash
                    paid for:Interest
                
                $
                -
                
                $
                94,886Income
                    taxes
                
                $
                -
                
                $
                -Non-cash
                    disclosures of investing andfinancing
                    activities:Shares
                  issued in settlement of payable
                
                $
                12,000
                
                $
                -Stock
                    options granted for services
                
                $
                527,753
                
                $
                270,860


See
              accompanying notes to financial statements.
 F-6
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO FINANCIAL STATEMENTS**





***NOTE
      1 - DESCRIPTION OF BUSINESS***





Founded
      in April 1997, Quick-Med Technologies Inc. (the ”Company”) is a life sciences
      company focused on developing proprietary, broad-based technologies in medical
      and consumer healthcare markets. The Company’s two core technologies under
      development are: (1) MultiStatTM, a family of advanced patented methods and
      compounds shown to be effective in skin therapy applications; and (2) Novel
      Intrinsically MicroBonded Utility Substrate (NIMBUS ® ),
      a
      family of advanced polymers bio-engineered to have antimicrobial,
      super-absorbent, and other properties that can be used in a wide range of
      applications. Currently, MultiStatTM has been developed in a cosmetic product
      line with  anti-aging products. MultiStatTM is also being employed in a drug
      product line as a post-injury treatment for mustard gas exposure, with the
      initial product currently at a developmental state of development in partnership
      with the U.S. Army. Quick-Med Technologies Inc.’s NIMBUS technology has
      initially been targeted at (a) medical device, including advanced wound dressing
      products, and (b) several enhanced consumer products, including order-controlled
      products (e.g. apparel or hygiene), and antibacterial related products. In
      each
      instance, the Company intends to form joint ventures or joint development
      partnerships with leading firms in the respective industry to co-develop and
      commercialize its products.





The
      Company specializes in the research and development of biomedical products
      and
      devices for antibacterial applications. The Company conducts research efforts
      or
      collaborates with third parties as necessary to develop products and administer
      the patent process. The Company does not expect to produce nor directly market
      its products. Instead, the Company intends to partner with clients for those
      activities.





Since
      its
      inception, the Company has been heavily dependent upon the receipt of capital
      investment or other financing and revenues to fund its continuing activities.
      In
      addition to the normal risks associated with a new business venture, there
      can
      be no assurance that the Company’s product development will be successfully
      completed or that it will be a commercial success. Further, the Company is
      dependent upon certain related parties to provide continued funding and capital
      resources.







***NOTE
      2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES***





Going
      Concern





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has negative cash flows from
      operations and an accumulated deficit that raises substantial doubt about its
      ability to continue as a going concern. The financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.





For
      the
      remainder of the year ending June 30, 2008, the Company will need additional
      cash infusions to meet its operating expenses. The Company’s common stock began
      trading on September 4, 2002 on the OTC Bulletin Board and the Company intends
      to raise additional equity or debt. The Company may also secure strategic
      partnerships or other joint ventures to either conduct its research or fund
      a
      portion of the expenses. No assurances can be made that we will be successful
      in
      these activities. Should the events not occur, the financial statements will
      be
      materially effected.





Cash
      and Cash Equivalents





All
      highly liquid investments purchased with maturity of three months or less from
      the time of purchase are considered to be cash equivalents.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 revenues and expenses during the reporting period.
      Actual results could differ from those estimates.






F-7





***NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
      continued***





*Intangible
      Assets*





The
      cost
      of obtaining license agreements along with the costs to defend the patents
      underlying the license agreements are capitalized and are amortized using the
      straight-line method over the estimated useful lives of the underlying license
      agreements. The costs of obtaining and maintaining new patents are capitalized
      and amortized using the straight-line method over the estimated useful lives
      of
      the patents. The cost of patents in process is not amortized until the patent
      is
      issued.





*Property
      and Equipment*





Property
      and equipment are stated at cost. Depreciation on property and equipment is
      computed using the straight-line method over the expected useful lives of the
      assets.





*Accounts
      Receivable and Allowance for Doubtful Accounts*





Accounts
      receivable as of June 30, 2007 represents amounts due from the customers
      including BASF Catalysts, LLC, a wholly- owned subsidiary of BASF (“BASF”),
      Hanesbrands Inc., and U.S. Army, and is reported in the balance sheet reduced
      by
      an allowance for doubtful accounts for estimated losses resulting from
      receivables not considered to be collectible.





Research
      and Development Costs





Research
      and development costs are expensed as incurred.





Earnings
      Per Share





Basic
      net
      loss per common share are computed by dividing net loss applicable to common
      shareholders by the weighted-average number of common shares outstanding during
      the period. Diluted net loss per common share is determined using the
      weighted-average number of common shares outstanding during the period, adjusted
      for the dilutive effect of common stock equivalents, consisting of shares that
      might be issued upon exercise of common stock options and warrants.  
For
      the years ended June 30, 2007 and 2006, 4,738,238 and
      3,825,802 diluted common stock equivalents, respectively, have been
      excluded from the calculation of diluted earnings per
      share.




Revenue
      Recognition




The
      Company recognizes the revenue of its royalties from the sale of products by
      BASF under the master agreement for product development, manufacturing and
      distribution (the “Master Agreement”). The Company also recognizes the revenue
      from the non-refundable exclusivity license fee derived from BASF under the
      Master Agreement and Derma Sciences Inc. on a pro rata basis over the term
      of
      the related exclusive license agreements. Revenue from the research agreement
      is
      recognized on a pro rata basis over the term of the agreement. Further,
      the Company recognizes the exclusive option fee as revenue on a pro rata basis
      over the term of the related exclusive option agreement. Revenue from the
      research agreement is recognized on a pro rata basis over the term of the
      agreement. Revenues from the small business innovation research program and
      the
      US Army medical research program are recognized based on the research work
      performed in accordance with the program requirements.





Unearned
      Revenue





The
      amount of unearned revenue represents the exclusive option fee, the license
      fee,
      and advance royalty fee yet to be earned on a pro rata basis over the exclusive
      option period of the related option and license agreements.






F-8





***NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
      continued***





*Stock
      Compensation*





In
      December 2004, the Financial Accounting Standards Board ("FASB") issued a final
      standard, SFAS No. 123R, "Share-Based Payment," ("SFAS 123R"), which requires
      companies to expense the value of employee stock options and similar awards.
      Under SFAS 123R, share-based payment awards result in a cost that will be
      measured at fair value on the grant date of the awards, based on the estimated
      number of awards that are expected to vest. Compensation cost for awards that
      vest would not be reversed if the awards expire without being exercised. The
      Company adopted SFAS 123R beginning in the first quarter of the fiscal year
      2006
      using the modified prospective approach. Under the modified prospective
      approach, SFAS 123R applies to all outstanding and unvested share-based payment
      awards at the adoption date. The fair value of stock options was determined
      using the Black-Scholes option-pricing model. The fair value of the restricted
      stock awards was based on the closing price of the Company's common stock on
      the
      date of grant.





*Concentration
      of credit risk of financial instruments*





Financial
      instruments that potentially subject the Company to credit risk consist of
      cash
      equivalents and accounts receivable. As of June 30, 2007, the Company’s cash
      levels exceeded the federally insured limit but were maintained with a high
      quality institution and management is regularly monitoring its cash position.
      As
      of June 30, 2007, all of the Company’s accounts receivable were derived from
      BASF, Hanesbrands Inc., US Army, and other. The credit risk of the accounts
      receivable is considered limited given the customers credit rating. There were
      no write-offs of uncollectible receivable during the year ended June 30,
      2007.





Reclassifications





Certain
      prior period amounts have been reclassified to conform to current period
      presentation. These reclassifications have no impact on reported net loss.





Income
      Taxes





The
      Company accounts for income taxes under the provisions of Statement of Financial
      Accounting Standards No. 109, “Accounting for Income Taxes.” This standard
      requires, among other things, recognition of future tax consequences, measured
      by enacted tax rates attributable to taxable and deductible temporary
      differences between financial statement and income tax bases of assets and
      liabilities. Valuation allowances are established, when necessary, to reduce
      deferred tax assets to the amount expected to be realized. Income tax expense
      is
      the tax payable for the period and the change during the period in the deferred
      tax asset and liability.





Recently
      Issued Accounting Pronouncements





In
      September 2006, the FASB issued SFAS no. 157, “Fair Value Measurements,” which
      enhances existing guidance for measuring assets and liabilities at fair value.
      SFAS No. 157 defines fair value, establishes
      a framework for measuring fair value and expands disclosures about fair value
      measurements, and is effective for fiscal year ending after December 15, 2008.
      The Company is assessing the impact of the adoption of this pronouncement,
      but
      does not expect that it will have a significant impact on its financial position
      or results of operations.





In
      June
      2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes -
      an interpretation of FASB Statement No. 109.” This interpretation prescribes a
      comprehensive model for the financial statement recognition, measurement,
      presentation and disclosure of uncertain tax positions taken or expected to
      be
      taken in income tax returns. The Company is assessing the impact of Fin No.
      48,
      but does not expect that it will have a significant impact on its financial
      position or results of operations.




***NOTE
      3 - FAIR VALUE OF FINANCIAL INSTRUMENTS***





The
      Company’s financial instruments are accounts receivable, accounts payable and
      notes payable. The carrying values of accounts receivable and accounts payable
      approximate fair values based on their short-term nature. The recorded values
      of
      the notes payable, including the convertible debt, approximate their fair values
      based on the equivalent market data and the interest rate approximates the
      market rate.




***NOTE
      4 - PROPERTY AND EQUIPMENT***





Property
      and equipment consist of the following at June 30, 2007 and 2006:




**2007**
              
              
              **2006**Computer
                  equipment
              
              $
              23,822
              
              $
              21,134Equipment
              
              
              29,575
              
              
              9,597Less:
                  accumulated depreciation
              
              
              (22,686
              )
              
              (14,927
              )Net
                  property and equipment
              
              $
              30,711
              
              $
              15,804




Depreciation
      expense for the years ended June 30, 2007 and 2006 was $7,759 and $4,815,
      respectively.




F-9


***NOTE
      5 - INTANGIBLE ASSETS***





*License
      Agreement*





The
      Company has a license agreement with two inventors (“Licensors”) for the
      worldwide rights to the MMP inhibitors and uses thereof. The license agreement
      transfers to the Company the technology that is the subject of issued patents
      as
      well as pending patent applications, which were filed by the original inventors.
      The licenses are amortized on a straight-line basis over the estimated useful
      lives of the underlying patents or the license agreement. The U.S. patents
      expire beginning November 2007 through November 2016 and the international
      patents expire beginning on November 21, 2011 through December 8, 2019.
      Accumulated amortization for the years ended June 30, 2007 and 2006 was $295,359
      and $241,296, respectively.





The
      Company assesses whether its intangible assets are impaired as required by
      SFAS
      No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” based
      on an evaluation of undiscounted projected cash flows through the remaining
      useful lives. If impairment exists, the amount of such impairment is calculated
      as the estimated fair value of the assets.





Under
      the
      terms of the license agreement, the Company paid $200,000 and granted 160,000
      shares of common stock valued at $0.05 per share and granted 160,000 stock
      options. The stock options are valued at the estimated minimum value in
      accordance with SFAS 123 of $8,000. In order to maintain the Company’s exclusive
      rights to the licenses, the agreements require total payments of $260,000 if
      certain milestones regarding the proof-of-concept and development of a prototype
      are reached. If a milestone on the “Civilian Chemical Burn” and “Other topical
      Medical Uses” categories is not met by the third anniversary of the agreement,
      the licenses granted within these categories become nonexclusive. The Company
      elected not to pay each inventor $25,000 per year until all such milestones
      are
      met. At June 30, 2007 and 2006, the balance due under the license agreement
      is
      $160,000.





As
      additional compensation to the Licensors, the Company will pay a royalty based
      on the Company’s net sales of licensed products. The royalty rate is 2% on the
      first $1,500,000 of applicable quarterly revenue and 1.5% of sales above
      $1,500,000 on applications of products other than applications for military
      and


cosmetic
      products. For each sublicense granted by the Company, the Licensors will be
      paid
      3% of the up-front licensing fee, limited to $100,000.





In
      November 2002, the Company and the University of Florida Research Foundation
      (the “University”) entered into an agreement whereby the University gave the
      Company exclusive sub-license rights to the use of its patents and patent
      applications from the effective date of the agreement until the earlier of
      the
      date that no licensed patents remain enforceable patents or the payment of
      earned royalties ceases more than three calendar quarters. The royalty rate
      is
      3% of the first $10 million of cumulative realized revenues and 1.8% of all
      subsequent realized revenues.





In
      June
      2007, the Company and the Regents of the University of Michigan (“Michigan”)
      entered into an agreement whereby Michigan gave the Company worldwide exclusive
      rights including sub-license rights to the use of its patents and patent
      applications of the uses of MMP inhibitors from the effective date of the
      agreement until the earlier of the date that no licensed patents remain
      enforceable patents or the default event. In addition to the initial license
      fee
      of $80,000, the Company will pay a 4% royalty rate of the net sales, 20% of
      the
      sublicense income, the annual fee of $50,000 for 2008 and 2009, $75,000 for
      2010
      and $100,000 in 2011 and in each year thereafter during the term of the
      agreement. The Company will also reimburse Michigan for the maintenance patent
      fee of $13,000 each period no later than December 31, 2007, 2008 and
      2009.





During
      the fiscal year 2006, the Company was issued both US and international patents
      for its NIMBUS technology on “ Intrinsically
      Bactericidal Absorbent Dressing And Method Of Fabrication”. These
      patents expire on December 8, 2019. The total capitalized costs for this issued
      patent were $35,470 and are being amortized over the life of the
      patents.





During
      the fiscal year 2007, the Company filed a number of US and international patent
      applications for its NIMBUS technology and applied for certain trademarks.
      As of
      June 30, 2007, the total capitalized costs for the patent applications and
      trademarks were $14,642.




**June
                  30, 2007**
              
              
              **June
                  30, 2006****Gross**
              
              
              **Accumulated**
              
              
              **Gross**
              
              **Accumulated****Amount**
              
              
              **Amortization**
              
              
              **Amount**
              
              **Amortization****Amortized
                  Intangible Assets**License
                  agreement
              
              $
              648,123
              
              $
              (295,359
              )
              $
              461,660
              
              
              
              
              $
              (241,296
              )Patents
                  in process
              
              
              74,931
              
              
              -
              
              
              55,402
              
              
              
              
              
              -Total
              
              $
              723,054
              
              $
              (295,359
              )
              $
              517,062
              
              
              
              
              $
              (241,296
              )
   F-10


***NOTE
      5 - INTANGIBLE ASSETS, continued***





Amortization
      of patents in process commences when the patents are issued.




**June
                  30, 2007**
              
              
              **June
                  30, 2006****Gross**
              
              
              **Accumulated**
              
              
              **Gross**
              
              
              **Accumulated****Amount**
              
              
              **Amortization**
              
              
              **Amount**
              
              
              **Amortization****Aggregate
                  Amortization Expense**For
                  the years ended
              
              $
              54,063
              
              $
              295,359
              
              $
              45,206
              
              $
              241,296**Estimated
                  Amortization Expense**
              
              
              **Amount**For
                  the year ended June 30, 2008
              
              $
              61,890For
                  the year ended June 30, 2009
              
              $
              61,890For
                  the year ended June 30, 2010
              
              $
              61,890For
                  the year ended June 30, 2011
              
              $
              19,271Thereafter
              
              $
              -





***NOTE
      6 - STOCKHOLDERS’ EQUITY (DEFICIT)***





Fiscal
      2007





In
      July,
      August and September 2006, the Company issued a total of 10,352 shares of
      restricted common stock for payment of services provided by two consultants.
      The
      amount charged to operations was $11,481, the value of the shares on the dates
      issued.





In
      September 2006, the Company issued 33,334 shares of restricted common stock
      for
      an aggregate exercise price of $5,000 or $0.15 per share resulting from the
      exercise of a stock option.





In
      October, November and December 2006, the Company issued a total of 10,511 shares
      of restricted common stock for payment of services provided by two consultants.
      The amount charged to operations was $12,326, the value of the shares on the
      dates issued.





In
      November 2006, the Company issued 45,000 shares of restricted common stock
      as
      part of an employee compensation package. The amount charged to operations
      was
      $45,000, the value of the shares on the dates issued.





In
      December 2006, the Company issued 75,000 shares of restricted common stock
      as a
      payment to a licensor for certain licensing rights. The amount capitalized
      to
      intangible assets was $67,500, the value of the shares on the dates
      issued.





In
      January, February and March 2007, the Company issued a total of 5,148 shares
      of
      restricted common stock for payment of services provided by a consultant. The
      amount charged to operations was $4,778, the value of the shares on the dates
      issued.





In
      February 2007, the Company issued 30,000 shares of restricted common stock
      for
      an aggregate exercise price of $6,000 or $0.20 per share resulting from the
      exercise of a warrant.




In
      April,
      May and June 2007, the Company issued a total of 5,423 shares of restricted
      common stock for payment of services provided by a consultant. The amount
      charged to operations was $4,306, the value of the shares on the dates
      issued.





In
      May
      2007, the Company issued 100,000 shares of restricted common stock for an
      aggregate exercise price of $79,000 or $0.79 per share for cash.





In
      June
      2007, the Company issued 67,500 shares of restricted common stock for an
      aggregate exercise price of $12,150 or $0.18 per share resulting from the
      exercise of a warrant as part of the settlement of a payable.






F-11




*NOTE
      6 - STOCKHOLDERS’ EQUITY
      (DEFICIT), continued*




Fiscal
      2006





In
      July
      and August 2005, the Company issued a total of 54,118 shares of restricted
      common stock for an aggregate purchase price of $33,553 or $0.62 cents per
      share
      for cash.





In
      August
      2005, the Company issued 175,000 shares of restricted common stock for an
      aggregate exercise price of $29,750 or $0.17 per share resulting from the
      exercise of a stock option.





In
      September 2005, the Company issued 130,000 shares of restricted common stock
      for
      the payment of services rendered by the members of the Board of Directors.
      In
      addition, the Company granted stock options and warrants of 710,000 and 175,000
      respectively to employees and consultants with exercise prices of $0.80 per
      share as performance bonus according to the vesting schedule. Further, the
      Company issued 5,556 shares of restricted common stock for payment of services
      provided by a consultant.





In
      November and December 2005, the Company issued a total of 13,324 shares of
      restricted common stock for payment of services provided by two consultants.
      The
      amount charged to operations was $10,514, the value of the shares on the dates
      issued.





In
      February 2006, the Company issued a total of 100,000 shares of restricted common
      stock for an aggregate purchase price of $80,000 or $0.80 per share for
      cash.





In
      January, February and March 2006, the Company issued a total of 5,071 shares
      of
      restricted common stock for payment of services provided by a consultant. The
      amount charged to operations was $5,948, the value of the shares on the dates
      issued.





In
      April,
      May and June 2006, the Company issued a total of 7,627 shares of restricted
      common stock for payment of services provided by consultants. The amount charged
      to operations was $12,050, the value of the shares on the dates
      issued.




***NOTE
      7 - COMMITMENTS***





The
      Company leases an equipped laboratory in Gainesville, Florida. The lease expires
      in March 2009. Rent expense for the years ended June 30, 2007 and 2006 was
      approximately $19,000 and $18,000, respectively.





The
      following is a schedule of minimum future payments on the operating lease as
      of
      June 30, 2007:








**For
                The Years Ending June 30,**2008
            
            
            
            
            $
            18,3842009
            
            
            
            
            
            22,2142010
                and thereafter
            
            
            
            
            
            -Total
            
            
            
            
            $
            40,598






F-12




***NOTE
      8- STOCK OPTIONS AND WARRANTS***





The
      Company adopted a qualified equity incentive plan (the “Plan”) on March 4, 2001.
      Under the Plan the Company is authorized to grant up to 3,000,000 shares of
      common stock. On December 13, 2004, the shareholders approved the Plan and
      ratified the amendment to increase the total number of shares to be granted
      under the Plan from 3,000,000 to 4,000,000 effective November 1, 2004.





In
      December 2004, the Financial Accounting Standards Board ("FASB") issued a final
      standard, SFAS No. 123R, "Share-Based Payment," ("SFAS 123R"), which requires
      companies to expense the value of employee stock options and similar awards.
      Under SFAS 123R, share-based payment awards result in a cost that will be
      measured at fair value on the grant date of the awards, based on the estimated
      number of awards that are expected to vest. Compensation cost for awards that
      vest would not be reversed if the awards expire without being exercised. The
      Company adopted SFAS 123R beginning in the first quarter of the fiscal year
      2006
      using the modified prospective approach. Under the modified prospective
      approach, SFAS 123R applies to all outstanding and unvested share-based payment
      awards at the adoption date. The fair value of stock options was determined
      using the Black-Scholes option-pricing model. The fair value of the restricted
      stock awards was based on the closing price of the Company's common stock on
      the
      date of grant.





On
      September 9, 2005, the Board of Directors (the “Board”) granted 130,000 shares
      of restricted common stock as payment for the services rendered by the board
      members for the year ended June 30, 2005
      and
      all shares were immediately vested. In addition, the Board granted 710,000
      stock
      options and 175,000 warrants to our employees and directors and consultants,
      respectively, in recognition of individual
      performance for the year ended June 30, 2005. The stock options and warrants
      were vested one-third immediately, one-third were vested on July 1, 2006 and
      the
      remaining one-third will be vested on July 1, 2007, assuming the person
      receiving the equity awards is employed by the Company at the time of vesting.
      The exercise price of those stock options and warrants is $0.80 per share,
      which
      was the closing price of the common stock on the date of grant. The weighted
      average grant date fair value of options
      was $0.72 per share based on the Black-Scholes option-pricing model. The options
      and warrants expire five years from the date of grant.





The
      weighted average grant date fair value of options granted during the fiscal
      year
      ended June 30, 2007 were estimated on the date of grant using the Black-Scholes
      option-pricing model with the assumptions noted in the following table. Expected
      volatilities are based on historical volatility of common stock, and other
      factors. The expected term of the options represents the period of time that
      options granted are expected to be outstanding and is derived from historical
      terms and other factors.





Assumptions
      utilized to value options are as follows:





Risk-free
      interest rate   4.75%
      to
      6%


Expected
      life (years)   5


Expected
      volatility   50%
      to
      138%


Expected
      dividends   None







On
      December 20, 2006, the Company issued 790,770 stock options to the board
      members, the management, the employees, and the consultants for their services.
      These options have an exercise price of $1.05 per share. The stock options
      were
      vested one-third immediately, one-third will be vested on December 20, 2007
      and
      the remaining one-third will be vested on December 20, 2008, assuming the person
      receiving the equity awards is employed by the Company at the time of vesting.
      The weighted average grant date fair value of options was $0.69 per share based
      on the Black-Scholes option-pricing model. The options expire five years from
      the date of grant.





During
      2002, 1,140,000 unqualified options were granted under the Plan. The exercise
      prices for 990,000 and 150,000 of the options were $2.84 and $0.95,
      respectively, representing the average trading price of the
      Company’s stock during the first 30 days after commencement of the stock trading
      on the Over the Counter (“OTC”) Market. The vesting provisions for 100,000 of
      the options are immediate and the remainder
      of the 1,040,000 options vested one-third on January 15, 2002, one third on
      January 15, 2003, and one-third on January 15, 2004. All of the options were
      expired or forfeited as of June 30, 2007.




In
      July
      2003, 1,231,500 unqualified options were granted under the Plan to employees,
      directors, and service providers. The options had an exercise price of $0.55,
      the average closing trading price at the grant date. The options vested
      immediately. All of the options expire five years after the grant date.





In
      August
      2004, 585,000 unqualified options under the Plan were granted to directors,
      employees and service providers. The options had an exercise price of $0.17,
      the
      average closing trading prices from July
      1 to
      15, 2004. The options vested immediately. All of the options expire five years
      after the grant date. On August 24, 2005, 175,000 options were exercised for
      an
      aggregate price of $29,750.






F-13




***NOTE
        8 - STOCK OPTIONS AND WARRANTS,
        continued***
  On
      October 1, 2004, the Company granted 50,000 unqualified options to a consultant,
      one third of which vested immediately, one third vested on July 1, 2005 and
      the
      remaining one third vested on July 1, 2006. The options had an exercise price
      of
      $0.15, the closing trading price at the grant date. Using the Black Scholes
      option pricing model, $4,333 of compensation expense was recorded during this
      fiscal year period. All the options expire five years after the grant date.
      On
      June 29, 2005, 16,666 options were exercised for an aggregate price of
      approximately $2,500. On September 15, 2006, 33,334 options were exercised
      for
      an aggregate price of approximately $5,000.





A
      summary
      of options for the years ended June 30, 2007 and 2006 is shown
      below:




**June
                  30, 2007**
              
              
              **June
                  30, 2006****Number**
              
              
              **Weighted-Average**
              
              
              **Number**
              
              
              **Weighted-Average****of
                  Shares**
              
              
              **Exercise
                  Price**
              
              
              **of
                  Shares**
              
              
              **Exercise
                  Price**Outstanding
                  at beginning of period
              
              
              2,779,834
              
              $
              1.33
              
              
              3,069,834
              
              $
              1.73Granted
              
              
              790,770
              
              
              1.05
              
              
              710,000
              
              
              0.80Exercised
              
              
              (33,334
              )
              
              0.15
              
              
              (175,000
              )
              
              0.17Forfeited
              
              
              (15,000
              )
              
              0.80
              
              
              -
              
              
              -Expired
              
              
              (765,000
              )
              
              3.69
              
              
              (825,000
              )
              
              2.61Outstanding
                  at end of period
              
              
              2,757,270
              
              $
              0.61
              
              
              2,779,834
              
              $
              1.33Exercisable
                  at end of period
              
              
              2,371,885
              
              
              
              
              
              2,543,167Available
                  for issuance at end of period
              
              
              1,034,396
              
              
              
              
              
              1,028,500


During
      the year ended June 30, 2007, the Company issued 37,640 common stock warrants
      to
      consultants as part of the payment for their services. These warrants were
      accounted for in accordance with the provisions of SFAS 123R. These warrants
      are
      vested immediately with fair market values  ranging
      from $0.62 per share to $1.25 per share and the total cost of approximately
      $36,000. Approximately 97,500 warrants were exercised for an aggregate price
      of
      approximately $18,150.





During
      the year ended June 30, 2006, the Company issued common stock warrants to
      consultants in recognition of their performance. These warrants were accounted
      for in accordance with the fair value provisions of SFAS 123R. The warrants
      vested one-third immediately on September 9, 2005, with one-third vested on
      July
      1, 2006, and the remaining one-third to be vested on July 1, 2007. The warrants
      were valued on the date of grant using the Black-Scholes option-pricing model.






F-14




*NOTE
      8 - STOCK OPTIONS AND WARRANTS,
      continued*


Assumptions
      utilized to value warrants are as follows:





Risk-free
      interest rate   6.00%


Expected
      life (years)   5


Expected
      volatility   73%
      to
      138%


Expected
      dividends   None




The
      following is a summary of warrants granted, exercised, canceled and outstanding
      involving the grants in the years ended June 30, 2007 and 2006:




**June
                  30, 2007**
              
              
              **June
                  30, 2006****Number**
              
              
              **Weighted-Average**
              
              
              **Number**
              
              
              **Weighted-Average****of
                  Shares**
              
              
              **Exercise
                  Price**
              
              
              **of
                  Shares**
              
              
              **Exercise
                  Price**Outstanding
                  at beginning of period
              
              
              913,968
              
              $
              0.37
              
              
              718,048
              
              
              0.24Granted
              
              
              37,640
              
              
              0.96
              
              
              195,920
              
              
              0.84Exercised
              
              
              (97,500
              )
              
              0.19
              
              
              -
              
              
              -Expired
                  or forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding
                  at end of period
              
              
              854,108
              
              $
              0.56
              
              
              913,968
              
              $
              0.37Exercisable
                  at end of period
              
              
              854,108
              
              
              
              
              
              697,302




***NOTE
      9 - INCOME TAXES***





For
      federal income tax purposes, the Company elected to capitalize start-up costs
      incurred during 1999 and 2000 totaling $357,989. The start-up costs are being
      amortized over sixty (60) months beginning in 2001. An analysis of the
      components of the (loss) before income taxes and the related income tax
      (benefit) is presented in the following tables. The tax amounts have been
      calculated using the 34% federal and 5.5% state income tax rates.




The
      (provision) benefit for income taxes consists of the following:




**2007**
                
                
                **2006**Current
                
                $
                -
                
                $
                -Deferred
                
                
                -
                
                
                -$
                
                
                $
                -





Deferred
      tax assets for June 30, 2007 and 2006 consist of the following:




**2007**
              
              
              **2006**Deferred
                  tax asset:Depreciation
                  and amortization
              
              $
              1,303
              
              $
              1,303Stock
                  based compensation
              
              
              2,327,030
              
              
              2,099,127Net
                  operating loss carry forward
              
              
              3,242,236
              
              
              2,903,954Research
                  tax credit
              
              
              7,203
              
              
              7,203Less:
                  valuation allowance
              
              
              (5,577,772
              )
              
              (5,011,587
              )Deferred
                  tax asset
              
              $
              -
              
              $
              -






F-15




*NOTE
      9 - INCOME TAXES,
      continued*




Valuation
                  allowance:Beginning
                  of year
              
              
              (5,011,587
              )
              
              
              
              
              (4,659,761
              )Decrease
                  (increase) during the year
              
              
              (566,185
              )
              
              
              
              
              (351,826
              )Ending
                  balance
              
              
              (5,577,772
              )
              
              
              
              
              (5,011,587
              )Net
                  deferred taxes
              
              $
              -
              
              
              
              
              $
              -




A
      reconciliation of income tax at the statutory rate to the Company’s effective
      tax rates for the periods ended June 30, 2007 and 2006, is as
      follows:





**2007**
              
              
              **2006**Federal
                  income tax at statutory rate of 34%
              
              $
              (511,568
              )
              $
              (576,031
              )State
                  tax, net of federal benefit
              
              
              (54,617
              )
              
              (61,500
              )Other
              
              
              -
              
              
              (1,128
              )Valuation
                  allowance
              
              
              566,185
              
              
              638,659$
              
              
              $
              -




As
      of
      June 30, 2007, the Company had a net operating loss carry forward of
      approximately $8,616,093 which will begin to expire in 2019.




***NOTE
      10 - NOTES PAYABLE***




**Interest**
              
              
              **Conversion**Director
              
              
              **Maturity**
              
              
              **Rate**
              
              
              **Price**
              
              
              **June
                  30, 2007**2003
                  Senior Convertible Note
              
              
              2010
              
              
              6
              %
              $
              0.38
              
              $
              1,268,625Senior
                  Convertible Note
              
              
              2010
              
              
              8
              %
              $
              0.74
              
              
              208,9552007
                  Senior Convertible Note
              
              
              2010
              
              
              8
              %
              $
              0.74
              
              
              303,160Accrued
                  interest
              
              
              
              
              
              
              
              
              
              
              
              37,4071,818,147Related
                  Party2007
                  Senior Convertible Note
              
              
              2010
              
              
              8
              %
              $
              0.74
              
              
              125,000Accrued
                  interest
              
              
              
              
              
              
              
              
              
              
              
              1,808126,808Total
                  long term note payable
              
              
              
              
              
              
              
              
              
              
              $
              1,944,955Director
              
              
              
              
              
              
              
              
              
              
              
              **June
                  30, 2006**2003
                  Senior Convertible Note
              
              
              2007
              
              
              6
              %
              $
              0.38
              
              $
              1,268,625Long
                  term note payable
              
              
              2007
              
              
              8
              %
              
              N/A
              
              
              132,950$
              1,401,575






F-16




*NOTE
      10 - NOTES PAYABLE
      (Continued)*




In
      June
      2007, the Company issued two 2007 senior convertible note payables to its
      Chairman and a major stockholder for $375,000 each. As of June 30, 2007, the
      Company received $303,160 from its Chairman and the remaining $71,840 in July
      2007 totaling $375,000. The Company also received $125,000 from a major
      stockholder and expects to receive the remainder in September 2007. These two
      senior convertible note payables are secured by the Company’s revenues and
      assets. When these notes are fully funded, approximately $250,000 are to be
      allocated and restricted for payment of the chief executive officer’s salary for
      the next twelve months. The Company may prepay the principal and interest upon
      meeting certain cash flow requirements and the approval of the
      board.





In
      addition, the Company combined its other outstanding note payables to its
      Chairman totaling $208,955 into a single note with the same annual interest
      rate
      and extended the maturity date to 2010. This senior convertible note is secured
      by the Company’s revenues and assets with the same priority as the 2007 senior
      convertible notes. Further, the 2003 senior convertible note maturity date
      was
      extended until 2010.





In
      June
      2006, the Company issued a note payable to its Chairman for $132,950 with an
      8%
      interest rate per annum and a maturity date of October 1, 2007.




In
      September 2003, the Company negotiated a successor agreement with its Chairman
      regarding the line of credit, which became a single convertible note for up
      to
      $1,500,000 excluding accrued interest, at an interest rate of 6% and due July
      1,
      2004. The convertible note is secured by the assets and revenues of the Company,
      which has the same priority as other senior convertible note payables. The
      note
      plus accrued interest will be convertible at a conversion rate of $0.38 per
      share. The conversion rate was determined as 15% above the average share price
      over the prior 20 trading days ($0.33 per share). The note has an anti-dilution
      provision in the event that the Company sells stock to other investors at less
      than $0.20 per share. During the year ended June 30, 2006, the maturity date
      of
      the note was extended until October 1, 2007. In January 2007, the Chairman
      agreed to extend the maturity date of the note until April 1, 2008. In June
      2007, the maturity date of this note was extended to June 2010.





During
      the period ended June 30, 2007, the Company paid accrued interest on the 2003
      senior convertible note for the three quarters by issuing the note payables
      for
      the interest amounts owed for the respective periods. For the fourth quarter
      of
      the year ended June 30, 2007, the interest was accrued to be paid at the
      maturity date.





During
      the period ended June 30, 2006, the Company paid accrued interest on the
      convertible note of approximately $94,886. At June 30, 2006, the Company accrued
      interest on the convertible note of approximately $18,864. Effective July 1,
      2006, the Company issued short term note payable for the unpaid quarterly
      accrued interest at an interest rate of 8% per annum.





***NOTE
      11 - RELATED PARTY TRANSACTIONS***





As
      fully
      described in Note 10, the Company has several senior convertible note payables
      with its Chairman and a major stockholder during the years ended June 30, 2007
      and 2006.





At
      June
      30, 2007 and 2006, the Company paid $7,531 and $6,900 respectively year in
      rent
      payments to the President for the sub-lease of office space. The term of the
      sub-lease is for a month to month period.





During
      the year ended June 30, 2007, the Company received several short-term loans
      totaling approximately $19,500 from an officer of the Company, which was repaid
      fully by June 30, 2007.







***NOTE
      12 - SUBSEQUENT EVENTS***





Effective
      February 1, 2007, the Company and HBI entered into a Development and Exclusive
      Option Agreement (the “Agreement”).  Under the Agreement, the Company
      granted to HBI an exclusive option (the “Option”) for a period of six months
      (“Option Period”) to obtain an exclusive license to our technology relating to
 certain products produced by HBI (the “License Agreement”).  In
      consideration for the Option, HBI is obligated to pay the Company $45,000 every
      three month period during the Option Period. During the Option Period, HBI
      will
      run and complete certain studies, and upon the conclusion of these studies,
      HBI
      will provide us with notice of the final decision with respect to entering
      into
      the License Agreement. In
      September 2007, the Company was informed that HBI decided not to complete these
      studies. As a result, the Company and HBI mutually agreed not to extend the
      Option Period.








F-17