**UNITED
      STATES**


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


WASHINGTON,
      D.C. 20549





**FORM
      10-KSB**





**(Mark
      One)**


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





For
      the
      fiscal year ended December 31, 2006





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





For
      the
      transition period _________ to____________





Commission
      file number: 000-51248





**OPTIGENEX
      INC.**


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





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





Issuer's
      telephone number, including area code: (212) 905-0189





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, par value
      $0.001 per share.





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (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 o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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
      amendment to this Form 10-KSB. x





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


Yes
o
      No x





Issuer's
      revenues for the fiscal year ended December 31, 2006 were $300,924.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant, as of March 30, 2007, was $149,231 based
      upon
      the closing price of $0.015 for such date as reported on the Over-the-Counter
      Bulletin Board.





There
      were 11,158,736 shares of Common Stock outstanding as of March 30, 2007.





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







**ANNUAL
      REPORT ON FORM 10-KSB**


**FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2006**





TABLE
      OF
      CONTENTS


PART
                I.Item
                1.
            Business
            1Item
                2.
            Description
                of Properties
            6Item
                3.
            Legal
                Proceedings
            6Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            6PART
                II.Item
                5.
            Market
                for Common Equity and Related Stockholder Matters
            7Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            8Item
                7.
            Financial
                Statements
            15Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            15Item
                8A.
            Controls
                and Procedures
            15Item
                8B.
            Other
                Information
            15PART
                III.Item
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            16Item
                10.
            Executive
                Compensation
            17Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            18Item
                12.
            Certain
                Relationships and Related Transactions
            19Item
                13.
            Exhibits
            20Item
                14.
            Principal
                Accountant Fees and Services
            21SIGNATURES
            22











**CAUTIONARY
      NOTE REGARDING FORWARD LOOKING STATEMENTS**





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




**PART
      I**





**Item
      1.****Description
      of Business**





**Overview**





Optigenex
      Inc. (“we”, “our”, “us”) was incorporated in the State of Delaware under the
      name Idunna, Inc. on July 10, 2002. Idunna, Inc. changed its name to Kronogen
      Sciences Inc. ("Kronogen") on November 21, 2002.





On
      April
      4, 2003, Kronogen acquired certain assets of the Giampapa Institute for
      Anti-Aging Medical Therapy, a sole proprietorship of the State of New Jersey
      and
      Optigene-X LLC, a New Jersey limited liability company (collectively
      "Giampapa"). This acquisition provided Kronogen with an exclusive license to
      certain intellectual property including patents, patents pending and trademarks
      that Giampapa utilized in its business. In this transaction, Kronogen issued
      an
      aggregate of 1,400,000 shares of its common stock to three individuals and
      a
      note payable of $173,080 to an individual for the release of his existing
      license agreement to utilize the same intellectual property. On July 30, 2003,
      Kronogen changed its name to Optigenex Inc.





On
      November 6, 2003, Optigenex acquired certain assets and assumed certain
      liabilities of CampaMed LLC, a New Jersey limited liability company
      ("CampaMed"). This acquisition provided Optigenex with certain intellectual
      property including patents, patents pending and trademarks that CampaMed
      utilized in its business. In this transaction, Optigenex issued an aggregate
      of
      1,156,250 shares of its common stock to seven individuals and note payable
      to
      CampaMed of $150,000. Optigenex also assumed certain liabilities of CampaMed
      in
      the amount of $128,512. In addition, Optigenex issued options to purchase an
      aggregate of 150,000 shares of its common stock at an exercise price of $0.001
      to four individuals in exchange for the release of an existing royalty
      obligation related to the intellectual property that Optigenex was acquiring
      from CampaMed.





On
      July
      30, 2004, Optigenex entered into an Asset Purchase Agreement (the "Transaction")
      with Vibrant Health International, a Nevada corporation ("Vibrant"), Optigenex
      Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Vibrant
      ("Acquisition Corp"), and Thomas McAdam ("McAdam), who, prior to the closing
      of
      the Transaction, was the principal shareholder and the sole officer and director
      of Vibrant. At the time of the Transaction, Vibrant was a reporting company
      for
      SEC purposes, however, its common stock was not registered with the SEC and
      as
      such, its shares were not listed on an established exchange or quoted on the
      Over-the-Counter Bulletin Board.





Vibrant
      was holding company that conducted its business of selling nutraceutical
      products through its wholly owned subsidiary Vibrant Health Inc. a Colorado
      corporation ("VHI"). At the time of the Transaction, in addition to Acquisition
      Sub and VHI, Vibrant also had another wholly owned subsidiary, Optigenex Merger
      Inc., a Delaware corporation ("Merger Inc."). Prior to the closing of this
      Transaction on July 30, 2004, Vibrant sold 100% of the common stock of VHI
      to
      McAdam in exchange for 3,417,560 shares of Vibrant that were owned by McAdam.
      These shares were cancelled and returned to the treasury of Vibrant. This
      reduced the total number of shares outstanding of Vibrant from 4,360,600 to
      943,040. Simultaneously, Vibrant affected a .599 to 1 reverse split of its
      common shares which reduced the total number of shares outstanding to 564,885.





In
      this
      Transaction, Acquisition Sub purchased all of the assets and assumed all of
      the
      liabilities of Optigenex in exchange for 8,621,255 shares of Vibrant common
      stock ("Vibrant Shares"), which represented approximately 94% of Vibrant's
      common stock outstanding immediately after the Transaction. The 8,621,255 shares
      issued by Vibrant to Optigenex were equal to the total number of Optigenex
      shares outstanding on July 30, 2004. Vibrant also issued 681,895 options
      ("Substitute Options") and 111,668 warrants ("Substitute Warrants") to purchase
      shares of Vibrant common stock to Optigenex. The number of Substitute Options
      and Substitute Warrants were equal to the number of Optigenex options and
      warrants that were issued and outstanding on the date of the Transaction. The
      Substitute Options and Substitute Warrants issued by Vibrant had the same
      exercise price and the same terms as the Optigenex options and warrants.





1


Simultaneous
      with the closing of the Transaction on July 30, 2004, Vibrant merged with and
      into its wholly owned Delaware subsidiary Merger Inc. with Merger Inc. being
      the
      surviving corporation. Also on July 30, 2004, Optigenex distributed its
      remaining assets, which consisted of the Vibrant Shares, the Substitute Options
      and the Substitute Warrants, directly to its shareholders, option holders and
      warrant holders. Upon the dissolution of Optigenex on July 30, 2004, Merger
      Inc.
      changed its name to Optigenex Inc.





On
      August
      25, 2004, Acquisition Sub, which contained the assets and liabilities that
      were
      acquired in the Transaction, merged with and into Optigenex with Optigenex
      being
      the surviving corporation. The effect of this merger was to eliminate
      Acquisition Sub as a legal subsidiary of Optigenex.





On
      April
      15, 2005, we registered our common stock under Section 12(g) of the Securities
      Exchange Act of 1934 and our shares began trading on the Over-the-Counter
      Bulletin Board under the ticker symbol OPGX.OB.





**Description
      of the Company's Business**





We
      develop and market proprietary products that feature our patented and wholly
      natural compound AC-11® (“AC-11”) as a core ingredient. AC-11 is a bioactive
      form of the medicinal herb known as *Uncaria
      tomentosa* which is
      indigenous to the Amazon rainforest and other tropical areas of South and
      Central America. AC-11 is manufactured for us by the Centroflora Group of Sao
      Paulo, Brazil, using a patented process that we own which delivers an alkaloid
      free, water soluble extract, standardized to an 8% carboxyl alkyl ester
      concentration. This manufacturing process takes place in a facility utilizing
      manufacturing equipment that we own. This facility complies with worldwide,
      voluntary standards for quality management.





In
      data
      compiled from over 10 years of scientific research and development, AC-11 has been
      shown, on a cellular level, to decrease DNA damage resulting from multiple
      causes, including the effects of stress, pollution, and premature aging of
      the
      skin due to photochemical damage from the sun. Additionally,
      in separate clinical studies
      AC-1 1 has
      been
      scientifically established as an
      effective anti-inflammatory compound, an anti-tumor
      agent and immune system enhancer .





Our
      product line consists of Activar AC-11, an oral nutritional supplement that
      we
      sell directly to the consumer through our Internet website www.ac-11.com. We
      also sell AC-11 as a bulk ingredient to strategic partners and mass market
      distributors in the nutraceutical, cosmeceutical, personal care, skin care,
      hair
      care, and beverage industries. In March 2006, we began selling a line of
      proprietary topical skin care products which contain AC-11 as an active
      ingredient. These skin care products consist of a day cream, night cream and
      eye
      cream. Initially, we marketed these products directly to the consumer through
      a
      celebrity endorsed TV infomercial. We began airing the infomercial in certain
      test markets in March 2006 on a variety of national and local television
      stations. After reviewing the results, we decided to discontinue airing the
      infomercial due to the insufficient levels of revenue generated and the high
      cost of purchasing media time. In 2007, we plan to reposition our skin care
      products to appeal to a higher socio-economic customer base by seeking to
      introduce these products to prestige retailers and international wholesale
      distributors.





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





**Research
      and Development**





The
      benefits of AC-11 are supported by a 10 year history of research and development
      including pre-clinical and clinical studies and published peer reviewed
      articles, which demonstrate statistically significant reduction in DNA damage
      and measurable enhancement of DNA repair activity. In numerous in-vitro studies
      and clinical trials, AC-11 has demonstrated activity in the following
      areas.





**DNA
      Repair -** As
      the
      human body ages, its natural ability to repair DNA damage caused by both
      oxidative and non-oxidative stress decreases. This adversely affects health
      and
      well being. AC-11 has also been shown to protect and decrease damage to cellular
      DNA caused by free radicals as well as increase the human body’s DNA repair
      capacity. AC-11 also reduces non-oxidative damage to cellular DNA due to
      exposure to the sun’s harmful rays and damage caused by stress and/or viral or
      bacterial disease states.





**Anti-Inflammatory
      -** Animal
      and human studies have found that AC-11 inhibits the immune mediator NF-kB.
      Research has shown that the inhibition of NF-kB is a rational strategy for
      the
      treatment of chronic inflammation. This may create potential uses for AC-11
      in
      the treatment of Arthritis, Chrohn’s Disease, Colitis, Irritable Bowel Syndrome,
      Lupus and other auto-immune diseases.




**Immune
      System Enhancement -** AC-11
      has
      been shown to help increase the number of white blood cells, which help the
      body
      fight off infection. In addition, many chemotherapeutic and immunosuppressant
      agents reduce white blood cell counts predisposing the body to infection. In
      animal studies, AC-11 has also been shown to decrease the time for recovery
      caused by reduced white blood cell counts. A low white blood cell count is
      found
      in such conditions like HIV/AIDS, and is also seen following organ transplants
      and in chemotherapy.





2


From
      time
      to time, we have provided funding to academic and other institutions for
      pre-clinical and clinical studies to evaluate the efficacy and mechanisms of
      action of AC-11, and we may continue to do so in the future. We may also supply
      AC-11 for use in studies for which we provide no funding. We believe that
      positive results from these studies, whether or not funded by us, would provide
      benefits to us by furthering the acceptance of AC-11. We intend to make
      presentations at various meetings to gain acceptance of AC-11. If we obtain
      successful research outcomes, we plan to publicize these findings to reposition
      our products and increase the demand for AC-11. We believe that successful
      research studies, if obtained, would strengthen our chances of obtaining
      developmental funding from pharmaceutical or other strategic partners for
      further pre-clinical and clinical trials.




**Government
      Regulation**





In
      the
      United States, the manufacturing, processing, formulation, packaging, labeling,
      advertising and sale of dietary supplements are regulated primarily by the
      Federal Food, Drug and Cosmetic Act, as amended, among others, by the Dietary
      Supplemental Health and Education Act of 1994 ("DSHEA Act") and by various
      federal agencies, including the Food & Drug Agency (the "FDA") and the U.S.
      Federal Trade Commission (the "FTC") and, to a lesser extent, the Consumer
      Product Safety Commission and the United States Department of Agriculture.
      Our
      activities may also be subject to regulation by various governmental agencies
      for the states and localities in which our products are manufactured,
      distributed or sold, and may be regulated by governmental agencies in certain
      countries outside the United States in which our products may be distributed
      and
      sold. Among other matters, regulation by the FDA and FTC is concerned with
      product safety and claims that refer to a product's ability to treat or prevent
      disease or other adverse health conditions.





Under
      the
      DSHEA, the FDA regulates the formulation, manufacture and labeling of dietary
      supplements, including our products. The DSHEA Act (i) defines dietary
      supplements, (ii) permits "structure/function" statements under certain
      conditions and (iii) permits, under certain conditions, the use of published
      literature in connection with the sale of herbal products. As dietary
      supplements, our products do not require approval by the FDA prior to marketing
      but are nevertheless subject to various regulatory requirements concerning
      their
      composition, permissible claims (including substantiation of any claims),
      manufacturing procedures and other elements. DSHEA prohibits marketing dietary
      supplements through claims for, or with intended uses in, the treatment or
      prevention of diseases. There can be no assurance that our supplement products
      can be identified and differentiated from competing products sufficiently enough
      on the basis of permissible claims regarding composition to compete
      successfully.





FDA
      regulations require us and our suppliers to meet relevant regulatory good
      manufacturing practices for the preparation, packaging and storage of these
      products. Good manufacturing practices for dietary supplements have yet to
      be
      promulgated, but are expected to be proposed. The Dietary Supplement Health
      and
      Education Act of 1994 revised the provisions of the Federal Food, Drug and
      Cosmetic Act concerning the composition and labeling of dietary supplements,
      which we believe is generally favorable to the dietary supplement industry.
      The
      Dietary Supplement Health and Education Act created a new statutory class of
      "dietary supplements." This new class includes vitamins, minerals, herbs, amino
      acids and other dietary substances for human use to supplement the diet. In
      general, a dietary supplement is a product (other than tobacco) that is intended
      to supplement the diet that bears or contains one or more of the following
      dietary ingredients: a vitamin, a mineral, a herb or other botanical, an amino
      acid, a dietary substance for use by man to supplement the diet by increasing
      the total daily intake, or a concentrate, metabolite, constituent, extract,
      or
      combinations of these ingredients; is intended for ingestion in pill, capsule,
      tablet, or liquid form; is not represented for use as a conventional food or
      as
      the sole item of a meal or diet; and is labeled as a "dietary supplement."
      However, the DSHEA grandfathered, with certain limitations, dietary ingredients
      that were on the market before October 15, 1994. A dietary supplement containing
      a new dietary ingredient and placed on the market on or after October 15, 1994
      must have a history of use or other evidence establishing a basis for expected
      safety. Manufacturers of dietary supplements having a "structure-function"
      statement must have substantiation that the statement is truthful and not
      misleading.





As
      dietary products, our products are regulated by FDA regulations promulgated
      under the DSHEA. Dietary supplements do not require approval by the FDA prior
      to
      marketing but are nevertheless subject to various regulatory requirements
      concerning their composition, permissible claims (including substantiation
      of
      any claims), manufacturing procedures and other elements. DSHEA prohibits
      marketing dietary supplements through claims for, or with intended uses in,
      the
      treatment or prevention of diseases.





In
      general, a dietary supplement:





·
            is
                a product (other than tobacco) that is intended to supplement the
                diet
                that bears or contains one or more of the followingdietaryingredients:
                a vitamin, a mineral, a herb or other botanical, an amino acid, a
                dietary
                substance for use by man tosupplement
                the diet by increasing the total daily intake, or a concentrate,
                metabolite, constituent, extract, or combinations ofthese
                ingredients;




·
            is
                intended for ingestion in pill, capsule, tablet, or liquid form;




·
            is
                not represented for use as a conventional food or as the sole item
                of a
                meal or diet; and




·
            is
                labeled as a "dietary supplement."




3


Dietary
      supplements must follow labeling guidelines outlined by the FDA. Neither dietary
      supplements nor personal care products require FDA or other government approval
      or notification to market in the United States.





Under
      the
      DSHEA, companies that manufacture and distribute dietary supplements are limited
      in the statements that they are permitted to make about nutritional support
      on
      the product label without FDA approval. In addition, a manufacturer of a dietary
      supplement must have substantiation for any such statement made and must not
      claim to diagnose, mitigate, treat, cure or prevent a specific disease or class
      of disease.





The
      product label must also contain a prominent disclaimer. These restrictions
      may
      restrict our flexibility in marketing our product. Although product labels
      must
      be submitted to the FDA, they are not subject to that agency's prior approval.
      We believe that we have made all necessary filings with the FDA.





We
      believe that all of our existing and proposed products are dietary supplements
      that do not require governmental approvals to be marketed in the United States.
      However, the FDA could conclude that our products are drugs and either require
      us to conduct clinical trials to establish efficacy and safety or cease to
      market these products. If this were to occur, our business, financial condition
      and results of operations may be negatively impacted.





Compliance
      with applicable FDA and any state or local statutes is critical. Although we
      believe that we are in compliance with applicable statutes, there can be no
      assurance that, should the FDA amend its guidelines or impose more stringent
      interpretations of current laws or regulations that we would be able to comply
      with these new guidelines. We are unable to predict the nature of such future
      laws, regulations, interpretations or applications, nor can we predict what
      effect additional governmental regulations or administrative orders, when and
      if
      promulgated, would have on our business in the future. These regulations could,
      however, require the reformation of certain products to meet new standards,
      market withdrawal or discontinuation of certain products not able to be
      reformulated, imposition of additional record keeping requirements, expanded
      documentation regarding the properties of certain products, expanded or
      different labeling and/or additional scientific substantiation.





Federal
      agencies have a variety of available remedies, including initiating
      investigations, issuing warning letters and cease and desist orders, requiring
      corrective labels or advertising, requiring consumer redress (for example,
      requiring that a company offer to repurchase products previously sold to
      consumers), seeking injunctive relief or product seizure and imposing civil
      penalties or commencing criminal prosecution. In addition, certain state
      agencies have similar authority, as well as the authority to prohibit or
      restrict the manufacture or sale of products within their jurisdiction. There
      can be no assurance that the regulatory environment in which we operate and
      intend to operate will not change or that such regulatory environment, or any
      specific action taken against us, will not result in a material adverse effect
      on our business, financial condition or results of operations. In addition,
      we
      may incur significant costs in complying with government regulations, defending
      claims of non-compliance or both. Moreover, there can be no assurance that
      new
      legislation or regulation, including changes to existing laws or regulations,
      will not materially adversely affect our business, financial condition and
      results of operations.




**Intellectual
      Property**





**Patents**





Our core
      intellectual property lies in four U.S. patents  issued
      for the extraction, testing and manufacturing process es of AC-11.
      These patents are as follows:





US6039949:
      method of preparation and composition of a water soluble extract of the plant
      species Uncaria;




US6238675:
      method of preparation and composition of a water soluble extract of the plant
      species Uncaria for enhancing  immune,
      anti-inflammatory and anti-tumor processes of warm blooded animals; and





US6361805:
      method of preparation and composition of a water soluble extract of the plant
      species Uncaria for enhancing  immune,
      anti-inflammatory, anti-tumor and DNA repair processes of warm blooded
      animals.





US6964784:
      method of preparation and composition of a water soluble extract of the
      bioactive component of the plant species Uncaria for enhancing immune,
      anti-inflammatory, anti-tumor and DNA repair processes of warm blooded animals.
      This patent is directed to administering the isolated purified active ingredient
      of the composition claimed in the 6238675 patent as a quinic acid alkyl
      ester.





There
      are
      corresponding international patent filings for the above four patents. These
      patents expire between 2016 and 2022.





4


**Trademarks**





We
      own
      the following seven registered trademarks:





·
      "Time Machine"




·
      "Age Manager"




·
      "AC-11"




·
      "Age Manager Professional"




·
      "Optigene-X"




·
      "Optigene"




·“CMed-100”





In
      addition, we have a trademark application pending for the name "Activar".





**Royalty
      Agreements**





In
      connection with the November 2003 acquisition of assets from CampaMed LLC,
      we
      entered into a separate agreement with Pierre Apraxine, Christian Flood, Peter
      Koepke and the Estate of John B. Elliott that obligates us to pay royalties
      in
      connection with the sale or licensing of any product that contains any compound,
      substance or ingredient derived or isolated from the Uncaria tomentosa vine
      such
      as our proprietary product AC-11, or its predecessor C-MED-100 (collectively
      referred to herein as "AC-11".) The maximum amount payable under this agreement
      is $347,700. The royalties are based on sales, as defined in the agreement,
      of
      any product that we sell or license. The royalty payments are calculated as
      follows: (i) 6% of gross sales for any product that we sell that contain AC-11
      as an ingredient which includes our nutritional supplement products and (ii)
      10%
      of gross sales of bulk AC-11. As of December 31, 2006, we have made royalty
      payments under the agreement totaling $71,299. These payments are recorded
      as
      additional purchase cost as they are incurred. The total remaining royalty
      obligation under the agreement as of December 31, 2006 is $276,401 and the
      agreement remains in effect until this amount is paid.





Also
      in
      connection with the November 2003 acquisition of assets from CampaMed LLC,
      we
      agreed to pay CampaMed additional payments based on 6% of the gross sales of
      any
      product containing AC-11, and 10% of the gross sales of any bulk AC-11, until
      additional payments in an aggregate amount of $500,000 have been made. As of
      December 31, 2006, we have made total payments under the agreement totaling
      $71,299. These payments are recorded as additional purchase cost as they are
      incurred. The total remaining payment obligation under the agreement is
      $428,701.





Also
      in
      connection with the acquisition of assets from CampaMed LLC, we assumed a
      royalty obligation based on the sales of any products that incorporate either
      the Nicoplex or Thiol technologies. These technologies are owned by Oxigene
      Inc.
      Nicoplex is a novel combination of antioxidant nutrients intended to be
      developed for the OTC market as an antioxidant therapy. The Thiol technology
      is
      a diagnostic test used to estimate oxidative stress-regulated DNA repair as
      an
      indicator of risk to illnesses associated with aging and cancer.





The
      total
      maximum amount due under this agreement is $3.5 million. To date, we have not
      paid nor do we owe any royalty payments under the agreement. Currently we are
      not developing or marketing any products that incorporate either the Nicoplex
      or
      the Thiol technologies.




**Competition**





We
      compete with a wide range of companies engaged in the nutraceutical, bulk
      ingredient and skin care markets. Most of our competitors if not all, have
      significantly greater financial and human resources and have a longer operating
      history. In
      considering our competitive position, we distinguish between our bulk
      ingredient business, nutritional  supplement products,
      and skin  care  business.





The
      bulk
      ingredient business is dominated by well established market leaders including
      AHD International, Schouten and Applied Food Science who market and sell a
      multitude of ingredients, both proprietary and non-proprietary, through a number
      of diverse channels. Our bulk ingredient business consists of our proprietary
      product AC-11 and as such, we are dependent upon one product for all our sales.
      In addition, we utilize a few distributors who market our ingredient to
      nutraceutical and skin care manufacturers and marketers along with direct to
      consumer retail marketing companies who use our ingredient in private branded
      nutraceutical and skin care finished products.


The
        nutritional supplement industry is large and intensely competitive. Some
        of the
        larger companies in this industry are: NBTY, Herbalife, Perrigo, Nature's
        Sunshine Products, Mannatech, USANA Health Sciences and Schiff Nutrition
        International. There are also many smaller companies in this
        sector.




5


Our
        nutritional supplement product contains our patented compound AC-11 which
        is
        derived from the rainforest botanical Uncaria tomentosa. Our product competes
        with other products on the market that contain Uncaria tomentosa as an
        ingredient. Most of our competitors in the nutritional supplement market
        have
        longer operating histories, greater name recognition and greater financial
        resources. In addition, nutritional supplements are sold through a wide variety
        of distribution channels such as retail stores and network marketing
        organizations. Currently, we sell our nutritional supplements through our
        Internet website and we have no plans to sell our product through retail
        outlets
        in the near future. While we believe that consumers may appreciate the
        convenience of ordering products from home through the Internet or from
        infomercials, the buying habits of many consumers accustomed to purchasing
        products through traditional retail channels are difficult to
        change.


In
        our
        skin care business, we expect to compete with offerings from large consumer
        product companies including; Unilever and Procter & Gamble, as well as large
        cosmetic companies such as Avon Products and Estee Lauder. Many of these
        products are marketed and advertised as having benefits similar to our skin
        care
        products. We will also compete with numerous companies that market skin care
        products via television infomercials. In addition we will compete with a
        number
        of companies that currently sell skin care products that contain Uncaria
        tomentosa as an ingredient. These companies include Joie de Vie, Murad and
        Optimal Outcome.




**Employees**





As
      of
      March 30, 2007, we had 2 full time employees. We have one executive officer
      and
      one administrative employee.




**Item
      2.****Description
      of Property**





Our
      executive offices are located at 750 Lexington Avenue, Sixth Floor, New York,
      New York. We currently sublease approximately 6,125 square feet of space at
      a
      monthly rent of $18,166. Our sublease expires on July 31, 2007.




**Item
      3.**  **Legal
      Proceedings**





We
      are
      not currently involved in any legal proceedings.




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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year ended December 31, 2006.




6


**PART
      II**





**Item
      5.****Market
      for Common Equity and Related Stockholder Matters**





Our
      common stock has been quoted on the OTC Bulletin Board under the symbol
      "OPGX.OB" since April 15, 2005. There was no trading in our common stock during
      the quarter ended March 31, 2005.





The
      following table shows the reported high and low closing bid quotations per
      share
      for our common stock based on information provided by the OTC Bulletin Board.
      Such over-the-counter market quotations reflect inter-dealer prices, without
      markup, markdown or commissions and may not necessarily represent actual
      transactions or a liquid trading market .





High
            
            LowSecond
                Quarter ended June 30, 2005
            
            $
            5.50
            
            $
            4.10Third
                Quarter ended September 30, 2005
            
            $
            5.50
            
            $
            0.68Fourth
                Quarter ended December 31, 2005
            
            $
            0.80
            
            $
            0.31First
                Quarter ended March 31, 2006
            
            $
            0.80
            
            $
            0.13Second
                Quarter ended June 30, 2006
            
            $
            0.25
            
            $
            0.07Third
                Quarter ended September 30, 2006
            
            $
            0.10
            
            $
            0.07Fourth
                Quarter ended December 31, 2006
            
            $
            0.10
            
            $
            0.011




**Holders**





As
      of
      March 30, 2007, we had approximately 174 holders of record of our common stock.
      Certain of our shares were held in street name and as such, we believe that
      the
      actual number of beneficial owners is higher.




**Dividends**





We
      have
      never declared or paid any cash dividends on our common stock. For the
      foreseeable future, we intend to retain any earnings to finance the development
      and expansion of our business, and we do not anticipate paying any cash
      dividends on our common stock. Any future determination to pay dividends will
      be
      at the discretion of our board of directors and will be dependent upon then
      existing conditions, including our financial condition and results of
      operations, capital requirements, contractual restrictions, business prospects,
      and other factors that our board of directors considers relevant.




**Recent
      Sales of Unregistered Securities**





In
      the
      fourth quarter of the year ended December 31, 2006 we did not issue any
      restricted securities.





7


**Item
      6.****Management's
      Discussion and Analysis or Plan of Operation**





The
      following discussion should be read in conjunction with our consolidated
      financial statements including the notes thereto contained in this report.
      In
      addition to historical information, the following discussion and other parts
      of
      this annual report contain forward-looking information that involves risks
      and
      uncertainties.





**Cautionary
      Note Regarding Forward Looking Statements**





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





**Overview**





We
      develop and market proprietary products that feature our patented and wholly
      natural compound AC-11® (“AC-11”) as a core ingredient. AC-11 is a bioactive
      form of the medicinal herb known as *Uncaria
      tomentosa* which is
      indigenous to the Amazon rainforest and other tropical areas of South and
      Central America. AC-11 is manufactured for us by the Centroflora Group of Sao
      Paulo, Brazil, using a patented process that we own which delivers an alkaloid
      free, water soluble extract, standardized to an 8% carboxyl alkyl ester
      concentration. This manufacturing process takes place in a facility utilizing
      manufacturing equipment that we own. This facility complies with worldwide,
      voluntary standards for quality management.





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





We
      sell
      AC-11 as a bulk ingredient to companies in the nutraceutical, cosmeceutical,
      personal care, skin care and hair care industries. Although we have executed
      several new bulk ingredient supply agreements with mass market retailers
      including Life Extension, an international distributor of private labeled of
      wellness products and LifeSpan International, a multi-level marketing
      organization, we continue to be highly dependent on a small base of customers
      that purchase bulk AC-11 as an ingredient and as such, these customers make
      purchases from us only when required to do so in connection with their
      manufacturing cycle and market demand. We rely on independent commissioned
      sales
      people, consultants and management to introduce us to prospective marketing
      partners and customers.





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





In
      March
      2006, we began test marketing our skin care products direct to the consumer
      through a celebrity endorsed, 30-minute television infomercial. This infomercial
      cost approximately $400,000 to produce. Based on the initial test marketing
      results, we determined that the infomercial needed to be modified and
      subsequently re-tested. We spent approximately $50,000 to reproduce certain
      portions of the infomercial and we began testing the modified program in April.
      We purchased media time on various over -the-air and cable TV channels in a
      variety of local, regional and national markets. After evaluating the results
      of
      the revised infomercial, we determined that the level of product sales which
      were achieved did not warrant the expenditure of additional funds to purchase
      media time. As a result, we discontinued the airing of the infomercial in June
      2006. In 2007, we plan to reposition our skin care products to appeal to a
      higher socio-economic customer base by seeking to introduce these products
      to
      prestige retailers and international wholesale distributors.





8


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





**Joint
      Ventures**





*PMO
      Products Inc.*





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





On
      August
      31, 2006, we entered into an agreement with PMO whereby PMO purchased the
      Company’s 50% ownership interest in exchange for $6,841 in cash. The purchase
      price represented the net book value of our investment in PMO as of such date.
      As a result, we no longer have an ownership interest in PMO.





In
      connection with the sale of our ownership interest, we entered into a seven-year
      Supply Licensing Agreement with PMO which allows PMO to utilize our registered
      trademark AC-11® for the sale of hair-care products in North America, South
      America and Japan. PMO granted us a seven-year trademark license to use its
      trademark “RepHair, by Pierre Michel” for hair-care products sold in Europe, all
      of Asia (except Japan) and Australia.





*Prometheon
      Labs LLC*





In
      September 2005, we contributed $40,000 in cash for a 50% ownership interest
      in
      Prometheon Labs LLC, a New York limited liability company which was formed
      for
      the purpose of developing and marketing an oral nutritional supplement
      containing our ingredient AC-11. Our joint venture partner Prometheon Holding
      LLC, contributed $40,000 in cash for its 50% ownership interest in Prometheon
      Labs. In June 2006, we advanced an additional $5,000 in cash to Prometheon
      for
      working capital purposes.





On
      November 19, 2006, we entered into an agreement with our joint venture partner
      Prometheon Holding whereby Prometheon Holding purchased our 50% ownership
      interest in Prometheon Labs in exchange for $18,000 in cash. The purchase price
      exceeded the net book value of our investment in Prometheon Labs which on
      November 30, 2006, the date of closing of the transaction, was $0. As a result,
      we no longer have an ownership interest in Prometheon Labs.





The
      parties also entered into a five-year Supply and Trademark Licensing Agreement
      which allows Prometheon Labs to continue to develop and market oral nutritional
      supplement products containing AC-11.





**Critical
      Accounting Policies and Estimates**





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





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





**Accounts
      Receivable and Bad Debt Expense**





Accounts
      receivable are reported at their outstanding unpaid principal balances net
      of an
      allowance for doubtful accounts. We estimate bad debt expense based upon past
      experience related to specific customers' ability to pay and current economic
      conditions. At December 31, 2006, our allowance for doubtful accounts was
      approximately $27,000.





9


**Inventory**





Our
      inventories are stated at the lower of cost, determined by the average cost
      method, or market. Our inventories consists of (i) raw materials that we
      purchase from a sole supplier in Brazil; (ii) our proprietary compound known
      as
      AC-11 which is manufactured in Brazil; and (iii) our line of nutritional
      supplement and skin care products that are produced for us by a contract
      manufacturer in the United States. We periodically review our inventories for
      evidence of spoilage and/or obsolescence and we remove these items from
      inventory at their carrying value. During 2006, we incurred inventory write-offs
      of approximately $280,000 as follows: (i) $152,000 of obsolete inventory which
      consisted of finished nutritional supplements that reached their stated
      expiration date; (ii) $51,000 of obsolete packaging components related to our
      skin creams and discontinued nutritional supplements; and (iii) $77,000 of
      raw
      material inventory in connection with the production of finished bulk AC-11
      powder that did not conform to our specifications. An inventory valuation
      allowance is established when we determine that quantities of inventory items
      on
      hand may exceed projected demand prior to the expiration date of such inventory
      items. At December 31, 2006, we recorded an inventory allowance of approximately
      $1,073,000 related to the book value certain raw material and finished goods
      inventory items that we determined may not be sold prior to their respective
      expiration dates.




**Revenue
      Recognition**





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





For
      our
      nutritional supplements, we provide a 100% money back guarantee on all unopened
      and undamaged products that are returned to us within 60 days of purchase.
      We
      estimate an allowance for product returns at the time of shipment based on
      historical experience. In 2006, product returns were negligible. We monitor
      our
      estimates on an ongoing basis and we may revise our allowance for product
      returns to reflect recent experience. To date, we have not made any significant
      changes in our allowance for returns. Products returned as a result of damage
      incurred during shipment are replaced at our cost. We do not estimate an
      allowance for returns due to damage as historically the level of returns has
      been negligible. For our bulk sales of AC-11, our standard return policy
      provides for a reimbursement of the full purchase price for any bulk AC-11
      that
      does not conform with the stated specifications. We must receive notification
      of
      a return request within 30 days from the date that the customer accepts
      delivery. In 2006, we did not incur any returns of bulk AC-11.





**Intangibles**





We
      account for long-lived assets and certain identified intangible assets such
      as
      patents and trademarks in accordance with Statement of Financial Accounting
      Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
      Management reviews these long-lived assets for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. An asset is considered to be impaired when the sum of the
      undiscounted future net cash flows expected to result from the use of the asset
      and its eventual disposition is less than its carrying amount. The amount of
      impairment loss, if any, is measured as the difference between the net book
      value of the asset and its estimated fair value. We monitor our projections
      of
      expected future net cash flows on an ongoing basis. If we determine that our
      projections require revision due to specific events such as a delayed product
      launch or a change in our product mix, or changes in economic conditions, we
      may
      incur additional write-offs. We recorded impairment charges of approximately
      $935,000 and $1,272,000 in 2006 and 2005, respectively.





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





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





10


**Employee
      Stock Options and Stock Based Compensation**





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




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





**Recent
      Accounting Pronouncements**





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





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





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements”, which establishes a framework for reporting fair value and
      expands disclosures about fair value measurements. SFAS No. 157 is
      effective for the Company January 1, 2008. We are currently evaluating the
      impact of this new standard on our consolidated financial
      statements.





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





**RESULTS
      OF OPERATIONS**





**For
      the year ended December 31, 2006 compared to the year ended December 31,
      2005.**





**Net
      Sales**





Our
      net
      sales are derived from the sale of our nutritional supplement product Activar
      AC-11 and our line of proprietary skin care products. We also sell AC-11 as
      a
      bulk ingredient to other companies in the nutritional supplement and
      cosmeceutical industries who utilize it in their own proprietary products.
      We
      sell Activar AC-11 direct to consumers through our Internet website www.ac-11.com .
      During
      2006, we began selling our skin care products via a 30-minute TV infomercial.
      We
      discontinued the infomercial in June 2006 and as a result, we are not currently
      selling our skin care products direct to the consumer.





Net
      sales
      for the year ended December 31, 2006 were $300,924 compared to net sales of
      approximately $277,831 for the year ended December 31, 2005, an increase of
      $23,093 or 8.3%. Our net sales by product line are summarized in the following
      table:





11


$%2006
            
            2005
            
            Inc/(Dec)
            
            Inc/(Dec)Nutritional
                Supplements:Activar
                AC-11
            
            $
            44,829
            
            $
            50,602
            
            $
            (5,773
            )
            
            (11.4
            %)Age
                Manager
            
            
            -
            
            
            31,639
            
            
            (31,639
            )
            
            (100.0
            %)Age
                Manager Pro
            
            
            -
            
            
            22,275
            
            
            (22,275
            )
            
            (100.0
            %)Total
                Nutritional Supplements
            
            
            44,829
            
            
            104,516
            
            
            (59,687
            )
            
            (57.1
            %)Bulk
                AC-11
            
            
            163,100
            
            
            116,306
            
            
            46,794
            
            
            40.2
            %Skin
                Care Products
            
            
            61,947
            
            
            -
            
            
            61,947
            
            
            NAOther
            
            
            31,048
            
            
            57,009
            
            
            (25,961
            )
            
            (45.5
            %)Total
                Revenue
            
            $
            300,924
            
            $
            277,831
            
            $
            23,093
            
            
            8.3
            %





Supplement
      sales decreased $59,687 or 57.1% in 2006 compared to 2005. This decrease is
      due
      primarily to the discontinuance of Age Manager and Age Manager Pro.




Sales
      of
      bulk AC-11 increased $46,794 or 40.2% in 2006 compared to 2005. This increase
      was due primarily to higher order levels from our existing customers in 2006.
      We
      also expanded our overall customer base in 2006.




Other
      sales consist primarily of sales that we made to our joint venture companies
      PMO
      Products and Prometheon Labs. Also included in other sales are royalties that
      we
      earned from products sold by third parties that utilize our trademark AC-11®.
      Other sales decreased $25,961 or 45.5% in 2006 compared to 2005. In 2006, sales
      made to our joint venture companies, net of deferred income was $22,036 compared
      to $27,510 in 2005. Royalties from product sales decreased from $17,892 in
      2005
      to $2,778 in 2006.





**Cost
      of Sales**





Cost
      of
      sales includes direct and indirect costs associated with manufacturing AC-11
      and
      our line of nutritional supplement and skin care products that contain AC-11
      as
      an ingredient. Cost of sales was $1,515,688 and $510,961 for the years ended
      December 31, 2006 and 2005, respectively. Included in cost of sales are
      write-offs of obsolete inventory of approximately $280,000 and $369,000 in
      2006
      and 2005 respectively. Also included in cost of sales in 2006 is an inventory
      allowance of $1,072,622 related to certain inventory items which we determined
      may not be sold prior to their expiration date. As a result of the inventory
      write-offs and valuation allowance, we incurred a gross loss of $1,214,764
      in
      2006 compared to a gross loss of $233,130 in 2005. Excluding the effect of
      the
      inventory write-offs and valuation allowance, our gross profit would have been
      $137,859 or 45.8% in 2006 compared to gross profit of $135,870 or 48.9% in
      2005.





**Selling,
      General and Administrative Expenses**





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





The
      table
      below highlights the major components of our SG&A expenses:





$%2006
            
            2005
            
            Inc/(Dec)
            
            Inc/(Dec)Employee
                compensation and benefits
            
            $
            559,235
            
            $
            1,243,721
            
            $
            (684,486
            )
            
            (55.0
            %)Marketing,
                advertising and promotion
            
            
            507,326
            
            
            875,501
            
            
            (368,175
            )
            
            (42.1
            %)Research
                and development
            
            
            98,675
            
            
            325,804
            
            
            (227,129
            )
            
            (69.7
            %)Consulting
                and other professional services
            
            
            147,628
            
            
            477,377
            
            
            (329,749
            )
            
            (69.1
            %)Legal
                and accounting
            
            
            553,000
            
            
            801,908
            
            
            (248,908
            )
            
            (31.0
            %)General
                and administrative
            
            
            225,078
            
            
            479,240
            
            
            (254,162
            )
            
            (53.0
            %)Occupancy
            
            
            153,680
            
            
            172,331
            
            
            (18,651
            )
            
            (10.8
            %)Stock
                based compensation
            
            
            213,175
            
            
            65,040
            
            
            148,135
            
            
            227.8
            %Depreciation
                and amortization
            
            
            294,731
            
            
            289,832
            
            
            4,899
            
            
            1.7
            %Total
                SG&A
            
            $
            2,752,528
            
            $
            4,730,754
            
            $
            (1,978,226
            )
            
            (41.8
            %)







12




In
      total,
      SG&A expenses decreased $1,978,226 or 41.8% from $4,730,754 in 2005 to
      $2,752,528 for the comparable period in 2006. Expenses decreased in all
      categories with the exception of an increase in stock based compensation and
      depreciation and amortization. Areas where we achieved significant cost savings
      are as follows:





·
            Employee
                compensation expense decreased $684,486 or 55.0% in 2006 compared to 2005.
                This decrease is due to a reduction in the number of full-time
                employees.




·
            Marketing,
                advertising and promotion expenses decreased $368,175 or 42.1% in
                2006
                compared to 2005. During 2006, we incurred costs related to the production
                of our TV infomercial and the purchase of media time. These cost
                increases
                were offset by decreased costs related to a reduction in the number
                of
                marketing, branding and public relations consultants that performed
                services for us in 2005.





·
            Research
                and development expenses decreased $227,129 or 69.7% in 2006 compared
                to
                2005. This decrease was due to higher product development costs in
                2005
                and higher costs related to services provided by scientific advisors
                in
                2005.





·
            Consulting
                and other professional services decreased $329,749 or 69.1% in 2006
                compared to 2005. A majority of this decrease is due to the fact
                that in
                2005, we engaged the services of consultants in the areas of strategic
                planning, mergers and acquisitions, investor relations and business
                development. We terminated many of these relationships during
                2006.




·
            Legal
                and accounting expenses decreased $248,908 or 31.0% in 2006 compared
                to
                2005. In 2005, we incurred legal fees related to a proposed acquisition
                that was never consummated and legal fees related to litigation in
                which
                we were the plaintiff.





·
            General
                and administrative expenses decreased $254,162 or 53.0% in 2006 compared
                to 2005. This decrease was due primarily to a reduction in travel
                and
                entertainment costs and other ancillary office expenses which is
                attributed to the reduction in the number of employees in 2006 compared
                to
                2005.




·
            Stock
                based compensation expense increased $148,135 or 227.8% in 2006 compared
                to 2005. In 2006, we began expensing the fair market value of stock
                options issued to employees pursuant to FASB
                123R.





**Interest
      Expense**





Interest
      expense for 2006 was $9,968,557 compared to $777,561 in 2005. Of the total
      in
      2006, approximately $9,661,963 was non-cash interest expense resulting from
      the
      accounting treatment of our convertible notes. At December 31, 2006, we had
      not
      paid $219,991 of interest due under our convertible notes and accordingly this
      amount is included in accrued expenses at December 31, 2006.





**Impairment
      of Intangible Assets**





In
      connection with an evaluation of projected future demand for our products,
      we
      determined that certain patents related to these products were impaired and
      as a
      result, were incurred an impairment charge of $935,448 at December 31, 2006.
      These patents cover the extraction, manufacturing, claims and testing processes
      for our proprietary compound AC-11. We determined the amount of the impairment
      charge based on an analysis of the expected future net cash flows generated
      from
      the sale of finished goods in inventory as of December 31, 2006. These finished
      goods consist of our nutritional supplement product Activar AC-11, our skin
      care
      products and finished bulk AC-11 which we sell as an ingredient to our customer
      base. We determined that the projected future net cash flows generated from
      product sales was less than the carrying value of the underlying patents at
      December 31, 2006. A key assumption contained in our analysis was the length
      of
      the projection period which was limited to three years due to the fact that
      products currently in inventory reach their stated expiration date over this
      three year period. In addition, we did not assume that we would manufacture
      and
      sell additional quantities of products during the projection period. The
      difference between the sum of the expected future net cash flows generated
      from
      sales over the projection period was less than the net book value of the
      underlying patents at December 31, 2006 and accordingly we reduced the carrying
      value of such patents to reflect the impairment charge. We incurred an
      impairment charge of approximately $1,272,000 in 2005. This charge was due
      to
      our evaluation of the carrying value of a patent and patent pending that we
      licensed in the 2003. The patent and patent pending related to the formulations
      for two of our nutritional supplement products that we discontinued in 2005.





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





We
      are
      required to measure the fair value of the warrants and the embedded conversion
      feature related to our convertible notes on the date of each reporting period.
      The effect of this re-measurement is to adjust the carrying value of the
      liabilities related to the warrants and the embedded conversion feature.
      Accordingly, during 2006, we recorded non-cash other income of $7,531,983
      related to the decrease in the fair value of the warrants and embedded
      derivative liability.





**Net
      Loss**





Net
      loss
      for the year ended December 31, 2006 was $7,357,459 or $0.68 per share, compared
      to a net loss of $6,996,157 or $0.69 for the year ended December 31,
      2005.





13


**LIQUIDITY
      AND CAPITAL RESOURCES**





Based
      upon our recurring losses from operations, a stockholders’ deficit of
      approximately $4,850,000 as of December 31, 2006, our current rate of cash
      consumption and the uncertainty of liquidity related initiatives described
      below, there is substantial doubt as to our ability to continue as a going
      concern. Future losses are likely to continue unless we successfully implement
      our business plan. At December 31, 2006, we had cash of approximately $153,000
      and net working capital of approximately $640,000. Excluding approximately
      $917,000 of inventory, we have a net working capital deficit of approximately
      $277,000. As of that same date, we had approximately $522,000 in current
      liabilities.





Subsequent
      to December 31, 2006, on February 12, 2007, we entered into a Securities
      Purchase Agreement with our four existing note holders for the sale of $250,000
      in secured convertible notes and warrants to purchase 20,000,000 shares of
      our
      common stock. The notes bear interest at 8.0% and mature on February 12, 2010.
      We are not required to make any principal payments during the term of the notes.
      The notes are convertible into shares of our common stock at the note holders'
      option, at the lower of (i) $0.10 per share or (ii) 60% of the average of the
      three lowest intra-day trading prices for our common stock as quoted on the
      Over-the-Counter Bulletin Board for the 20 trading days preceding the conversion
      date. The full principal amount of the notes is due upon the occurrence of
      an
      event of default. Interest on the notes is paid quarterly in
      arrears.





The
      warrants are exercisable for a period of seven years from the date of issuance
      and have an exercise price of $0.07 per share. In addition, the conversion
      price
      of the notes and the exercise price of the warrants will be adjusted in the
      event that we issue common stock at a price below the fixed conversion price
      of
      $0.10, with the exception of any shares of common stock issued in connection
      with the notes. We have the right to prepay the entire outstanding balance
      of
      the notes under certain circumstances at premiums ranging from 35% to 50%.
      We
      also have the right to prepay a portion of the notes each month in an amount
      equal to 104% of the then outstanding principal balance divided by 36, plus
      one
      month’s interest.





As
      a
      result of this sale of additional notes, at March 31, 2007, we have an aggregate
      of $4,595,024 of secured convertible notes outstanding, which may hinder our
      ability to raise additional debt or equity capital. In addition, we have granted
      a security interest in substantially all of our assets to the holders of the
      notes. If we were required to repay all or a portion of the outstanding balance
      of the notes in cash due to the occurrence of an event of default, we would
      be
      required to raise additional funds in the event that we do not have sufficient
      cash available. There can be no assurance that any additional financing will
      be
      available when needed, on commercially reasonable terms or at all. If we were
      to
      seek asset based financing, we would need the approval of the existing note
      holders which we may not receive. Any additional equity financing may involve
      substantial dilution to our then existing shareholders. Consequently, if we
      were
      unable to repay the notes, the note holders could commence legal action against
      us and foreclose on all of our assets to recover the amounts due. Any such
      action would require us to curtail or cease operations.





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





We
      maintain high levels of inventory relative to our historical product sales.
      We intend to aggressively market our existing inventory of skin care products
      and bulk AC-11 in order to convert this inventory into cash. The shelf life
      of
      our bulk AC-11 is approximately three years from the date of processing. In
      October 2006, we began testing certain lots of our existing inventory of bulk
      AC-11 using established and accepted protocols to determine the stability of
      the
      active ingredient and its microbiology profile. We contracted with an
      independent laboratory to perform these tests. Based on the results of this
      testing, we extended the shelf life of these specific lots for an additional
      24
      month period. As a result, the earliest expiration date for our inventory of
      bulk AC-11 is December 2008. In the event that future lots are retested and
      the
      test results indicate that the active ingredient and/or microbiology profile
      do
      not meet our specifications, we will be required to write-off the value of
      this
      inventory. We are unable to predict the likelihood at this time of future
      write-offs related to our bulk inventory however at December 31, 2006, we
      incurred an allowance for inventory obsolescence of approximately $1,073,000
      to
      reflect the uncertainty of being able to sell our existing inventory prior
      to
      its expiration.




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





We
      currently do not have the required cash on hand and therefore, we will be
      relying on product sales to augment our existing cash. In addition, this
      estimated “burn-rate” does not include costs related to (i) marketing and
      advertising our products, (ii) cash needed to satisfy existing accounts payable,
      (iii) research and new product development and; (iv) interest payable under
      our
      notes which at December 31, 2006 was approximately $220,000.





14


**Item
      7. Financial Statements**





The
      financial statements are included in this annual report on Form 10-KSB at page
      F-1.





**Index
      to Financial Statements**




Report
                of Independent Registered Public Accounting Firm
            
            F-2Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2006 and
                2005.
            
            F-4Consolidated
                Statements of Changes in Shareholders’ Equity (Deficit) for the years
                ended December 31, 2006 and 2005
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ending December 31, 2006 and
                2005
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-7





**Item
      8. Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      8A. Controls and Procedures**





As
      of the
      end of the period covered by this report, an evaluation was carried out under
      the supervision and with the participation of Daniel Zwiren, our Chief Executive
      Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of
      our
      disclosure controls and procedures. The system of disclosure controls and
      procedures was designed to be effective at a reasonable assurance level. Based
      on that evaluation, Mr. Zwiren has concluded that our disclosure controls and
      procedures are effective at the reasonable assurance level to timely alert
      him
      of information required to be disclosed by us in reports that we file or submit
      under the Securities Act of 1934. During the quarter ended December 31, 2006,
      there were no changes in our internal controls over financial reporting that
      have materially affected, or are reasonably likely to materially affect our
      internal controls over financial reporting.





**Item
      8B. Other Information**





None.




15


**PART
      III**





**Item
      9. Directors, Executive Officers, Promoters, Control Persons and Corporate
      Governance; Compliance With Section 16(a) of the Exchange
      Act.**





The
      following table sets forth certain information about each of our directors
      and
      our executive officer:





Name
            
            Age
            
            Positions
            
            Director
              SinceWilliam
                Walters
            
            69
            
            Chairman
                of the Board
            
            2004Daniel
                Zwiren
            
            51
            
            President,
                Chief Executive Officer and Chief Financial Officer
            
            2006Michael
                Mullarkey
            
            38
            
            Director
            
            2004





**William
      Walters** was
      appointed Chairman of our Board of Directors on July 30, 2004. Mr. Walters
      was
      previously the Chairman of the Board of Optigenex Inc. ("Old Optigenex") from
      July 2002 until July 30, 2004, the date on which a subsidiary of Vibrant Health
      International acquired the assets of Old Optigenex. From November 2001 until
      October 2004, Mr. Walters was the Vice-Chairman of Sands Brothers & Co.
      Ltd., a New York based investment banking group. From November 2005 to May
      2005,
      Mr. Walters was employed by Laidlaw Inc., a New York based investment banking
      group. In June 2005, Mr. Walters became Chairman of Commonwealth Associates,
      a
      New York based investment banking group. Mr. Walters founded Whale Securities
      in
      1984 and served as its Chairman until Whale sold its customer assets and
      discontinued its operations in November 2001.





**Daniel
      Zwiren** was
      appointed as our Chief Financial Officer on May 13, 2006 and as our President
      and Chief Executive Officer on September 14, 2006. From August 2004 to January
      2006, Mr. Zwiren was Managing Director of Valued Ventures LLC an
      advisory/capital procurement firm located in New York, New York specializing
      in
      the biotech and technology industries. From January 2003 to July 2004, Mr.
      Zwiren served as a private equity advisor at UBS in New York, New York. From
      January 2002 to January 2003, Mr. Zwiren was the Managing Partner of Osprey
      Capital LLC, a capital procurement/advisory services company based in Ponte
      Vedra Beach, Florida. From January 2000 to December 2000, Mr. Zwiren was
      Executive V.P. of telic.net, an early stage Internet telephony service provider
      located in New York, New York.




**Michael
      Mullarkey** was
      appointed as a Director of our Company on October 1, 2004. Since November 2001,
      he has been the Chairman of the Board of Directors of Workstream Inc., a company
      that offers software and services that address the needs of companies to
      recruit, train, evaluate, motivate and retain their employees and has been
      Workstream's Chief Executive Officer since April 2001. In April 2003, Mr.
      Mullarkey assumed the responsibilities of President of Workstream, a position
      in
      which he previously served from April 2001 until November 2001. From January
      2001 to April 2001, Mr. Mullarkey was the President of Allen and Associates
      Inc., a full service outplacement firm in the United States, which Workstream
      acquired in April 2001. From October 1999 to December 2000, Mr. Mullarkey served
      as General Manager of Sony Corporation. From January 1998 to September 1999,
      Mr.
      Mullarkey was the co-founder and managing director of Information Technology
      Mergers & Acquisitions, LLC, an investment capital group managing private
      equity funding and investing in emerging technology markets and organizations.
      From March 1997 to December 1998, he was the Senior Vice President of sales
      and
      marketing for Allin Communications, a publicly traded enterprise solution
      provider. From October 1989 to February 1997, Mr. Mullarkey was Vice President
      and General Manager at Sony Corporation of America, a US subsidiary of Sony
      Corporation.





**Employment
      Agreements with Management**





None.




**Compliance
      With Section 16(a) of the Exchange Act**





Section 16(a)
      of the Securities Exchange Act of 1934 requires our executive officers and
      directors, and persons who beneficially own more than 10% of a registered class
      of our equity securities, to file reports of ownership and changes in ownership
      with the Securities and Exchange Commission (“SEC”). Executive officers,
      directors and greater than 10% stockholders are also required to furnish us
      with
      copies of all Section 16(a) forms they file. Based solely on our review of
      the reports furnished to us, or written representations from certain reporting
      persons, we believe that all filing requirements applicable to our executive
      officers, directors and greater than ten percent beneficial owners were timely
      made during the fiscal year ended December 31, 2006.





**Board
      Committees**





We
      do not
      currently have an audit committee or a compensation committee. The full Board
      acts in place of a nominating committee to investigate qualified nominees for
      election to the Board when vacancies occur.





16


**Code
      of Ethics**





In
      November 2005 we adopted a code of ethics that applies to all of our employees
      including our principal executive officer, principal financial officer and
      principal accounting officer to our Board of Directors. We will provide to
      any
      person without charge, a copy of our code of ethics upon the receipt of a
      written request sent to our headquarters at 750 Lexington Ave, 6th Floor, New
      York, NY 10022.




**Item
      10. Executive Compensation**





The
      following table sets forth information with respect to compensation earned
      by
      the executive officers of the Company for 2006 and 2005.





**SUMMARY
      COMPENSATION TABLE**





Name
                and
              Principal
                Position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Option
              Awards
                ($)
            
            Total
              ($)Daniel
                Zwiren, Chief Executive Officer
            
            
            2006
            
            
            87,500
            
            
            0
            
            
            0
            
            
            87,500and
                Chief Financial Officer (1)
            
            
            2005
            
            
            0
            
            
            0
            
            
            0
            
            
            0Anthony
                Bonelli, Former Chief Executive
            
            
            2006
            
            
            181,250
            
            
            75,000
            
            
            137,237
            
            
            393,487Officer
                (2)
            
            
            2005
            
            
            200,000
            
            
            200,000
            
            
            0
            
            
            400,000Joseph
                McSherry, Former Chief Financial
            
            
            2006
            
            
            58,333
            
            
            0
            
            
            45,438
            
            
            103,771Officer
                (3)
            
            
            2005
            
            
            140,000
            
            
            0
            
            
            0
            
            
            140,000





(1)
      Mr.
      Zwiren joined the Company as Chief Financial Officer on May 13, 2006 and was
      appointed as Chief Executive Officer on September 14, 2006.




(2)
      Mr.
      Bonelli resigned his position as Chief Executive Officer on August 23,
      2006.




(3)
      Mr.
      McSherry resigned as Chief Financial Officer on May 13, 2006.





**Grants
      of Plan-Based Awards**





In
      2006,
      we issued the options listed below. There were no stock options exercised in
      2006. The following table sets forth the options granted in 2006:




Name
            
            Grant
              Date
            
            Number
                of Securities Underlying Options
              (#)
            
            Exercise
                or Base Price of Option Awards
              ($/Sh)Daniel
                Zwiren (1)
            
            
            —
            
            
            —
            
            
            —Anthony
                Bonelli
            
            
            3/1/2006
            
            
            500,000
            (2)
            $
            0.133/1/2006
            
            
            500,000
            (2)
            $
            1.00Joseph
                McSherry
            
            
            3/1/2006
            
            
            300,000
            (3)
            $
            0.133/1/2006
            
            
            200,000
            (3)
            $
            1.00





(1)
      Mr.
      Zwiren was not granted options during 2006.




(2)
      Options were forfeited upon Mr. Bonelli’s resignation on August 23,
      2006.




(3)
      Options were forfeited upon Mr. McSherry’s resignation on May 13,
      2006.





With
      respect to the above named executive officers, there were no outstanding equity
      awards at December 31, 2006.





17


**Director
      Compensation**





Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            All
              Other
                Compensation ($)
            
            Total
              ($)William
                Walters (1)
            
            
            41,667
            
            
            0
            
            
            41,667Michael
                Mullarkey
            
            
            0
            
            
            0
            
            
            0James
                Favia (2)
            
            
            10,000
            
            
            0
            
            
            10,000Dr.
                Kenji Kitatani (3)
            
            
            0
            
            
            39,000
            
            
            39,000





(1)
      Mr.
      Walters was compensated under an employment agreement which expired on March
      31,
      2006.




(2)
      Mr.
      Favia resigned as a Director of the Company on June 12, 2006.




(3)
      Dr.
      Kitatani resigned as a Director of the Company on May 8, 2006. During 2006,
      Dr.
      Kitatani was compensated as a business development consultant.





**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table sets forth information as of March 31, 2007 regarding the
      beneficial ownership of our Common Stock, based on information provided by
      (i)
      each of our executive officers and directors; (ii) all executive officers and
      directors as a group; and (iii) each person who is known by us to beneficially
      own more than 5% of the outstanding shares of our Common Stock.





Unless
      otherwise indicated, the address of each beneficial owner is in care of
      Optigenex Inc., 750 Lexington Avenue, Sixth Floor, New York, New York 10022.
      Unless otherwise indicated, we believe that all persons named in the following
      table have sole voting and investment power with respect to all shares of Common
      Stock that they beneficially own.





For
      purposes of this table, a person is deemed to be a beneficial owner of the
      securities if that person has the right to acquire such securities within 60
      days of March 31, 2007 upon the exercise of options or warrants. In determining
      the percentage ownership of the persons in the table below, we assumed in each
      case that the person exercised all options and warrants which are currently
      held
      by that person and which are exercisable within such 60 day period, but that
      options and warrants held by all other persons were not exercised, and based
      the
      percentage ownership on 11,158,736 shares outstanding on March 31,
      2007.





**Name
                and Address of Beneficial Owner******
            
            ******Number
                of Shares (1)******
            
            **Percent
                of Class (2)*******Directors
                and Executive Officers:*William
                Walters, Chairman
            
            
            1,410,000
            (3)
            
            12.2
            %Daniel
                Zwiren, President, Chief Executive Officerand
                Chief Financial Officer 0
            
            
            *Michael
                Mullarkey, Director
            
            
            125,000
            (4)
            
            1.1
            %All
                Directors and Executive Officers as a Group (3 persons)
            
            
            1,535,000
            
            
            13.3
            %*Non-Management
                5% Stockholders:*Richard
                Serbin
            
            
            985,000
            
            
            8.8
            %Vincent
                Giampapa
            
            
            960,000
            
            
            8.6
            %Claudia
                Walters
            
            
            660,000
            (5)
            
            5.9
            %




*
      less
      than 1.0%





(1)  All
      entries exclude beneficial ownership of shares issuable pursuant to options
      that
      have not vested or that are not otherwise exercisable as of the date hereof
      and
      which will not become vested or exercisable within 60 days of March 31,
      2007.





(2)  Percentages
      are rounded to nearest one-tenth of one percent. Percentages are based on
      11,158,736 shares of common stock outstanding. Options that are presently
      exercisable or exercisable within 60 days are deemed to be beneficially owned
      by
      the person holding the options for the purpose of computing the percentage
      ownership of that person, but are not treated as outstanding for the purpose
      of
      computing the percentage of any other person.





(3)  Includes
      options to purchase 400,000 shares of our common stock which are presently
      exercisable.





(4)  Includes
      options to purchase 25,000 shares of our common stock which are presently
      exercisable.





(5)  Includes
      options to purchase 60,000 shares of our common stock which are presently
      exercisable.





18


**Equity
      Compensation Plan Information**





The
      following table sets forth certain information, as of December 31, 2006
      concerning shares of common stock authorized for issuance under the Company’s
      equity compensation plans.





(c)Number
                of SecuritiesRemaining
                Available(a)
            
            (b)
            
            for
                Future IssuanceNumber
                of Securities
            
            Weighted
                Average
            
            Under
                Equityto
                be Issued Upon
            
            Exercise
                Price of
            
            Compensation
                PlansExercise
                of
            
            Outstanding
            
            (Excluding
                SecuritiesOutstanding
                Options,
            
            Options,
                Warrants
            
            Reflected
                inWarrants
                and Rights
            
            and
                Rights
            
            Column
                (a))Equity
                compensation plans approved byshareholders
            
            
            325,000
            
            $
            1.15
            
            
            4,675,000Equity
                compensation plans notapproved
                by shareholders
            
            
            1,339,605
            
            $
            2.31
            
            
            0Total
            
            
            1,664,605
            
            $
            2.08
            
            
            4,675,000




In
      July
      2004, our shareholders approved the 2004 Stock Incentive Plan (the "Plan").
      The
      purpose of the Plan is to further the growth of Optigenex by allowing the
      Company to compensate employees and consultants who have provided bona fide
      services to the Company, through the award of Common Stock of the Company.
      The
      maximum number of shares of common stock that may be issued under the Plan
      is
      5,000,000.





The
      Board
      of Directors is responsible for the administration of the Plan and has full
      authority to grant awards under the Plan. Awards may take the form of (i) Stock
      Options, (ii) Restricted Stock, (iii) Deferred Stock, and/or (iv) Other
      Stock-Based Awards. The Board of Directors has the authority to determine;
      (a)
      the employees and other persons that will receive awards under the Plan, (b)
      the
      number of shares covered by each award to be granted to each employee or other
      person, and (c) the exercise price, term and vesting periods, if any, in
      connection with the granting of an award.





**Issuance
      of Non-Plan Options during 2006**





In
      May
      2006, we issued in the aggregate, options to purchase 100,000 shares of our
      common stock to a consultant. These options have an exercise price of $0.30
      and
      a term of 3 years from the date of grant. Of the total, 50,000 options vested
      on
      the date of grant and the remaining 50,000 vested on December 31, 2006.





**Item
      12. Certain Relationships and Related Transactions**





During
      the fiscal years ended December 31, 2006 and 2005, we had the following related
      party transactions:





We
      paid
      Dr. Kenji Kitatani, a member of our Board of Directors consulting fees totaling
      $39,000 and $156,000 during 2006 and 2005, respectively. These payments were
      made pursuant to a consulting agreement between the Company and Dr. Kitatani
      dated October 1, 2004. Dr. Kitatani provided business development services
      to
      the Company and was paid at a rate of $13,000 per month. This agreement expired
      on September 30, 2005 however the Company extended the agreement on a month
      to
      month basis until March 31, 2006. Dr. Kitatani resigned as a Director on May
      8,
      2006.





19


**Item
      13. Exhibits**





ExhibitNo.
            
            Title2.1
            
            Asset
                Purchase Agreement dated as of July 30, 2004 by and among Vibrant
                Health
                International, Optigenex Acquisition Corp., ThomasH.
                McAdam and Optigenex Inc. (i)2.2
            
            Certificate
                of Ownership and Merger of Vibrant Health International into Optigenex
                Merger Inc. (i)2.3
            
            Asset
                Purchase Agreement dated November 6, 2003 by and among Optigenex
                Inc.
                CampaMed LLC, the Pero Family Limited Partnership, Ronald W. Pero,
                Michael
                W. Moers, Gerald E. Morris, Oxigene, Inc., E. Gerald Kay, Allen Williams
                and Anthony Worth (iv)3.1
            
            Certificate
                of Incorporation of Registrant - formerly known as Optigenex Merger
                Inc.
                (i)3.2
            
            By-laws
                of Optigenex Inc. (i)4.1
            
            Form
                of Callable Secured Convertible Note (v)4.2
            
            Form
                of Stock Purchase Warrant (v)10.1
            
            Service
                Agreement dated as of October 1, 2004 by and between Communications
                Policy
                and Management Corporation and Optigenex Inc. (ii)10.2
            
            Employment
                Agreement dated as of April 10, 2003 by and between Kronogen Sciences
                Inc.
                (predecessor to Old Optigenex) and Richard Serbin.
                (iii)10.3
            
            Employment
                Agreement dated as of April 10, 2003 by and between Kronogen Sciences
                Inc.
                (predecessor to Old Optigenex) and William Walters.
                (iii)10.4
            
            Employment
                Agreement dated as of April 4, 2003 between Kronogen Sciences Inc.
                (predecessor to Old Optigenex) and Dr. Vincent C. Giampapa.
                (iii)10.5
            
            Employment
                Agreement dated as of June 15, 2004 by and between Old Optigenex
                and
                Joseph W. McSherry. (iii)10.6
            
            Employment
                Agreement dated as of August 16, 2004 by and between Optigenex Inc.
                and
                Anthony Bonelli. (iii)10.7
            
            Optigenex
                Inc. 2004 Incentive Stock Plan (iii)10.8
            
            Securities
                Purchase Agreement, dated August 31, 2005, by and among Optigenex,
                Inc.,
                AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC
                and New
                Millennium Capital Partners II, LLC. (v)10.9
            
            Registration
                Rights Agreement, dated August 31, 2005, by and among Optigenex,
                Inc., AJW
                Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and
                New
                Millennium Capital Partners II, LLC. (v)10.10
            
            Security
                Agreement, dated as of August 31, 2005, by and among Optigenex, Inc.,
                AJW
                Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and
                New
                Millennium Capital Partners II, LLC. (v)10.11
            
            Intellectual
                Property Security Agreement, dated August 31, 2005, by and among
                Optigenex, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC,
                AJW
                Partners, LLC and New Millennium Capital Partners II, LLC.
                (v)10.12
            
            Agreement
                dated November 6, 2003 by and among Optigenex, Pierre Apraxine, Michael
                L.K. Hwang as executor for the Estate of John B. Elliott, Anthony
                Christian Flood and Peter Koepke (iv)10.13
            
            Securities
                Purchase Agreement, dated September 15, 2006, by and among Optigenex,
                Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners,
                LLC
                and New Millennium Capital Partners II, LLC. (vi)10.14
            
            Registration
                Rights Agreement, dated September 15, 2006, by and among Optigenex,
                Inc.,
                AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC
                and New
                Millennium Capital Partners II, LLC. (vi)10.15
            
            Security
                Agreement, dated as of September 15, 2006, by and among Optigenex,
                Inc.,
                AJW Offshore, Ltd., AJW Qualified Partners,LLC,
                AJW Partners, LLC and New Millennium Capital Partners II, LLC.
                (vi)10.16
            
            Intellectual
                Property Security Agreement, dated September 15, 2006, by and among
                Optigenex, Inc., AJW Offshore, Ltd., AJWQualified
                Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
                II,
                LLC. (vi)23.1
            
            Consent
                of Independent Registered Public Accountant (vii)31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 (vii)31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 (vii)32.1
            
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002 (vii)32.2
            
            Certifications
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002 (vii)




(i)
      Incorporated by reference to our Form 8-K filed on August 12, 2004.





(ii)
      Incorporated by reference to our Form 8-K filed on October 7, 2004.





(iii)
      Incorporated by reference to our Form 10-QSB filed on January 24, 2005.





(iv)
      Incorporated by reference to our Form 10-KSB filed on April 15,
      2005.





(v)
      Incorporated by reference to our Form 8-K filed on September 7,
      2005.





(vi)
      Incorporated by reference to our Form 8-K filed on September 19,
      2006.





(vii)
      Filed Herewith.





20


**Item
      14. Principal Accountant Fees and Services**





Through
      September 30, 2005, Goldstein Golub Kessler LLP (the "Firm") had a continuing
      relationship with American Express Tax and Business Services Inc. ("TBS") from
      which it leased auditing staff who were full time, permanent employees of TBS
      and through which its partners provided non-audit services.  Subsequent to
      September 30, 2005, this relationship ceased and the Firm established a similar
      relationship with RSM McGladrey, Inc. ("RSM").  The Firm has no full time
      employees, and, therefore, none of the audit services performed were provided
      by
      permanent, full-time employees of the Firm.  The Firm manages and
      supervises the audit and audit staff and is exclusively responsible for the
      opinion rendered in connection with its examination.





The
      following is a summary of the fees paid or accrued for the audit and other
      services provided by Goldstein Golub Kessler LLP for the fiscal years ended
      December 31, 2006 and 2005.


2006
              
              2005Audit
                  Fees
              
              $
              89,000
              
              $
              95,955Audit
                  - Related Fees
              
              
              —
              
              
              —Tax
                  Fees
              
              
              —
              
              
              —All
                  Other Fees
              
              
              —
              
              
              —Audit
                  Fees
              
              $
              89,000
              
              $
              95,955


21


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




**OPTIGENEX
              INC.**/s/ Daniel ZwirenDaniel
                Zwiren
              Chief
                Executive Officer and DirectorDated: April 17, 2007





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.


Signature
              
              Title
              
              Date/s/
                  Daniel Zwiren
              
              President,
                  Chief Executive Officer (Principal Executive Officer)
              
              April
                  17, 2007Daniel
                  Zwiren
              
              Chief
                  Financial Officer (Principal Financial and Accounting
                  Officer)/s/
                  William Walters
              
              Chairman
                  of the Board
              
              April
                  17, 2007William
                  Walters/s/
                  Michael Mullarkey
              
              Director
              
              April
                  17, 2007Michael
                  Mullarkey


22




OPTIGENEX
      INC.





INDEX
      TO
      FINANCIAL STATEMENTS





December
                31, 2006Report
                of Independent Registered Public Accounting Firm
            F-2Financial
                Statements:Balance
                Sheet
            F-3Statement
                of Operations
            F-4Statement
                of Stockholders' Equity (Deficiency)
            F-5Statement
                of Cash Flows
            F-6Notes
                to Financial Statements
            F-7









REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors


Optigenex
      Inc.





We
      have
      audited the accompanying balance sheets of Optigenex Inc. as of December 31,
      2006 and 2005, and the related statements of operations, stockholders' equity
      (deficiency), 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 audits.





We
      conducted our audits 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. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide 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 Optigenex Inc. as of December
      31,
      2006 and 2005, and the results of its operations and its cash flows for the
      years then ended in conformity with United States generally accepted accounting
      principles.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 17 to the financial
      statements, the Company has suffered recurring losses from operations and has
      a
      stockholders deficiency which raises substantial doubt about its ability to
      continue as a going concern. Management's plan in regard to these matters is
      also described in Note 17. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.





As
      discussed in Note 1 to the financial statements, effective January 1, 2006,
      the Company changed its method of accounting for share-based payments to adopt
      Statements of Financial Accounting Standards No. 123(R) Share-Based Payments.





GOLDSTEIN
      GOLUB KESSLER LLP


New
      York,
      New York





April
      13,
      2007





F-2


OPTIGENEX
      INC.




BALANCE
      SHEET


December
      31,


2006
              
              2005ASSETSCurrent
                  Assets:Cash
              
              $
              153,153
              
              $
              969,289Accounts
                  receivable, net of allowance fordoubtful
                  accounts of $27,426 and $37,426 respectively
              
              
              34,510
              
              
              94,245Inventories,
                  net
              
              
              916,645
              
              
              2,003,778Prepaid
                  expenses and other current assets
              
              
              56,396
              
              
              120,655Total
                  current assets
              
              
              1,160,704
              
              
              3,187,967Property
                  and equipment, net
              
              
              70,023
              
              
              116,834Intangible
                  assets, net
              
              
              1,479,815
              
              
              2,578,577Other
                  assets
              
              
              114,183
              
              
              222,541Total
                  Assets
              
              $
              2,824,725
              
              $
              6,105,919LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
                  Liabilities:Accounts
                  payable
              
              $
              248,565
              
              $
              443,179Accrued
                  expenses
              
              
              272,855
              
              
              72,540Deferred
                  income
              
              
              -
              
              
              22,036Total
                  current liabilities
              
              
              521,420
              
              
              537,755Callable
                  secured convertible notes,net
                  of debt discount of $3,020,763 and $2,410,799,
                  respectivelyincluding
                  embedded derivative liability
              
              
              6,152,065
              
              
              3,286,701Common
                  stock warrants
              
              
              1,001,047
              
              
              41,407Total
                  liabilities
              
              
              7,674,532
              
              
              3,865,863CommitmentsStockholders'
                  Equity (Deficiency):Preferred
                  stock - $0.001 par value; 5,000,000 shares authorized,none
                  issuedCommon
                  stock - $0.001 par value; 100,000,000 shares authorized,10,958,736
                  and 10,450,234 issued and outstanding respectively
              
              
              10,959
              
              
              10,450Additional
                  paid-in capital
              
              
              18,064,334
              
              
              17,797,247Accumulated
                  deficit
              
              
              (22,925,100
              )
              
              (15,567,641
              )Stockholders'
                  equity (deficiency)
              
              
              (4,849,807
              )
              
              2,240,056Total
                  Liabilities and Stockholders' Equity (Deficiency)
              
              $
              2,824,725
              
              $
              6,105,919





See
      Notes
      to Financial Statements





F-3


OPTIGENEX
      INC.




STATEMENT
      OF OPERATIONS


Years
      Ended December 31,


2006
              
              2005Net
                  sales
              
              $
              300,924
              
              $
              277,831Cost
                  of sales
              
              
              1,515,688
              
              
              510,961Gross
                  (loss)
              
              
              (1,214,764
              )
              
              (233,130
              )Selling,
                  general and administrative expenses
              
              
              2,752,528
              
              
              4,730,754Impairment
                  of intangible assets
              
              
              935,448
              
              
              1,271,599Loss
                  from operations
              
              
              (4,902,740
              )
              
              (6,235,483
              )Other
                  (income) expense:Interest
                  expense
              
              
              9,968,557
              
              
              777,561Equity
                  in loss from joint ventures
              
              
              18,145
              
              
              27,014Net
                  change in fair value ofcommon
                  stock warrants andderivative
                  liability
              
              
              (7,531,983
              )
              
              (43,901
              )Net
                  loss
              
              $
              (7,357,459
              )
              $
              (6,996,157
              )Net
                  loss per common share - basic and diluted
              
              $
              (0.68
              )
              $
              (0.69
              )Weighted-average
                  number of commonshares
                  outstanding - basic and diluted
              
              
              10,784,159
              
              
              10,128,365





See
      Notes
      to Financial Statements





F-4


OPTIGENEX
      INC.




STATEMENT
      OF STOCKHOLDERS’ EQUITY (DEFICIENCY)


Year
      ended December 31, 2006


Common
                  Stock
              
              Additional
              
              
              
              Stockholders’Number
                  of
              
              
              
              Paid-in
              
              Accumulated
              
              EquityShares
              
              Amount
              
              Capital
              
              Deficit
              
              (Deficiency)Balance
                  at January 1, 2005
              
              
              9,456,140
              
              $
              9,456
              
              $
              15,351,139
              
              $
              (8,571,484
              )
              $
              6,789,111Issuance
                  of common stock for cash
              
              
              853,304
              
              
              853
              
              
              2,381,068
              
              
              
              
              
              2,381,921Exercise
                  of stock options
              
              
              140,790
              
              
              141
              
              
              
              
              
              
              
              
              141Issuance
                  of options to consultants
              
              
              
              
              
              
              
              
              65,040
              
              
              
              
              
              65,040Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (6,996,157
              )
              
              (6,996,157
              )Balance
                  at December 31, 2005
              
              
              10,450,234
              
              $
              10,450
              
              $
              17,797,247
              
              $
              (15,567,641
              )
              $
              2,240,056Issuance
                  of options to consultants
              
              
              
              
              
              
              
              
              17,500
              
              
              
              
              
              17,500Issuance
                  of options to employees
              
              
              
              
              
              
              
              
              182,675
              
              
              
              
              
              182,675Issuance
                  of stock for services
              
              
              100,000
              
              
              100
              
              
              12,900
              
              
              
              
              
              13,000Conversion
                  of convertible notesinto
                  shares of common stock
              
              
              408,502
              
              
              409
              
              
              54,012
              
              
              
              
              
              54,421Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (7,357,459
              )
              
              (7,357,459
              )Balance
                  at December 31, 2006
              
              
              10,958,736
              
              $
              10,959
              
              $
              18,064,334
              
              $
              (22,925,100
              )
              $
              (4,849,807
              )


See
      Notes
      to Financial Statements





F-5




OPTIGENEX
      INC.




STATEMENT
      OF CASH FLOWS


Years
                  Ended December 31,2006
              
              2005Cash
                  flows from operating activities:Net
                  loss
              
              $
              (7,357,459
              )
              $
              (6,996,157
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
              
              
              46,811
              
              
              48,874Amortization
                  of intangibles
              
              
              207,348
              
              
              229,014Amortization
                  of debt discount
              
              
              1,255,036
              
              
              239,201Amortization
                  of deferred financing costs
              
              
              40,572
              
              
              11,944Reserve
                  for obsolete inventory
              
              
              1,072,622Bad
                  debt expense (recovery)
              
              
              (10,000
              )
              
              37,426Stock-based
                  compensation
              
              
              213,175
              
              
              65,040Non-cash
                  financing costs
              
              
              8,406,927
              
              
              482,808Impairment
                  of intangible assets
              
              
              935,448
              
              
              1,271,599Equity
                  in loss from joint ventures
              
              
              36,145
              
              
              27,014Net
                  income from change in valueof
                  warrants and embedded derivative liability
              
              
              (7,531,983
              )
              
              (43,901
              )Changes
                  in operating assets and liabilities:Decrease
                  (increase) in accounts receivable
              
              
              69,735
              
              
              (50,910
              )(Increase)
                  decrease in inventories
              
              
              14,511
              
              
              37,921Decrease
                  in prepaid expensesand
                  other current assets
              
              
              64,259
              
              
              201,166Decrease
                  (increase) in other assets
              
              
              50,000
              
              
              (47,581
              )Decrease
                  in accounts payable
              
              
              (194,614
              )
              
              (428,130
              )Increase
                  (decrease) in accrued expenses
              
              
              200,315
              
              
              (152,012
              )(Decrease)
                  increase in deferred income
              
              
              (22,036
              )
              
              22,036Net
                  cash used in operating activities
              
              
              (2,503,188
              )
              
              (5,044,648
              )Cash
                  flows from investing activities:Patent
                  costs
              
              
              (44,034
              )
              
              (45,705
              )Purchases
                  of property and equipment
              
              
              
              
              
              (18,988
              )Proceeds
                  from sale of joint venture interest
              
              
              6,841Investment
                  in joint venture
              
              
              (5,000
              )
              
              (40,000
              )Net
                  cash used in investing activities
              
              
              (42,193
              )
              
              (104,693
              )Cash
                  flows from financing activities:Proceeds
                  from the sale of convertible notes
              
              
              1,865,000
              
              
              2,650,000Proceeds
                  from the issuance of common stock
              
              
              
              
              
              2,382,062Deferred
                  financing costs
              
              
              (20,200
              )
              
              (110,000
              )Repayment
                  of convertible notes
              
              
              (115,555
              )Payments
                  on notes payableNet
                  cash provided by financing activities
              
              
              1,729,245
              
              
              4,922,062Net
                  increase (decrease) in cash
              
              
              (816,136
              )
              
              (227,279
              )Cash
                  - beginning of period
              
              
              969,289
              
              
              1,196,568Cash
                  - end of period
              
              $
              153,153
              
              $
              969,289Supplemental
                  schedule of cash flow information:Cash
                  paid for interest
              
              $
              205,123
              
              $
              70,666Supplemental
                  schedule of non-cash investingand
                  financing activities:Debt
                  discount in connection with recordingvalue
                  of embedded derivative liability
              
              $
              1,865,000
              
              $
              2,813,950Allocation
                  of convertible noteproceeds
                  to warrants
              
              $
              8,021,094
              
              $
              319,218Common
                  stock issued in connection withconversion
                  of convertible notes
              
              $
              54,421


See
      Notes
      to Financial Statements





F-6


OPTIGENEX
      INC.





NOTES
      TO
      FINANCIAL STATEMENTS


December
      31, 2006





1.
      PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:





Optigenex
      Inc. (the "Company") is engaged in the business of developing and marketing
      proprietary products based on its patented compound known as AC-11.





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities, the disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenue and expenses
      during the reporting period. Actual results could differ from those estimated
      by
      management.





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





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





Inventories
      are stated at the lower of cost, determined by the average cost method, or
      market. Inventories consists of (i) raw materials that are purchased from a
      sole
      supplier in Brazil; (ii) the Company’s proprietary compound known as AC-11 which
      is manufactured in Brazil; and (iii) finished nutritional supplement and skin
      care products that are produced by a contract manufacturer in the United States.
      The Company periodically reviews its inventories for evidence of spoilage and/or
      obsolescence and removes these items from inventory at their carrying value.
      An
      inventory valuation allowance is established when management determines that
      quantities on hand may exceed projected demand prior to the expiration date
      of
      the inventory item.





The
      Company reviews long-lived assets for impairment whenever events or changes
      in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. An asset is considered to be impaired when the sum of the
      undiscounted future net cash flows expected to result from the use of the asset
      and its eventual disposition is less than its carrying amount. The amount of
      impairment loss, if any, is measured as the difference between the net book
      value of the asset and its estimated fair value. At December 31, 2006 and 2005,
      management performed an evaluation of the carrying value of intangible assets,
      which consist primarily of patents and patents pending that were acquired in
      2003. This resulted in impairment charges of $935,448 and $1,271,599 in 2006
      and
      2005, respectively.





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





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





Deferred
      income taxes are provided for the differences between the bases of assets and
      liabilities for financial reporting and income tax purposes. A valuation
      allowance is established when necessary to reduce deferred tax assets to the
      amount expected to be realized.





Depreciation
      of office and production equipment is provided for by the straight-line method
      over the estimated useful lives of the related assets. Leasehold Improvements
      are amortized over the shorter of the lease agreement or the useful lives of
      the
      related assets.





Shipping
      costs are included in cost of sales and amounted to approximately $7,159 and
      $22,200 for the years ended December 31, 2006 and 2005, respectively.





Research
      and development costs are expensed when incurred. Research and development
      costs
      were approximately $99,000 and $326,000 for the years ended December 31, 2006
      and 2005, respectively.





Costs
      incurred for producing and communicating advertising are expensed as incurred
      and included in selling, general and administrative expenses in the accompanying
      statement of operations. Advertising expenses approximated $297,000 and $413,000
      for the years ended December 31, 2006 and 2005, respectively.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements”, which establishes a framework for reporting fair value and
      expands disclosures about fair value measurements. SFAS No. 157 is
      effective for the Company January 1, 2008. The Company is currently
      evaluating the impact of this new standard on its consolidated financial
      statements.





F-7





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





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





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





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





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




The
      following table illustrates the effect on net loss for the years ended December
      31, 2005 as if we had applied the fair value method to our stock-based
      compensation:


Year
                  ended December 31,
              
              2005Reported
                  net loss
              
              $
              (6,996,157
              )Deduct:
                  total stock-based employeecompensation
                  expense determinedunder
                  fair value based methodfor
                  all awards
              
              
              (330,172
              )Proforma
                  net loss
              
              $
              (7,326,329
              )Reported
                  net loss per share-
                  basic and diluted
              
              $
              (0.69
              )Proforma
                  net loss per share-
                  basic and diluted
              
              $
              (0.72
              )





As
      a
      result of adopting SFAS 123R, the Company recorded pretax compensation expense
      of $182,675 for the year ended December 31, 2006. Stock-based compensation
      is
      included in each expense category that includes salary expense. The Company
      has
      recorded a full valuation allowance on the deferred tax asset related to
      stock-based compensation and therefore, no tax benefit is recognized for the
      year ended December 31, 2006.





F-8


2.
      LOSS
      PER SHARE:





Basic
      loss per share is computed by dividing net loss by the weighted-average number
      of shares of common stock outstanding during the period after giving retroactive
      effect to the recapitalization. Diluted earnings per share gives effect to
      dilutive options, warrants and other potential common stock outstanding during
      the period.





Potential
      common stock consists of the following:





At
                December 31,
            
            2006
            
            2005Stock
                options
            
            
            1,664,605
            
            
            3,301,605Common
                stock warrants
            
            
            100,891,918
            
            
            680,980Common
                stock issuable uponconversion
                of convertible notes (1)
            
            
            482,780,444
            
            
            13,947,368Total
            
            
            585,336,967
            
            
            17,929,953




(1)
      At
      December 31, 2006 and 2005 the Company had Callable Secured Convertible Notes
      outstanding of $4,345,024 and $2,650,000, respectively. The Notes are
      convertible into shares of the Company's common stock at the Note Holders'
      option, at the lower of (i) $3.20 per share or (ii) 60% of the average of the
      three lowest intra-day trading prices for the common stock as quoted on the
      Over-the-Counter Bulletin Board for the 20 trading days preceding the conversion
      date. At December 31, 2006 and 2005 the Notes would have been convertible into
      shares of the Company’s common stock at a price of $0.009 and $0.19,
      respectively. See Note 8 for a complete discussion of the Callable Secured
      Convertible Notes. The potential common stock has not been included in the
      computation of diluted loss per share, as the effect would be anti-dilutive.




3.
      INVENTORIES:





At
      December 31, 2006 and 2005, inventories net of reserves, were as
      follows:


2006
              
              2005Raw
                  materials
              
              $
              789,274
              
              $
              768,075Work-in-process
              
              
              
              
              
              35,000Finished
                  goods
              
              
              1,199,993
              
              
              1,200,703Inventory
                  reserves
              
              
              (1,072,622
              )$
              916,645
              
              $
              2,003,778





The
      Company recorded an inventory valuation allowance of $1,072,622 at December
      31,
      2006. This allowance relates to quantities of raw materials and finished goods
      that management determined would not be sold prior to their respective
      expiration dates. The amount of the inventory allowance is equal to the book
      value of the inventory items at December 31, 2006 which was $691,355 for raw
      materials and $381,267 for finished goods.





During
      2006, the Company incurred inventory write-offs totaling approximately $280,000
      as follows:





(1)
      Approximately $152,000 related to obsolete inventory which consisted of finished
      nutritional supplements that reached their stated expiration date.





(2)
      Approximately $77,000 of raw material inventory in connection with the
      production of finished bulk AC-11 powder that did not conform to the Company’s
      specifications.





(3)
      Approximately $51,000 of obsolete packaging components for the Company’s skin
      care and nutritional supplement products.





During
      2005, the Company incurred a write-off $368,690 related to obsolete inventory
      which consisted of finished nutritional supplements that the company is no
      longer selling and bulk AC-11 powder that was expired.




4.
      PROPERTY AND EQUIPMENT:





Property
      and equipment, at cost, consists of the following:


December
                  31,
              
              2006
              
              2005
              
              Useful
                  LifeOffice
                  equipment
              
              $
              88,739
              
              $
              88,739
              
              
              3
                  to 7 yearsLeasehold
                  improvements
              
              
              66,160
              
              
              66,160
              
              
              3
                  yearsProduction
                  equipment
              
              
              47,550
              
              
              47,550
              
              
              3
                  to 7 years202,449
              
              
              202,449Less
                  accumulated depreciation
              
              
              (132,426
              )
              
              (85,615
              )$
              70,023
              
              $
              116,834
   F-9


5.
      INTANGIBLE ASSETS:





Intangible
      assets, at cost, consist of the following:


2006
              
              2005Gross
              
              Accumulated
              
              Gross
              
              AccumulatedDecember
                    31,
              
              Amount
              
              Amortization
              
              Amount
              
              AmortizationTrademarks,
                  trade namesand
                  copyrights
              
              $
              259,712
              
              $
              82,722
              
              $
              259,712
              
              $
              56,282Patents
              
              
              1,720,656
              
              
              558,563
              
              
              2,612,069
              
              
              377,655Patents
                  pending
              
              
              140,732
              
              
              0
              
              
              140,732
              
              
              0$
              2,121,100
              
              $
              641,285
              
              $
              3,012,513
              
              $
              433,937





The
      Company's long-lived assets and certain identified intangible assets such as
      patents, patents pending and trademarks are reviewed in accordance with
      Statement of Financial Accounting Standard No. 142, "Goodwill and Other
      Intangible Assets" ("SFAS No. 142") whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be
      recoverable.





In
      connection with an evaluation of the projected demand for the Company’s
      products, management determined that certain patents related to these products
      were impaired. These patents cover the extraction, manufacturing and testing
      processes for the Company’s proprietary compound AC-11. Management’s
      determination of impairment was based on an analysis of the expected future
      net
      cash flows generated from the sale of finished goods in inventory as of December
      31, 2006. These finished goods consist of the Company’s nutritional supplement
      product, skin care products and finished bulk AC-11 which it sells as an
      ingredient to its customer base. Management determined that the projected future
      net cash flows generated from product sales was less than the carrying value
      of
      the underlying patents at December 31, 2006. A key assumption contained in
      management’s analysis was the length of the projection period which was limited
      to three years due to the fact that products currently in inventory reach their
      stated expiration date over this three year period. In addition, management
      did
      not assume that it would manufacture and sell additional quantities of products
      during the projection period. The sum of the expected future net cash flows
      generated from sales over the three year period was $1,302,826, which was less
      than the net book value of the underlying patents at December 31, 2006 of
      $2,238,274. Accordingly, the Company recorded an impairment charge of
      $935,448.




At
      December 31, 2005, the Company determined that it would no longer be selling
      the
      nutritional supplement products that pertain to a licensed patent and patent
      pending and accordingly, an impairment charge of $1,271,599 was recorded to
      reflect write-off of the net book value of these impaired assets. Of the total
      write-off, $999,355 related to the patent pending and $272,244 related to the
      patent.





Patents
      are amortized over periods ranging from of 12 to 18 years, which represents
      the
      remaining lives of the patents. Patent pending applications will be amortized
      when the patents are issued. Trademarks, trade names and copyrights are being
      amortized over 10 years, the remaining estimated useful lives.





Amortization
      expense amounted to approximately $207,000 and $229,000 for the years ended
      December 31, 2006 and December 31, 2005, respectively. Estimated amortization
      expense for the next five years is as follows:


Year
                  ending December 31,2007
              
              
              209,0002008
              
              
              209,0002009
              
              
              209,0002010
              
              
              209,0002011
              
              
              209,000





6.
      ACCRUED EXPENSES:





Accrued
      expenses consist of the following:


December
                  31,
              
              2006
              
              2005Accrued
                  professional fees
              
              $
              50,000
              
              $
              55,692Accrued
                  interest
              
              
              219,991Other
              
              
              2,864
              
              
              16,848$
              272,855
              
              $
              72,540
   F-10


7.
      CALLABLE SECURED CONVERTIBLE NOTES





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





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





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





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





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





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





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





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





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





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





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





F-11


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





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





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





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





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





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





The
      Company calculated the fair value of the embedded conversion feature related
      to
      the Third Installment of $1,350,000 on February 17, 2006 using the Black-Scholes
      valuation model with the following assumptions: market price of $0.30; exercise
      price of $0.18, which represents a 40% discount to the market price on February
      17, 2006; risk free interest rate of 4.0%; expected volatility of 100% and
      an
      expected life of 3 years. The fair value of $1,650,000 was recorded as a debt
      discount, which reduced the carrying amount of the Notes. To determine the
      liability related to the warrants, the Company calculated the fair value of
      the
      warrants on February 17, 2006 using the Black-Scholes valuation model with
      the
      following assumptions: market price of $0.30; exercise price of $4.50; risk
      free
      interest rate of 4.0%; expected volatility of 100% and an expected life of
      5
      years. The fair value of $21,094 was also recorded as a debt discount. The
      total
      debt discount attributable to the warrants and embedded conversion feature
      of
      $1,671,094 exceeded the principal amount of the Notes by $321,094 and
      accordingly this excess amount was charged directly to interest expense on
      February 17, 2006. The remaining $1,350,000 of debt discount will be amortized
      over the three year term of the Notes using the interest method.





F-12


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





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





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





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





On
      November 17, 2006, the Note Holders converted a total of $2,821 of Convertible
      Notes into 108,502 shares of the Company's common stock at a price of $0.026
      per
      share.





As
      a
      result of the conversions and principal payments made under the Notes the
      outstanding principal balance of the Notes at December 31, 2006 was
      $4,345,024.





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





The
      Company is required to measure the fair value of the warrants on the date of
      each reporting period. The effect of this re-measurement will be to adjust
      the
      carrying value of the liability related to the warrants. Accordingly, the
      Company measured the fair value of the 625,000 warrants at December 31, 2006
      using the Black-Scholes valuation model with the following assumptions: market
      price of common stock on the measurement date of $0.015, exercise price of
      warrants $4.50, risk-free interest rate of 4.65%, expected volatility of 125%
      to
      135%, and expected lives ranging from of 3.67 to 4.13 years. This resulted
      in a
      fair value for the 625,000 warrants of $1,047 at December 31, 2006.





The
      Company also measured the fair value of the 100,000,000 warrants at December
      31,
      2006 using the Black-Scholes valuation model with the following assumptions:
      market price of common stock on the measurement date of $0.015, exercise price
      of warrants $0.10, risk-free interest rate of 4.65%, expected volatility of
      162%, and an expected life of 6.71 years. This resulted in a fair value for
      the
      100,000,000 warrants of $1,000,000 at December 31, 2006.





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




The
      Company is required to measure the fair value of the embedded conversion feature
      related to the $4,345,024 of Notes at December 31, 2006 using the Black-Scholes
      valuation model with the following assumptions: market price of common stock
      on
      the measurement date of $0.015, exercise price of $0.009 which represents a
      40%
      discount to the market price on December 31, 2006; risk-free interest rate
      of
      4.65%, expected volatility of 111% and expected lives of 1.67 to 2.71 years.
      This resulted in a fair value for the embedded conversion feature of
      $4,827,804.





In
      total,
      for the year ended December 31, 2006, the Company recorded non-cash other income
      of $7,531,983 related to the net change in the fair value of the liabilities
      related to the warrants and embedded conversion feature.





A
      summary
      of the Callable Secured Convertible Notes at December 31, 2006 is as follows:


Callable
                  Secured Convertible Notes; 8% per annum;due
                  August 31, 2008
              
              $
              1,130,024Callable
                  Secured Convertible Notes; 8% per annum;due
                  October 19, 2008
              
              $
              1,350,000Callable
                  Secured Convertible Notes; 8% per annum;due
                  February 17, 2009
              
              $
              1,350,000Callable
                  Secured Convertible Notes; 8% per annum;due
                  September 15, 2009
              
              $
              515,000Debt
                  Discount, net of accumulated amortizationof
                  $1,255,036
              
              
              (3,020,763
              )Embedded
                  Derivative Liability
              
              
              4,827,804Total
              
              $
              6,152,065





The
      Company did not pay $219,991 of interest related to the Notes which was due
      for
      the period April 1, 2006 through December 31, 2006. Accordingly, this amount
      is
      included in accrued expenses at December 31, 2006.





F-13


8.
      COMMITMENTS AND CONTINGENCIES:





In
      June
      2004, the Company entered into a non-cancelable operating lease for office
      space
      expiring July 31, 2007. The aggregate minimum future payments remaining under
      the lease are $127,155.





The
      lease
      is subject to escalation for the Company's proportionate share of increases
      in
      real estate taxes and porters' wages. During 2006 and through March 31, 2007,
      the Company sub-leased a portion of its office space to unrelated companies
      on a
      month to month basis. Net rent expense charged to operations amounted to
      approximately $150,000 and $171,000 for the years ended December 31, 2006 and
      2005, respectively.




From
      time
      to time, the Company conducts research and development activities to support
      its
      proprietary compound AC-11. The Company generally utilizes the services of
      outside contractors such as physicians, scientists and academic institutions.
      These outside contractors are compensated on an hourly or fixed price basis.
      To
      date, the Company has not entered into any research arrangements that require
      it
      to pay according to research and development milestones. At December 31, 2006,
      the Company is not a party to any material research and development
      agreement.





9.
      STOCKHOLDERS' EQUITY:





During
      2005, the Company completed private sales of its common stock, whereby it sold
      853,304 shares of restricted common stock at a price of $3.00 per share. The
      Company received gross proceeds of $2,559,912 and paid commissions of $177,991
      to its placement agents. The Company also issued warrants to its placement
      agents to purchase 155,250 shares of its common stock at a price of $3.00 per
      share. The warrants are exercisable for a period of five years from the
      respective dates of grant.





During
      2005, three consultants exercised options to purchase an aggregate of 140,790
      shares of common stock at an exercise price of $0.001 per share. The Company
      received proceeds of $140.79 in connection with these option exercises.





During
      2005 the Company issued options to purchase an aggregate of 93,000 shares of
      its
      common stock to four consultants in exchange for services rendered. The options
      have an exercise price of $3.00 per share and are exercisable for a period
      of
      five years from the respective dates of grant. Of the total, 68,000 options
      vested immediately and 25,000 will vest in April 2006. The fair value of the
      options of $65,040 has been included in selling, general and administrative
      expenses for the year ended December 31, 2005. The fair value of the option
      grants was estimated on the date of each grant using the Black-Scholes option
      pricing model with the following weighted-average assumptions: expected
      volatility 50%; risk-free interest rate of 4%; expected life of 5 years; and
      no
      expected dividends.





During
      2006, the holders of the Company’s Callable Secured Convertible Notes converted
      an aggregate principal amount of $54,421 of their Notes into 408,502 shares
      of
      common stock at conversion prices ranging from $0.026 to $0.20 per
      share.





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





In
      May
      2006, the Company issued options to purchase an aggregate of 100,000 shares
      of
      its common stock to a consultant in exchange for services rendered. The options
      have an exercise price of $0.30 per share and are exercisable for a period
      of
      three years from the dates of the grant. Of the total, 50,000 options vested
      immediately and 50,000 vested in December 2006. The fair value of the option
      of
      $6,000 has been included in selling, general and administrative expenses for
      the
      year ended December 31, 2006. The fair value of the option grant was estimated
      on the date of grant using the Black-Scholes option pricing model with the
      following assumptions: expected volatility 100%; risk-free interest rate of
      5.0%; expected life of 3 years; and no expected dividends.





F-14


10.
      STOCK
      OPTION PLANS:





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





The
      fair
      value of each option award is estimated on the date of each option grant using
      the Black-Scholes option valuation model using the assumptions noted in the
      following table. Because the Company’s common stock has only traded publicly
      since April 2005, the expected volatility for the years ended December 31,
      2006
      and 2005 was estimated based on a sampling of similar size companies. The
      Company has limited history by which to estimate the expected holding period
      of
      the options, and therefore, has estimated that the expected holding period
      for
      all stock options granted is equal to the contractual life of the option. As
      a
      result of the adoption of FASB 123R, the Company has recorded stock based
      compensation expense related to employee stock options of $213,175 for the
      year
      ended December 31, 2006.





The
      following table summarizes the assumptions used for options granted during
      the
      years ended December 31, 2006 and 2005.





Year
                Ended December 31,2006
            
            2005Expected
                life (in years)
            
            
            3-5
            
            
            2-5Risk-free
                interest rate
            
            
            4.66-5.20
            %
            
            4.0
            %Volatility
            
            
            100
            %
            
            0-50
            %Dividend
                yield
            
            
            None
            
            
            None




On
      March
      1, 2006, the Board of Directors of the Company approved the following stock
      option issuances:


Quantity
              
              Exercise
                  Price
              
              VestingAnthony
                  Bonelli
              
              
              500,000
              
              $
              0.13
              
              
              Immediately(President
                  and
              
              
              250,000
              
              $
              1.00
              
              
              February
                  28, 2007Chief
                  Executive Officer)
              
              
              250,000
              
              $
              1.00
              
              
              February
                  28, 2008Joseph
                  McSherry
              
              
              300,000
              
              $
              0.13
              
              
              Immediately(Chief
                  Financial Officer)
              
              
              100,000
              
              $
              1.00
              
              
              February
                  28, 2007100,000
              
              $
              1.00
              
              
              February
                  28, 2008





In
      connection with his voluntary resignation on May 13, 2006, Mr. McSherry
      forfeited all of his outstanding options including options to purchase 300,000
      shares which were issued to him in August 2004.





In
      connection with his voluntary resignation on August 23, 2006, Mr. Bonelli
      forfeited all of his outstanding options including options to purchase 250,000
      shares which were issued to him in August 2004 and options to purchase 300,000
      shares which were issued to him in February 2005.





A
      summary
      of the status of the Company's options as of December 31, 2006 is presented
      below:


WeightedNumber
              
              Averageof
              
              Exercise
              
              AggregateShares
              
              Price
              
              Intrinsic
                  ValueOutstanding
                  at January 1, 2005
              
              
              3,074,395
              
              $
              2.57Granted
                  during 2005
              
              
              393,000
              
              $
              3.00Exercised
                  during 2005
              
              
              (140,790
              )
              $
              0.001Forfeited
                  during 2005
              
              
              (25,000
              )
              $
              3.00Outstanding
                  at December 31, 2005
              
              
              3,301,605
              
              $
              2.73Granted
                  during 2006
              
              
              1,600,000
              
              $
              0.52Exercised
                  during 2006
              
              
              —Forfeited
                  during 2006
              
              
              (3,237,000
              )
              $
              1.79Outstanding
                  at December 31, 2006
              
              
              1,664,605
              
              $
              2.44
              
              $
              209Options
                  exercisable at December 31, 2006
              
              
              1,664,605
              
              $
              2.44
              
              $
              209
   F-15


A
      summary
      of the status of the Company’s non-vested stock options as of December 31, 2006,
      and of changes during the year ended December 31, 2006, is presented
      below:





Number
                of
              Options
            
            Weighted
              Average
              Option
                PriceNon-vested
                at December 31, 2005
            
            
            275,000
            
            $
            3.00Granted
            
            
            750,000
            
            $
            0.95Vested
            
            
            (275,000
            )
            $
            2.51Forfeited/Cancelled
            
            
            (750,000
            )
            $
            1.13Outstanding
                at December 31, 2006
            
            
            -
            
            
            -





The
      Company did not issue any stock options during the three months ended December
      31, 2006. The weighted-average grant date fair value of options granted during
      the years ended December 31, 2006 and 2005 was $0.08 and $0.90
      respectively.




The
      following table summarizes information for options currently outstanding and
      exercisable at December 31, 2006:


Options
                  Outstanding
              
              Options
                  ExercisableWeighted-
              
              Weighted-
              
              
              
              Weighted-Shares
              
              Average
              
              Average
              
              Shares
              
              AverageRange
                  of
              
              Underlying
              
              Remaining
              
              Exercise
              
              Underlying
              
              ExerciseExercise
                  Prices
              
              Options
              
              Life
              
              Price
              
              Options
              
              Price$0.001
              
              
              9,210
              
              
              1.91
                  years
              
              $
              0.001
              
              
              9,210
              
              $
              0.001$0.01
              
              
              16,000
              
              
              2.75
                  years
              
              
              0.01
              
              
              16,000
              
              
              0.01$0.30
              
              
              100,000
              
              
              2.40
                  years
              
              
              0.30
              
              
              100,000
              
              
              0.01$1.00
              
              
              165,000
              
              
              1.00
                  years
              
              
              1.00
              
              
              165,000
              
              
              1.00$2.00
              
              
              259,395
              
              
              1.08
                  years
              
              
              2.00
              
              
              259,395
              
              
              2.00$3.00
              
              
              1,115,000
              
              
              2.67
                  years
              
              
              3.00
              
              
              1,115,000
              
              
              3.00$0.001-$3.00
              
              
              1,664,605
              
              
              2.24
                  years
              
              $
              2.44
              
              
              1,664,605
              
              $
              2.44


The
      table
      below summarizes warrants outstanding as of December 31, 2006 and
      2005:


Exercise
              
              Shares
                  Underlying
                Warrants
                  Outstanding
                as
                  of December 31,Expiration
                  Date
              
              Price
              
              2006
              
              2005May
                  2009
              
              $
              3.30
              
              
              16,667
              
              
              16,667June
                  2009
              
              $
              3.30
              
              
              89,667
              
              
              89,667July
                  2009
              
              $
              3.30
              
              
              5,334
              
              
              5,334March
                  2010
              
              $
              3.00
              
              
              66,786
              
              
              66,786June
                  2010
              
              $
              3.00
              
              
              30,664
              
              
              30,664July
                  2010
              
              $
              3.00
              
              
              57,800
              
              
              57,800August
                  2010
              
              $
              4.50
              
              
              203,124
              
              
              203,124October
                  2010
              
              $
              4.50
              
              
              210,938
              
              
              210,938February
                  2011
              
              $
              4.50
              
              
              210,938September
                  2013
              
              $
              0.10
              
              
              100,000,000100,891,918
              
              
              680,980
   F-16


11.
      INCOME TAXES





The
      Company has net operating loss carry-forwards of approximately $14,843,000
      available to offset taxable income through the year 2027.





The
      tax
      effects of loss carry-forwards and the valuation allowance that give rise to
      deferred tax assets are as follows:


Net
                  operating losses
              
              $
              5,047,000Temporary
                  book/tax difference related to:Impairment
                  of intangible assets
              
              
              1,238,000Non
                  employee stock based compensation
              
              
              270,000Inventory
                  allowance
              
              
              365,0006,920,000Less
                  valuation allowance
              
              
              (6,920,000
              )Deferred
                  tax assets
              
              $
              -0-





The
      difference between income taxes computed at the statutory federal rate of 34%
      and the benefit for income taxes relates to the following:


December
                  31,
              
              2006
              
              2005Tax
                  benefit at the federal statutory rate
              
              
              34
              %
              
              34
              %Valuation
                  allowance
              
              
              (34
              )%
              
              (34
              )%-0-
              %
              
              -0-
              %





12.
      RELATED PARTY TRANSACTIONS:





The
      following are related party transactions:


Year
                  ended December 31,
              
              2006
              
              2005Royalty
                  payments due from a company whosesignificant
                  stockholder is a 5%stockholder
                  of the Company (a)
              
              
              
              
              $
              15,529Consulting
                  fees paid to a director of the Company (b)
              
              $
              39,000
              
              $
              156,000





(a)
      This
      amount has not been paid to the Company as of December 31,
      2006.




(b)
      This
      director resigned on May 8, 2006.





At
      December 31, 2006, 44% of accounts receivable or approximately $27,000 was
      due
      from the related party (a) listed above. This account receivable is past due
      and
      there is substantial doubt that the full amount of the receivable will be paid.
      Accordingly, the Company has reserved the entire balance of the account
      receivable of $27,000.




13.
      ROYALTY AGREEMENTS:





In
      connection with the November 2003 acquisition of assets from CampaMed LLC,
      the
      Company entered into a separate agreement with a group of four individuals
      which
      obligated the Company to pay royalties in connection with the sale or licensing
      of any product that contains any compound, substance or ingredient derived
      or
      isolated from the Uncaria tomentosa vine such as its proprietary product AC-11,
      or its predecessor C-MED-100 (collectively referred to as "AC-11".) The maximum
      amount payable under this agreement is $347,700. The royalties are based on
      sales, as defined in the agreement, of any product that we sell or license.
      The
      royalty payments are calculated as follows: (i) 6% of gross sales for any
      products that contain AC-11 as an ingredient which includes the Company’s
      nutritional supplement products and (ii) 10% of gross sales of bulk AC-11.
      As of
      December 31, 2006, the Company has made royalty payments under the agreement
      totaling $71,299. These payments are recorded as additional purchase cost as
      they are incurred. The total remaining royalty obligation under the agreement
      as
      of December 31, 2005 is $276,401 and the agreement remains in effect until
      this
      amount is paid.





Also
      in
      connection with the November 2003 acquisition of assets from CampaMed LLC,
      the
      Company agreed to pay CampaMed LLC additional payments based on 6% of the gross
      sales of any product containing AC-11, and 10% of the gross sales of any bulk
      AC-11, until such additional payments in an aggregate amount of $500,000 have
      been made. As of December 31, 2005, the Company has made payments under the
      agreement of $71,299. These payments are recorded as additional purchase cost
      as
      they are incurred. The total remaining payment obligation under the agreement
      is
      $428,701.





Additionally,
      in connection with the CampaMed acquisition, the Company has assumed a royalty
      obligation based on sales of certain products using the Thiol or Nicoplex
      Technology. The maximum amount of royalties due is $3,500,000 and will be paid
      based on product sales, as defined in the agreement. Currently, the Company
      is
      not marketing these products and it is not required to make any payments under
      the agreement, other than payments based on product sales.





F-17


14.
      SIGNIFICANT CUSTOMERS:





In
      2006,
      the Company’s two largest customers accounted for 10.2% and 10.0% of total sales
      and the Company’s five largest customers accounted for an aggregate of 41.1% of
      total sales. At December 31, 2006, the Company’s largest customer accounted for
      an aggregate of 16.4% of accounts receivable and the Company’s five largest
      customers accounted for an aggregate of 32.2% of total accounts
      receivable.





In
      2005,
      the Company’s largest customer accounted for 16.9% and 7.7% of total sales. The
      Company’s five largest customers accounted for an aggregate of 43.7% of total
      sales. At December 31, 2005, the Company’s two largest customers accounted for
      an aggregate of 72.5% of accounts receivable.





15.
      SIGNIFICANT SUPPLIER:





The
      Company purchases 100% of the raw material for its products from a single
      supplier located in Brazil. In addition, the Company's proprietary manufacturing
      and processing equipment is located in a warehouse that is owned by this
      supplier. At December 31, 2005, approximately $691,000 of inventory was
      warehoused at this location. The Company is not contractually obligated to
      make
      minimum purchases from this supplier.





16.
      JOINT
      VENTURES:





*PMO
      Products Inc.*





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




The
      Company accounted for its investment in PMO under the equity method. Since
      inception in November 2004 and through August 31, 2006, PMO incurred a total
      net
      loss of $36,318 of which the Company’s 50% share was $18,159.





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





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





*Prometheon
      Labs LLC*





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





The
      Company accounted for its investment in Prometheon under the equity method.
      Since inception in September 2005 through November 30, 2006, Prometheon incurred
      a total net loss of $125,600 of which the Company’s 50% share was $62,800
      however the Company only recorded losses totaling $45,000 which represented
      the
      entire amount of its investment.




On
      November 19, 2006, the Company and its joint venture partner Prometheon Holding
      entered into an agreement whereby Prometheon Holding purchased the Company’s 50%
      ownership interest in Prometheon in exchange for $18,000 in cash. The purchase
      price exceeded the net book value of the Company’s investment in Prometheon
      which on November 30, 2006, the date of closing of the transaction, was $0.
      The
      parties also entered into a five-year Supply and Trademark Licensing Agreement
      which allows Prometheon to continue to develop and market oral nutritional
      supplement products containing AC-11.





Since
      inception in September 2005 and through November 30, 2006, the Company sold
      approximately $27,000 of products to Prometheon. The Company recorded as
      deferred income, the profit from any sales it made to Prometheon until such
      time
      that the products were resold by Prometheon to an independent third party.
      At
      November 30, 2006, deferred income related to sales made to Prometheon was
      $5,253 and in connection with the sale of its ownership interest in Prometheon
      on such date, the Company reclassified the remaining deferred income of to
      revenue as it no longer had any rights to the remaining inventory of
      Prometheon.





F-18


17.
      GOING
      CONCERN:





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





18.
      SUBSEQUENT EVENT (UNAUDITED):





Subsequent
      to December 31, 2006, on February 12, 2007, the Company entered into a
      Securities Purchase Agreement with its four existing note holders for the sale
      of $250,000 in secured convertible notes and warrants to purchase 20,000,000
      shares of its common stock.  The notes bear interest at 8.0% and mature on
      February 12, 2010.  The Company is not required to make any principal
      payments during the term of the notes.  The notes are convertible into
      shares of the Company’s common stock at the note holders' option, at the lower
      of (i) $0.10 per share or (ii) 60% of the average of the three lowest intra-day
      trading prices for our common stock as quoted on the Over-the-Counter Bulletin
      Board for the 20 trading days preceding the conversion date.  The full
      principal amount of the notes is due upon the occurrence of an event of
      default.  Interest on the notes is paid quarterly in arrears.




The
      warrants are exercisable for a period of seven years from the date of issuance
      and have an exercise price of $0.07 per share. In addition, the conversion
      price
      of the notes and the exercise price of the warrants will be adjusted in the
      event that the Company issues shares of its common stock at a price below the
      fixed conversion price of $0.10, with the exception of any shares of common
      stock issued in connection with the notes.  The Company has the right to
      prepay the entire outstanding balance of the notes under certain circumstances
      at premiums ranging from 35% to 50%.  The Company also has the right to
      prepay a portion of the notes each month in an amount equal to 104% of the
      then
      outstanding principal balance divided by 36, plus one month’s
      interest.





Based
      on
      the closing price of the Company's common stock on February 12, 2007 of $0.035
      discounted by 40%, the full principal amount of the notes would have been
      convertible into approximately 11,905,000 shares of the Company's common stock.





F-19