**UNITED
      STATES**


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


**Washington,
      D.C. 20549**





**FORM
      10-KSB/A**


**(Amendment
      No. 2)**





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 FROM _____________ TO
                __________________**





**Commission
      file number 000-50601**





**EUGENE
      SCIENCE, INC.**


**(Name
      of small business issuer in its charter)**





**Delaware**
            **33-0827004****(State
                or other jurisdiction**
              **of
                incorporation or organization)**
            **(I.R.S.
                Employer**
              **Identification
                No.)**





**8th
      Floor, LG Palace Building, 165-8 Donggyo-Dong, Mapo-Gu, Seoul,
      Korea**


**(Address
      of principal executive offices)**





**Issuer’s
      telephone number: 82-2-338-6283**





**Securities
      registered pursuant to Section 12(b) of the Act: None**





**Securities
      registered under Section 12(g) of the Exchange Act:**





**Common
      Stock, par value $0.0001 per share**


(Title
      of
      Class)





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





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





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.  ̈





The
      issuer’s revenues for the most recent fiscal year were $669,329.





As
      of
      March 31 , 2007, the aggregate market value of voting and non-voting common
      stock held by non-affiliates of the issuer, based upon the closing sales price
      of $0.28 per share of common stock on March 31, 2007, was approximately
      $11,288,397.





The
      number of outstanding shares of the issuer’s common stock as of March 31, 2007
      was 40,315,705.





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











**EXPLANATORY
      NOTE**




This
      Amendment No. 2 to the Annual Report on Form 10-KSB of Eugene Science, Inc.
      (“we,” “our,” “us,” or the “Company”) for the fiscal year ended
      December 31, 2006, which was originally filed with the Securities and
      Exchange Commission on April 17, 2007, and was amended on April 23, 2007, is
      being filed solely (i) to revise and add disclosures to the financial
      statements and notes to the financial statements in Item 7, (ii) to revise
      the
      disclosures in Item 6 to reflect revisions made and disclosures added to the
      financial statements and (iii) to revise the responses to Item 8A. This
      Amendment No. 2 does not reflect events occurring after April 23, 2007, the
      date of the filing of our original Form 10-KSB, or modify or update those
      disclosures that may have been affected by subsequent events.




1


*This
      Annual Report on Form 10-KSB contains forward-looking statements relating to
      future events or our future financial performance, including but not limited
      to
      statements contained in “Description of Business” and “Management’s Discussion
      and Analysis or Plan of Operation-Factors Which May Affect Future Operating
      Results.” Readers are cautioned that such statements, which may be identified by
      words including “anticipates,” “believes,” “intends,” “estimates,” “expects,”
and similar expressions, are only predictions or estimations and are subject
      to
      known and unknown risks and uncertainties. In evaluating such statements,
      readers should consider the various factors identified in this Annual Report
      on
      Form 10-KSB, including, but not limited to, matters set forth in “Management’s
      Discussion and Analysis or Plan of Operation-Risk Factors,” which could cause
      actual events, performance or results to differ materially from those indicated
      by such statements.*




**PART
      I**


**Item
      1. Description of Business**




**Overview**




We
      are a
      global biotechnology company that develops, manufactures and markets
      nutraceuticals, or functional foods that offer health-promoting advantages
      beyond that of nutrition. Our primary products are our plant sterol products,
      including our CZ TM -series
      of food additives, and our CholZero TM -branded
      beverages and capsules.




Our
      primary products are a series of cholesterol-lowering food additives, consisting
      of specially formulated plant sterols that are soluble in both oil and water.
      The key technology to produce such plant sterols is a patented nanotechnology
      which allows plant sterols to be added to a wide range of oil and water-based
      foods. Our nano-sized plant sterols used as food additives are branded as
      "CZ-series" additives and our food and consumable products containing CZ-series
      additives are being marketed under the brand name of CholZero. Our initial
      CholZero-branded products include CholZero capsules containing our CZ-S Series
      additive and a CholZero beverage.




During
      the fiscal year ending December 31, 2004, we did not aggressively market our
      nutraceuticals and functional food products, pending regulatory approval of
      certain health claims associated with our products from government agencies
      in
      the Republic of Korea, or Korea, and the United States of America. In June
      2005,
      we received this regulatory approval in Korea.




We
      also
      generate revenue from the sale of supplemental products, including raw cooking
      oil (oils used in the manufacturing of cooking oil). We have an approximately
      73% ownership interest in UcoleBio Corp., a company originally formed to provide
      sales and distribution services for our products in Korea.




**Corporate
      History and Exchange Transaction**




We
      were
      incorporated on August 26, 1998 under the name Orcas Ltd., under the laws of
      the
      State of Delaware. As Orcas Ltd., we were in the business of building and
      promoting arcade video games and vending machines. We underwent a reverse merger
      and abandoned this enterprise to develop a loyalty reward program based in
      Taipei, Taiwan, and changed our name to Ezcomm, Inc. to reflect this change
      in
      business. We were unable to raise enough capital to finance the research and
      development of our proposed consumer incentive and loyalty program in Asia
      and
      all efforts to develop the business were abandoned in January 2001. We remained
      inactive until July 2004, when we changed our name to Ezcomm Enterprises, Inc.,
      or Ezcomm Enterprises, and began to consider and investigate potential business
      opportunities, including an acquisition by merger.




On
      September 30, 2005, pursuant to an Exchange Agreement dated September 1, 2005
      by
      and among us, Eugene Science and certain stockholders of Eugene Science, we
      acquired approximately 89.5% of the issued and outstanding shares of Eugene
      Science in exchange for the issuance of an aggregate of 272,790,948 shares
      of
      our common stock to the former Eugene Science stockholders. In addition, and
      pursuant to the Exchange Agreement, we exchanged an equal amount of cash with
      the Eugene Science stockholders (an aggregate of $103,514.48) and we assumed
      all
      of Eugene Science's outstanding options. As a result of the Exchange
      Transaction, Eugene Science became our wholly-owned subsidiary, and the former
      Eugene Science stockholders held approximately 89% of our voting stock on a
      fully-diluted basis immediately following completion of the exchange
      transaction. Prior to the exchange transaction, we were a "shell company" as
      defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
      In
      conjunction with the exchange transaction we also issued a warrant to purchase
      7,073,760 shares of our common stock to WestPark Capital, Inc., at $0.17 per
      share as partial compensation for their financial advisory services with respect
      to the exchange transaction.




The
      exchange transaction was accounted for as a reverse merger (recapitalization)
      with Eugene Science deemed to be the accounting acquirer, and us deemed to
      be
      the legal acquirer. Accordingly, the historical financial information presented
      in the consolidated financial statements included in this report are that of
      Eugene Science as adjusted to give effect to any difference in the par value
      of
      ours and Eugene Science's stock with an offset to capital in excess of par
      value. The basis of the assets, liabilities and retained earnings of Eugene
      Science, the accounting acquirer, have been carried over in the
      recapitalization.


2




On
      January 13, 2006, we changed our name from Ezcomm Enterprises to Eugene
      Science.




**Industry**




The
      nutraceutical industry includes many small and medium-sized companies that
      manufacture and distribute products intended to aid in the maintenance of the
      body's health and general well being. Nutraceutical products include the
      following categories of products manufactured and sold by us:




*Dietary
      Supplements* .
      Products such as vitamins and minerals, specialty supplements, herbs and
      botanicals, sports performance enhancers, meal replacements, dietary
      supplements, and compounds derived from these substances




*Functional
      Foods* .
      Products with added ingredients or fortifications specifically designed for
      health or performance purposes.




**Products**




*Plant
      Sterol and Cholesterol-Reduction Products*




It
      has
      been well established that blood cholesterol, particularly low-density
      lipoprotein , or LDL, cholesterol, should be controlled in the body in order
      to
      minimize the risk of coronary heart disease. Excess LDL cholesterol can be
      oxidized to ultimately form plaque that can build up on artery walls, thereby
      restricting blood flow and elevating blood pressure. People with high blood
      cholesterol levels are typically advised by health professionals to exercise
      and
      consume a diet high in fiber and low in saturated fats and cholesterol. Although
      these measures can reduce blood cholesterol, other cholesterol-lowering
      interventions may be needed, including cholesterol-lowering medicines or adding
      plant sterol to the diet.




Plant
      sterols are natural substances that are present as minor components in seeds,
      legumes and vegetable oils. Plant sterols are essential components of plant
      cell
      membranes and structurally resemble cholesterol. Plant sterols have been
      approved by the United States Food and Drug Administration, or FDA, for their
      cholesterol-lowering health function in humans, and are recommended by the
      United States National Institutes of Health to treat cholesterol problems.
      Although people consume plant sterols every day in food, the amounts are often
      not great enough to have significant blood cholesterol-lowering effects. Plant
      sterols are naturally insoluble in oil and water, making it difficult to
      incorporate plant sterols in foods as an additive. However, several companies
      have developed plant sterol products that are oil-soluble by esterifying plant
      sterols and adding them to dietary fat (in oils and spreads). While this allows
      plant sterols to be incorporated in oil-based foods, this delivery strategy
      requires the consumption of large amounts of fats (23-50 grams of dietary
      triacylglyceride per day). We have developed and patented a series of
      cholesterol-lowering food additives, consisting of specially formulated plant
      sterols that are soluble in both oil and water. The key technology to produce
      such plant sterols is a patented nanotechnology which allows plant sterols
      to be
      added to a wide range of oil and water-based foods. Our nano-sized plant sterols
      used as food additives are branded as "CZ-series" additives and our food and
      consumable products containing CZ-series additives are being marketed under
      the
      brand name of “CholZero.” Our initial CholZero-branded products include CholZero
      capsules containing our CZ-S Series additive and a CholZero
      beverage.




We
      produce the following specific plant sterol food ingredients:




·
            CZ-L,
                an oil soluble plant sterol and fatty
                acid;




·
            CZ-S,
                a water dispersible natural plant sterol;
                and




·
            CZ-H,
                a water-soluble, next generation CZ-series
                additive.




The
      plant
      sterol in the CZ-series additives reduces the absorption of both dietary and
      biliary cholesterol into the body. Normally, approximately 30% of all
      cholesterol is supplied through food. When food is consumed along with the
      CZ-series additives, the absorption level of cholesterol is greatly reduced,
      the
      plant sterol is not absorbed and the plant sterol is excreted from the
      body.







*Liphophilic
      Quality - CZ-L*




CZ-L
      is a
      plant sterol in ester form which is soluble in oil and fat. CZ-L may be added
      to
      foods with a significant fat content and does not influence the taste or flavor
      of such foods.




*Water
      Dispersible Plant Sterol - CZ-S*




CZ-S
      is a
      water dispersible plant sterol. Prior to the development of our CZ-S products,
      only fat soluble plant sterol food additives were available to consumers.
      Because such products were only fat soluble, their application was limited
      to
      foods that are inherently high in fat


3


content.
      CZ-S can be used to integrate plant sterol into beverages, dairy products,
      and
      other water-based foods. CZ-S comes in the form of a water dispersible powder
      that makes very fine micelles (less than 1 micro meter) in an aqueous solution.
      Like CZ-L, CZ-S does not influence the taste and flavor of the food or beverage
      to which it is added. In November 2000, we produced our first CholZero-branded
      beverage product with CZ-S.




*Next
      Generation - CZ-H*




CZ-H
      is
      also a plant sterol in ester form which is water soluble and transparent in
      water. Like the other CZ-series ingredients, CZ-H has a cholesterol-lowering
      effect upon ingestion by blocking the absorption of cholesterol in the
      intestines and can be added to water-based products.




*Supplemental
      Products*




In
      addition to our CZ-series and CholZero-branded products, we currently distribute
      DG Oil, a functional cooking oil with a body fat lowering effect manufactured
      by
      OnBio Corporation, animal feed, pet shampoo and deodorant in Korea. From January
      2004 through March 2005, the majority of our revenues were from the sale of
      raw
      cooking oil to OnBio Corporation. We obtained our raw cooking oil on favorable
      terms pursuant to a contract with a Korean supplier. In March 2005, we
      determined that it was in our best interests to cease our distribution of raw
      cooking oil and we assigned the supply contract to OnBio Corporation. Our chief
      executive officer and significant stockholder, Seung Kwon Noh, is also the
      chief
      executive officer and a significant stockholder of OnBio Corporation. The
      distribution of the raw cooking oil and supplemental products provided necessary
      cash flow during our development stage, and the sale of our supplemental
      products continues to support the costs of the research, development and
      marketing of our CZ-series ingredients and nutraceuticals and our
      CholZero-branded products.




**Research
      and Development**




We
      invested approximately $441,764 and $291,803 in research and development of
      new
      products during our fiscal years ending December 31, 2005 and 2006,
      respectively. In addition to refining the manufacturing processes for our
      CZ-series products, we continue to perform research and development on other
      dietary supplements and nutraceuticals. For example, we have developed a
      microbial conversion technology for steroid hormone intermediates called AD/ADD.
      The production of chemicals utilizing microbial conversion technology is
      cost-effective since it produces less inactive isomers than the chemical
      synthesis and, therefore, requires less purification costs, and friendly to
      the
      environment. AD/ADD is used as a raw material in steroid hormones such as
      Androgen, Estrogen, gluco-corticoids and mineral-corticoids. We have completed
      the development of the microbial strain used to establish the AD/ADD
      manufacturing process which secures an economically efficient level of
      production.




**Intellectual
      Property Protection**




We
      regard
      our technology as proprietary and attempt to protect it by relying on patent,
      trademark, service mark, copyright and trade secret laws and restrictions on
      disclosure and transferring title and other methods. We currently have 31
      registered patents or patents pending in the United States, Japan, Europe,
      China, Korea, Taiwan, Australia and Brazil, and we anticipate that patents
      will
      become a significant part of our intellectual property in the foreseeable
      future. We currently have patents or have applied for patents for the following
      CZ-series additives and manufacturing processes in the following
      countries:




·
            CZ-L.
                Korea.




·
            CZ-S.
                Korea, Japan, and an International Patent (application only) covering
                the
                United States, Europe, China, Australia, Brazil, India and
                Singapore.




·
            CZ-H.
                Korea (application only).




We
      generally enter into confidentiality or license agreements with our employees
      and consultants, and control access to and the distribution of our documentation
      and other proprietary information. Despite these precautions, it may be possible
      for a third party to copy or otherwise obtain and use our proprietary
      information without authorization or to develop similar technology
      independently. We intend to pursue the registration of our trademarks, CZ and
      CholZero in the United States and internationally.




**Government
      Regulation**




Our
      CZ-series additives and CholZero-branded products contain additives that are
      generally regulated by governmental agencies of the countries in which they
      are
      sold. To date, we have only distributed our products in Korea and Japan. We
      began distributing our CZ-S additive and CholZero-branded products containing
      our CZ-S additive in the United States immediately upon the approval of our
      "Generally Recognized as Safe," or GRAS, application with the FDA, which we
      received in January 2006.


4




*Korea*




In
      May
      2005, plant sterols, the main ingredient of our CZ-series additives were
      formally approved as a health function food ingredient by the South Korean
      Food
& Drug Administration, making it possible for us to advertise the
      cholesterol-lowering function of our CZ-series additives and food enriched
      with
      CZ-series additives. Because plant sterol is registered as a health functional
      food material, we do not have to apply for any additional approvals for our
      plant sterol products if they comply with requirements set forth in the
      Amendment of Health Functional Food Standards.




*Japan*




In
      Japan,
      the government allows Foods for Specified Health Use, of FOSHU, marks for
      products showing scientifically proven health functions. These marks are
      authorized for use pursuant to the requirements of the Nutrition Improvement
      Act
      of 1994 and the Food Sanitation Act of 1991. Under FOSHU law, any food
      containing plant sterols showing more than a 5% cholesterol-lowering efficacy
      through its clinical test may claim the health benefit of plant sterols in
      the
      food label. None of our current products are permitted to be sold with a FOSHU
      mark at this time. We anticipate beginning the process of applying for the
      use
      of such mark for our CZ-series additives in the near future.




*United
      States*




FDA
      regulations require that certain informational labeling be presented in a
      prescribed manner on all foods, drugs, dietary supplements and cosmetics.
      Specifically, the United States Federal Food, Drug, and Cosmetic Act, or FDCA,
      requires that foods, including dietary supplements, drugs and cosmetics, not
      be
      misbranded. In 1994, the Dietary Supplement Health and Education Act, or DSHEA,
      which amended the FDCA, created a new regulatory framework for the safety and
      labeling of dietary supplements. Under DSHEA, a manufacturer or distributor
      must
      notify the FDA if it intends to market a dietary supplement in the United States
      that contains a "new dietary ingredient." The manufacturer and distributor
      must
      demonstrate to the FDA why the ingredient is reasonably expected to be safe
      for
      use in a dietary supplement, unless it has been recognized as a food substance
      and is present in the food supply. This type of demonstration is referred to
      as
      a GRAS application.




In
      addition, the FDA has issued regulations that allow dietary supplement
      manufacturers to make three types of claims: (i) nutrient-content claims, (ii)
      health claims, and (iii) structure-function claims based upon DSHEA and specific
      food labeling laws. Under these regulations, the FDA has specifically approved
      claims that link plant sterol/stanol esters and a reduced risk of heart disease.
      Our CZ-S additives have received GRAS approval from the FDA in cooperation
      with
      our United States distributor, Archer Daniels Midland Company, or ADM, which
      makes it possible for any products containing certain amounts of CZ-S to make
      certain health claims.




*European
      Market*




The
      European Parliament and the Council of the European Union have approved plant
      sterols as cholesterol-lowering ingredients under the regulation (EC) No. 258/97
      of the European Parliament and of the Council of 27 January 1997 concerning
      novel foods and novel food ingredients. This approval allows us to make claims
      that products containing our CZ-series additives aid in reducing cholesterol
      in
      those markets.




**Revenue**




During
      our fiscal year ending December 31, 2005, we generated our revenue from the
      sale
      of neutraceuticals and functional cooking oil to Amway Korea, the sale of raw
      cooking oil to Onbio Corporation and the sale of functional health foods to
      Korean companies. Sales to four major customers, including Amway Korea,
      accounted for 88% of our total revenue in the 2005 fiscal year. During our
      fiscal year ending December 31, 2006, we generated our revenue from the sale
      of
      our CholZero capsules to Nutra Nano Tech and other distributors, from the sale
      of our functional cooking oil products to Amway Korea, from the sale of our
      crude oil products to OnBio Corporation and from the sale of our functional
      health foods. Sales to four major customers, including Amway Korea, accounted
      for 52% of our total revenue in the 2006 fiscal year.




**Manufacturing**




We
      manufacture our own CZ-series additives, corn oil and animal feed at our
      facility in Bucheon, Korea. Our CholZero-branded products are manufactured
      by
      third parties. We have several suppliers for our raw materials. However, we
      cannot easily replace ADM as the supplier of our raw plant sterol. Pursuant
      to
      our strategic alliance agreement with ADM, we are obligated to use their plant
      sterols when manufacturing products for the North American and European
      markets.




5




**Market
      Demographic**




The
      primary consumers of our CholZero-branded products are health conscious
      individuals in their mid-30s and older. The same demographic is generally the
      target market for food and supplement manufacturers to whom we market our
      CZ-series additives. Currently, we only sell our CholZero-branded products
      and
      CZ-series additives in the United States, Korea and Japan.




**Marketing
      and Distribution**




To
      date,
      with respect to our nutraceutical and functional food products, we have focused
      on developing strong partnerships with large food and beverage manufacturers
      in
      Korea and Japan. We have also engaged distributors familiar with the domestic
      markets of Japan, Taiwan, North America and Europe.




In
      March
      2002, we entered into an exclusive distribution agreement with Hokuyo Koeki
      Co.
      to distribute our nutraceutical and functional food products in the Japanese
      market. Currently, two products containing our CZ-series additives, fermented
      soy milk and instant rice, are being manufactured in Japan. During the first
      quarter of our 2006 fiscal year, five new products containing our CZ-S additive,
      including ice cream, cheese cake, Japanese Kyoja, Lamen instant noodles and
      tablets, were launched by Japanese food manufacturers.




In
      June
      2005, we entered into a strategic alliance agreement with ADM for the exclusive
      marketing of our CZ-series additives in North America and Europe. ADM has been
      assisting us in developing a market for our CZ-series additives worldwide.
      ADM
      is one of the largest producers of plant sterol, which is the raw material
      of
      our CZ-series additives, and the company has a strong interest in increasing
      the
      value of plant sterols. Because we are obligated to purchase ADM's plant sterols
      as a raw material in the production of our CZ-series additives for use in North
      America and Europe, ADM will also benefit from the development of a strong
      market for CZ-series additives. We also entered into an exclusive distribution
      agreement with Nutra Nano Tech to distribute our CholZero capsules in the United
      States, primarily via television infomercials. We terminated the agreement
      with
      Nutra Nano Tech on November 13, 2006.




On
      September 27, 2006, we entered into a distribution agreement with Ceragem
      International for the sale and distribution of our CholZero capsules in North
      America. In November 2006, we entered into a commissioned production and
      resource supply agreement with RexGene Biotech for the manufacturing and
      marketing of several of our CZ-series products. RexGene Biotech began marketing
      CZ-series products through multiple channels, including network marketing,
      drug
      store chains, online shopping malls and direct response home shopping
      television, in January 2007. Under the terms of the agreement, we retain
      overseas distribution rights, including rights in the United States, for
      CZ-series products manufactured by RexGene Biotech, providing us with additional
      products to distribute through our distribution partners in Asia and
      elsewhere.




As
      our
      presence grows in Japan, the United States, Europe and Korea, we expect to
      employ conventional methods of distribution to create awareness of our products,
      including the following:




·
            ***Free
                samples***.
                Our products will be available in the aisles of grocery stores and
                through
                third-party service providers for free sample
                testing.




·
            ***Co-marketing***.
                We intend to market our products through a combination of in-store
                and
                other forms of advertising, including in-store advertising on high
                traffic
                area and traditional industry print, trade shows and targeted direct
                mail.




·
            ***Viral
                Marketing***.
                We intend to select distribution partners based on the value of their
                existing brands. We expect to be able to take advantage of the value
                of
                established brands by associating our CZ-series products with such
                branded
                products in foreign markets and cooperating with our partners to
                establish
                public relations campaigns that create a sense of growing community
                and a
                grass-roots movement that promotes the use of functional
                foods.




**Competition**




Due
      to
      the recently achieved commercial success of products such as Benecol margarine,
      the use of plant sterols as food supplements to reduce cholesterol has become
      an
      attractive and competitive market. We expect competition to intensify in the
      future. A range of cholesterol-lowering foods and dietary supplements are
      currently on the market, primarily in the United States and Europe, but we
      are
      not aware of any products produced by our competitors that are water-soluble.
      However, the industry is characterized by intensive research and development
      activity. Our present competitors include the following companies:




·
            ***Functional
                Foods***.
                (i) Benecol (Raisio's joint venture with Johnson & Johnson); (ii) Take
                Control (Unilever); (iii) Aviva Heart Benefits (Novartis); (iv) Cheerios
                (General Mills); (v) Ensemble (Kellogg); (vi) Health Source (Ross
                Products
                Division of Abbott Laboratories); and (vii) Quaker Oats (Quaker Oat
                Company).




·
            ***Dietary
                Supplements***.
                (i) LO-CHOL (Applied Plant Pharmaceuticals, Inc.); (ii) Cholestin
                (Pharmanex); (iii) Kholestrol Blocker (Nutrition For Life International);
                (iv) EvolvE (Bionutrics); (v) Kwai (Lichtwer Pharma); and (vi) Metamucil
                (Procter & Gamble).





6




While
      other major companies have the financial and technical ability and greater
      resources than us to compete aggressively in the market for health products,
      we
      believe that, at present, we may have a competitive advantage over our
      competition because our plant sterol products have a wide variety of
      applications (including in water-based products) and our products are more
      efficient than many of our competitors' products at prohibiting cholesterol
      absorption due to the nano-size of plant sterol in our CZ-series
      additives.




**Employees**




As
      of
      December 31, 2006, we employed 20 people on a full-time basis. We believe that
      the success of our business will depend, in part, on our ability to attract
      and
      retain qualified personnel. Our employees are not subject to a collective
      bargaining agreement, and we believe we have good relations with our
      employees.




**Filing
      Status**




We
      file
      periodic reports, current reports, proxy and information statements and other
      information with the Securities and Exchange Commission, or Commission. We
      intend to make available on our website free of charge our annual reports on
      Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K
      and
      amendments to those reports as soon as reasonably practicable after we
      electronically file such materials with or furnish them to the Commission.
      You
      may also read and copy any materials we file with the Commission at its Public
      Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain
      additional information about the operation of the Public Reference Room by
      calling the Commission at 1-800-SEC-0330. In addition, the Commission maintains
      an Internet website, www.sec.gov ,
      that
      contains our periodic reports, current reports, proxy and information
      statements, and other information regarding us that we file electronically
      with
      the Commission.




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




Our
      executive offices, factory and research and development facility are located
      in
      Bucheon, Korea, where we own 116,962 square feet of land and 63,142 square
      feet
      of building space. In January 2004, we entered into an agreement to sell our
      land and building. The transfer of title pursuant to the agreement will occur
      on
      January 31, 2009. We also currently own 19,978 square feet of office space
      in
      Seoul, Korea, which we leased to another party under a lease agreement which
      expired on July 9, 2006. We did not renew the lease and we currently use this
      space for our executive office and laboratory.




**Item
      3. Legal Proceedings**




None.





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




None.






**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Securities**





Our
      symbol on the Over-the-Counter Bulletin Board, or OTCBB, is “EUSI,” or,
      depending on the service that quotes stocks trading on the OTCBB, “EUSI.OB.” The
      following table sets forth the high and low sale prices for our common stock
      as
      reported on the OTCBB. The quotations reflect inter-dealer prices, without
      retail mark-up, mark-down or commission and may not necessarily represent actual
      transactions.




**High**
            
            **Low**Year
                Ended December 31, 2005First
                Quarter
            
            $
            0.26
            
            $
            0.18Second
                Quarter
            
            
            0.26
            
            
            0.17Third
                Quarter
            
            
            0.28
            
            
            0.11Fourth
                Quarter
            
            
            0.30
            
            
            0.10Year
                Ended December 31, 2006First
                Quarter
            
            $
            1.75
            
            $
            0.41Second
                Quarter
            
            
            1.55
            
            
            0.75Third
                Quarter
            
            
            1.19
            
            
            0.38Fourth
                Quarter
            
            
            1.00
            
            
            0.35




7




On
      March
      31, 2007, the closing sale price of our common stock on the OTCBB was $0.28
      per
      share and there were 540 record holders of our common stock.




***Dividend
      Policy***




We
      have
      never paid any dividends on our common stock. We currently intend to retain
      all
      earnings, if any, for use in the expansion of our business and therefore do
      not
      anticipate paying any dividends in the foreseeable future.




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




*In
      addition to other information included in this report, the following factors,
      among others, could cause actual results to differ materially from those
      contained in forward-looking statements contained in this Annual Report on
      Form
      10-KSB, and thus should be considered carefully in evaluating our business
      and
      future prospects* .




**Overview**




We
      were
      incorporated on August 26, 1998 as Orcas Ltd. under the laws of the State of
      Delaware. As Orcas Ltd., we were in the business of building and promoting
      arcade video games and vending machines. We underwent a reverse merger and
      abandoned this enterprise to develop a loyalty reward program based in Taipei,
      Taiwan, at which time we changed our name to Ezcomm, Inc. to reflect this change
      in our business model. We were unable to raise enough capital to finance the
      research and development of our proposed consumer incentive and loyalty program
      in Asia and, therefore, we abandoned all efforts to develop such business in
      January 2001. We remained inactive until July 2004, at which time we changed
      our
      name to Ezcomm Enterprises, Inc. and began to consider and investigate potential
      business opportunities, including an acquisition or merger. On September 30,
      2005, we acquired Eugene Science, Inc. pursuant to the terms of an exchange
      agreement. The exchange transaction was accounted for as a reverse merger
      (recapitalization) with Eugene Science deemed to be the acquirer for accounting
      purposes. Accordingly, the historical financial information presented in our
      financial statements is that of Eugene Science as adjusted to give effect to
      any
      difference between the par value of our capital stock and Eugene Science capital
      stock with an offset to capital in excess of par value. The basis of the assets,
      liabilities and retained earnings of Eugene Science, the accounting acquirer,
      were carried over in the recapitalization. Upon the closing of the exchange
      transaction, we became a global biotechnology company that develops,
      manufactures and markets nutraceuticals, functional foods that offer
      health-promoting advantages beyond that of nutrition. Our primary products
      are
      our plant sterol products, including our CZ-series of food additives, and our
      CholZero-branded beverages and capsules. On January 13, 2006, we changed our
      name from Ezcomm Enterprises to Eugene Science.




**Going
      Concern**




Our
      independent registered public accounting firm has expressed substantial doubt
      as
      to our ability to continue as a going concern, in its report for the fiscal
      year
      ended December 31, 2006, based on significant operating losses that we incurred
      and the fact that we do not have adequate working capital to finance our
      day-to-day operations. Our continued existence depends upon the success of
      our
      efforts to raise additional capital necessary to meet our obligations as they
      become due and to obtain sufficient capital to execute our business plan. We
      intend to obtain capital primarily through issuances of debt or equity. There
      can be no degree of assurance that we will be successful in completing
      additional financing transactions.




If
      we
      cannot obtain adequate funding or achieve revenues from the sale of our
      products, we may be required to significantly curtail or even shut down our
      operations.




**Results
      of Operations**




**Revenue**




*Comparison
      of Fiscal Years Ended December 31, 2006 and 2005*




We
      experienced a 24% decrease in revenue for our fiscal year ended December 31,
      2006 as compared to our fiscal year ended December 31, 2005. Such decrease
      in
      revenue is attributable primarily to a decrease in sales of our cooking oil
      products, which was partially offset by an increase in sales of our CholCare
      products. Revenue from our CholZero-branded products was $291,271 for our 2006
      fiscal year, representing an increase of $107,129 from our 2005 fiscal year.
      This increase is primarily a result of increased sales of our CholCare-branded
      products in the United States and Southeast Asia. Approximately 81% of our
      revenue in 2006, or $541,914, was derived from the sale of our supplemental
      products, including the sale of our CholCare-branded products.




We
      anticipate that sales of our products during our 2007 fiscal year will continue
      to increase as a result of our ability to make health claims


8


with
      respect to our CZ-series additives and CholZero-branded products in South Korea
      and as a result of the FDA’s approval of our "Generally Recognized as Safe"
      application for our CZ-S additive on January 13, 2006. We engaged ADM as our
      exclusive distributor of CZ-series additives in North America and Europe and
      authorized ADM to manage our FDA approval process in the United States.
      Following the approval of our GRAS application, ADM ordered one ton of our
      CZ-S
      additive for testing and marketing. We are currently producing the required
      quantities of our CZ-S additive at our laboratory facility in Seoul,
      Korea.




*Comparison
      of Fiscal Years Ended December 31, 2005 and 2004*




We
      experienced a 67% decrease in revenue for our fiscal year ended December 31,
      2005 as compared to our fiscal year ended December 31, 2004. Such decrease
      is
      attributable primarily to a decrease in sales of our germ and raw cooking oils
      as we transferred the right for germ supply to our related company, OnBio
      Corporation. Revenue from our CholZero-branded products was $107,129 for our
      2005 fiscal year, representing an increase of $42,363 from our 2004 fiscal
      year.
      This increase is primarily a result of our successful development, and increased
      sales, of new functional health foods and our CholCare-branded products.
      Approximately 65.4% of our revenue in 2005 was derived from the sale of our
      supplemental products, including the sale of raw cooking oil to OnBio
      Corporation.




**Operating
      Expenses**




***Comparison
      of Fiscal Years Ended December 31, 2006 and 2005***




**Cost
      of Sales**




For
      our
      2006 fiscal year, our cost of sales consisted primarily of $28,732 of production
      costs for our CholZero capsule, which we paid to a third party manufacturer.
      Our
      gross margin for our 2006 fiscal year was approximately 31% of our gross
      revenue, as compared to a gross margin of approximately 16.9% of our gross
      revenue in our 2005 fiscal year. The change in our gross margin is due primarily
      to our purchase of raw materials for our cooking oils and CholZero
      capsules.




**Expenses**




We
      had a
      $329,178 increase in expenses in our 2006 fiscal year as compared to our 2005
      fiscal year due primarily to an increase in professional fees and depreciation
      from our sale of certain real property.




**Other
      Income (Expense)**




The
      increase in interest expense in our 2006 fiscal year as compared to our 2005
      fiscal year is primarily attributable to an increase in interest due on loans
      from our employees. In addition, all of our bank loans were in default as of
      December 31, 2006. The interest rates on such loans range from 15% to 18%.
      We
      are currently in negotiations with our lenders to settle our outstanding debts,
      and we intend to enter into settlement agreements with such lenders during
      the
      second quarter of our 2007 fiscal year.




***Comparison
      of Fiscal Years Ended December 31, 2005 and 2004***




**Cost
      of Sales**




For
      our
      2005 fiscal year, our cost of sales consisted primarily of $131,336 in corn
      oil
      production costs paid to a third party manufacturer. Our gross margin for our
      2005 fiscal year was approximately 16.9% of our gross revenues, as compared
      to a
      gross loss of approximately 6.1% of our gross revenues in the 2004 fiscal year.
      The change in our gross margin is due, in part, to fact that our gross margin
      for the 2004 fiscal year reflected the partial return of CZ-series additives
      from our Japanese distributor.




**Expenses**




We
      had a
      $214,825 increase in expenses in our 2005 fiscal year as compared to our 2004
      fiscal year due primarily to an increase in rent expense and our incurrence
      of
      additional professional fees and travel expenses related to the exchange
      transaction.




**Other
      Income (Expense)**




The
      increase in interest expense in our 2005 fiscal year as compared to our 2004
      fiscal year is primarily attributable to an increase in interest due on loans
      in
      default. All of our bank loans, except for our loan from the National
      Agricultural Cooperative Federation, were in default as of December 31, 2005.
      The interest rate on such loans ranges from 15% to 18%.




9




**Liquidity
      and Capital Resources**




***Comparison
      of Fiscal Years Ended December 31, 2006 and 2005***




As
      of
      December 31, 2006, we had cash and cash equivalents of approximately $9,031
      and
      negative working capital of approximately $13,819,618. As of December 31, 2005,
      we had cash and cash equivalents of approximately $13,466 and negative working
      capital of approximately $17,757,508. The decrease in our cash and working
      capital during our 2006 fiscal year was due primarily to the repayment of the
      outstanding principal and a portion of the accrued and unpaid interest owed
      under certain of our outstanding bank loans upon the sale of our real property
      in Bucheon, Kyonggi-Do, Korea.




We
      currently satisfy our working capital requirements primarily through cash flows
      generated from operations, bank loans and sales of equity and debt securities.
      For the twelve months ended December 31, 2006, we had a net decrease in cash
      of
      approximately $4,435, as compared with a net decrease in cash of approximately
      $13,464 for the twelve months ended December 31, 2005.




**Cash
      Used in Operating Activities**




Our
      net
      cash used in operating activities increased 1,067% to $3,891,287 in our 2006
      fiscal year, as compared to $333,423 used in our 2005 fiscal year. This increase
      of $3,557,864 resulted primarily a gain on the sale of our real property in
      Bucheon, Kyonggi-Do, Korea, partially offset by a provision for loss on
      uncollectible related party loans.




**Cash
      Used in Investing Activities**




Our
      net
      cash used in investing activities increased 1,151% to $279,051 in our 2006
      fiscal year, as compared to $22,302 used in our 2005 fiscal year. This increase
      of $256,749 resulted primarily from our investment in securities available
      for
      sale.




**Cash
      Provided By Financing Activities**




Our
      net
      cash provided by financing activities increased 1,118% to $4,165,903 in our
      2006
      fiscal year, as compared to $342,025 provided in our 2005 fiscal year. This
      increase of $3,823,878 resulted primarily from net proceeds on the sale of
      our
      real property in Bucheon, Kyonggi-Do, Korea, partially offset by the repayment
      of the outstanding principal and a portion of the accrued and unpaid interest
      due under certain of our outstanding bank loans and advances made by us to
      a
      related party.




***Comparison
      of Fiscal Years Ended December 31, 2005 and 2004***




As
      of
      December 31, 2005, we had cash and cash equivalents of approximately $13,466
      and
      negative working capital of approximately $17,757,508. As of December 31, 2004,
      we had negative working capital of approximately $12,502,194 and cash and cash
      equivalents of approximately $36,681. The decrease in our cash and working
      capital during our 2005 fiscal year was due to poor progress in our business
      operations and a decrease in sales during our 2005 fiscal year as compared
      to
      our 2004 fiscal year.




We
      currently satisfy our working capital requirements primarily through cash flows
      generated from operations, bank loans and sales of equity and debt securities.
      For the twelve months ended December 31, 2005, we had a net decrease in cash
      of
      approximately $13,464, as compared with a net decrease in cash of approximately
      $661,269 for the twelve months ended December 31, 2004.




**Cash
      Used in Operating Activities**




The
      net
      cash used in operating activities decreased 79.9% to $333,423 in our 2005 fiscal
      year, as compared to $1,657,518 in our 2004 fiscal year. This decrease of
      $1,324,095 resulted primarily from a decrease in our total accounts receivable
      due to a write off of an account receivable due to us from OnBio Corporation.
      In
      addition, such decrease resulted from an increase in our accounts payable
      balance in our 2005 fiscal year due to an aggravation of our cash
      flow.




**Cash
      Used in Investing Activities**




The
      net
      cash used in investing activities was $22,302 in our 2005 fiscal year, compared
      to net cash of $299,498 used in our 2004 fiscal year. This decrease of $277,196
      resulted primarily from a significant decrease in our acquisition of property
      and equipment due to poor progress in our business operations and an aggravation
      of our cash flow.




**Cash
      Used in Financing Activities**




The
      net
      cash used in financing activities decreased 72.7% to $342,025 in our 2005 fiscal
      year, as compared to $1,256,488 in our 2004 fiscal year. This decrease of
      $914,463 resulted primarily from our return of the deposit which we had
      previously received from Wando Seafood


10


Distribution
      Co. Ltd. in our 2004 fiscal year in connection with the agreement to sell our
      real estate in South Korea. In addition, such decrease resulted from expenses
      related to an increase in the issuance of common stock by one of our
      subsidiaries.




**Bank
      Loans**




Since
      1999, we have borrowed an aggregate principal amount of $3,889,259 from the
      Industrial Bank of Korea, which we refer to herein as IBK. These loans bear
      interest at rates of 4.5% to 18% per annum and are due and payable on demand.
      A
      portion of these loans was secured by our real property located in Bucheon,
      Korea. Loans in the aggregate principal amount of $1,301,919 were guaranteed
      by
      the Korea Technology Credit Guarantee Fund, which we refer to herein as KOTEC,
      a
      fund operated by the Korean government. During the first half of the 2006 fiscal
      year, we used the proceeds from the sale of our real property in Bucheon, Korea
      to repay all of the outstanding principal and a portion of the accrued and
      unpaid interest owed under these loans from IBK. During the second half of
      the
      2006 fiscal year, we did not pay IBK any accrued and unpaid interest owed under
      these loans. At December 31, 2006, the accrued and unpaid interest owed by
      us to
      IBK under these loans was approximately $1,123,124.




In
      December 2004, we obtained a short-term loan from the National Agricultural
      Cooperative Federation, which we refer to herein as NACF, in the principal
      amount of $1,946,105. This loan has an interest rate of 4.6% per annum and
      was
      due on December 22, 2005. This loan is guaranteed by KOTEC. At December 31,
      2006, the loan had not been repaid to NACF and the aggregate outstanding
      principal balance and accrued and unpaid interest on such loan was approximately
      $1,320,190.




In
      September 2002, we obtained a short-term loan from ChoHeung Bank in the
      principal amount of $278,805. This loan has an interest rate of 9.5%, was due
      on
      August 1, 2004 and is personally guaranteed by Mr. Noh, our president, chief
      executive officer, chairman of the board and principal stockholder. At December
      31, 2006, the aggregate principal balance and accrued and unpaid interest on
      such loan was approximately $405,018. In each of July 2001 and December 2002,
      we
      entered into loan arrangements with Kookmin Bank. Each loan has a principal
      amount of $1,000,000, is unsecured and bears interest at the rate of 6.22%
      or
      11.22% per annum, respectively. Both loans were due and payable on November
      15,
      2004. At December 31, 2006, the aggregate principal balance and accrued and
      unpaid interest on such loans was approximately $3,102,606.




**Notes**




On
      October 9, 2004, we issued KOTEC a note in connection with its payout as
      guarantor of a convertible debenture issued by us. The note bears interest
      at a
      rate of 21% per annum, is guaranteed by Mr. Noh, our president, chief executive
      officer, chairman of the board and principal stockholder, and is due and payable
      on demand. To date, KOTEC has made no demands for payment of this note. At
      December 31, 2006, the outstanding balance of this note was
      $3,085,330.




In
      October 2003, we issued a note in the principal amount of $47,772, bearing
      interest at a rate of 9% per annum, to Jae Ho Lee, the president of UcoleBio
      Corp., an entity in which Eugene Science Korea, our subsidiary, has a 73%
      ownership interest. The note is due and payable on demand and, to date, Mr.
      Lee
      has made no demands to us for payment of this note. The outstanding balance
      of
      this note was $49,652 at December 31, 2006.




In
      February 2002, we issued a note in the principal amount of $100,000, bearing
      interest at a rate of 8% per annum, to Kyungioils Co., Ltd. The note is due
      and
      payable on demand and, to date, no demands have been made to us for payment
      of
      this note. The outstanding balance on this note was $19,937 at December 31,
      2006.




**Government
      Loans**




On
      March
      2, 2003, we received a non-interest bearing, unsecured loan from the Korean
      government in the principal amount of $61,779. Pursuant to its terms, the loan
      was to be repaid in three annual installments of $20,593, beginning February
      26,
      2004. The loan matured in its entirety in February 2006. At December 31, 2006,
      we were $58,921 in arrears under this loan.







We
      received a $316,181 loan from the Korean government in connection with certain
      of our research and development projects over the period from 1999 to 2002.
      These research and development projects were not successful and, as a result,
      we
      are obligated to repay the principal amount of the loan to the Korean
      government. We repaid $21,034 of the amount due under this loan in our 2004
      fiscal year. At December 31, 2006, we were $42,817 in arrears under this loan
      arrangement.




**Related
      Party Transactions**




See
      "Certain Relationships and Related Party Transactions" included elsewhere in
      this report for a full description of transactions to which we were or will
      be a
      party, in which the amount involved exceeds $120,000, and in which any director,
      executive officer, stockholder of more than 5% of our common stock or any member
      of their immediate family had or will have a direct or indirect material
      interest.


11




**Critical
      Accounting Policies**




Our
      financial position, results of operations and cash flows are impacted by the
      accounting policies we have adopted. In order to get a full understanding of
      our
      financial statements, one must have a clear understanding of the accounting
      policies employed. A summary of our critical accounting policies
      follows:




BASIS
      OF
      PRESENTATION. These financial statements have been prepared with the assumption
      that we will be able to realize our assets and discharge our liabilities in
      the
      normal course of business.




BASIS
      OF
      CONSOLIDATION. The reverse-takeover transaction between us and Eugene Science
      Korea, our Korean subsidiary, has been recorded as our recapitalization, with
      our net assets brought forward at their historical basis. The intention of
      Eugene Science Korea’s management was to acquire us as a shell company listed on
      a stock market. As such, accounting for the reverse-takeover as our
      recapitalization is deemed appropriate. The consolidated financial statements
      included the accounts of us (formerly, Ezcomm Enterprises) in the United States,
      Eugene Science Korea, our Korean subsidiary, in Korea, and Ucolebio, Inc.,
      a
      subsidiary of Eugene Science Korea, in Korea. Significant inter company
      transactions, if any, have been eliminated in consolidation. Minority interests
      are recorded to the extent of their equity. Losses in excess of minority
      interest equity capital are charged against the majority interest and will
      be
      reversed when the losses reverse.




UNIT
      OF
      ESTIMATES. The preparation of financial statements in accordance with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements and related notes to financial statements. These estimates are based
      on our management's best knowledge of current events and actions that we may
      undertake in the future. Actual results may ultimately differ from estimates,
      although our management does not believe such changes will materially affect
      the
      financial statements in any individual year.




REVENUE
      RECOGNITION. We generate revenue from sales of manufactured goods and
      merchandise, as well as rental of our buildings. Revenue from product sales
      is
      recognized, in accordance with Staff Accounting Bulletin No. 101, "Revenue
      Recognition in Financial Statements," when delivery has occurred provided there
      is persuasive evidence of an agreement, the fee is fixed or determinable and
      collection of the related receivable is probable. For manufactured finished
      goods, we recognize revenue when there is a definitive sales agreement, and
      upon
      shipment of products, when title is passed and the amount collectible can
      reasonably be determined. For merchandise sales, we recognize revenue upon
      shipment of products, when title is passed and the amount collectible can
      reasonably be determined. For rental income, we retain substantially all of
      the
      benefits and risks of ownership of our income properties and therefore recognize
      revenue upon receipt of monthly rent.




GOVERNMENT
      GRANTS. Government grants are recognized as income over the periods necessary
      to
      match them with the related costs that they are intended to
      compensate.




CURRENCY
      TRANSLATION. Our functional currency is the Korean Won. Adjustments to translate
      those statements into United States dollars at the balance sheet date are
      recorded in other comprehensive income. Foreign currency transactions of our
      Korean operation have been translated to Korean Won at the rate prevailing
      at
      the time of the transaction. Realized foreign exchange gains and losses were
      charged to income in the year.




CASH
      AND
      EQUIVALENTS. Highly liquid investments with maturities of three months or less
      when purchased are considered cash equivalents and recorded at cost, which
      approximates fair value.




ALLOWANCE
      FOR DOUBTFUL ACCOUNTS. An allowance for doubtful accounts is computed based
      on
      our historical experience and our management’s analysis of possible bad debts.
      Accounts receivable are shown net of allowance for doubtful accounts of $67,783
      and $41,402 as of December 31, 2006 and 2005, respectively.




PROPERTIES
      AND EQUIPMENT. Properties and equipment are stated at cost. Major renewals
      and
      betterments are capitalized and expenditures for repairs and maintenance are
      charges to expense as incurred. Depreciation is computed using the straight
      line
      method over the following periods:


Building
            
            
            20-40
                yearsMachinery
            
            
            10
                yearsVehicles
            
            
            5
                yearsFurniture
                and equipment
            
            
            3-5
                years




INTANGIBLE
      ASSETS. Intangible assets such as cost of obtaining industrial rights and
      patents are stated at cost, net of depreciation computed using the straight
      line
      method over five to ten years.


12


INVENTORIES.
      Inventories are stated at the lower of cost or net realizable value. Net
      realizable value is determined by deducting selling expenses from selling price.
      The cost of inventories is determined on the first-in first-out method, except
      for materials-in-transit for which the specific identification method is
      used.




INVESTMENTS.
      Investments in available-for-sale securities are being recorded in accordance
      with FAS-115, "Accounting for Certain Investments in Debt and Equity
      Securities." Equity securities that are not held principally for the purpose
      of
      selling in the near term are reported at fair market value with unrealized
      holding gains and losses excluded from earnings and reported as a separate
      component of stockholders' equity.




FINANCIAL
      INSTRUMENTS. Fair values of cash equivalents, short-term and long-term
      investments and short-term debt approximate their costs. The estimated fair
      values of other financial instruments, including debt, equity and risk
      management instruments, have been determined using market information and
      valuation methodologies, primarily discounted cash flow analysis. These
      estimates require considerable judgment in interpreting market data, and changes
      in assumptions or estimation methods could significantly affect the fair value
      estimates.




**Recent
      Accounting Pronouncements**




In
      May
      2005, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards, or SFAS, No. 154, "Accounting Changes and Error
      Corrections," or SFAS 154, which replaces Accounting Principles Board, or APB,
      Opinion No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting
      Changes in Interim Financial Statements An Amendment of APB Opinion No. 28."
      SFAS No. 154 provides guidance on the accounting for and reporting of changes
      in
      accounting principles and error corrections. SFAS No. 154 requires retrospective
      application to prior period financial statements of voluntary changes in
      accounting principle and changes required by new accounting standards when
      the
      standard does not include specific transition provisions, unless it is
      impracticable to do so. SFAS No. 154 also requires certain disclosures for
      restatements due to correction of an error. SFAS No. 154 is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005 and was required to be adopted by us as of January
      1,
      2006. The impact that the adoption of SFAS No. 154 will have on our results
      of
      operations and financial condition will depend on the nature of future
      accounting changes adopted by us and the nature of transitional guidance
      provided in future accounting pronouncements.




**Risk
      Factors**




*The
      following risks could affect our business, financial results and results of
      operations. These risk factors should be considered in connection with
      evaluating the forward-looking statements contained in this Annual Report on
      Form 10-KSB because these factors could cause the actual results and conditions
      to differ materially from those projected in the forward-looking
      statements* .




**Risks
      Related to Our Company**




***Our
      independent registered public accounting firm has a going concern qualification
      in their opinion contained in our audited financial statements which raises
      substantial doubt about our ability to continue as a going
      concern*** .




As
      a
      result of our substantial historical operating losses, limited revenues and
      working capital and our capital needs, our auditors added a going concern
      qualification in their report contained in our audited consolidated financial
      statements for the fiscal year ended December 31, 2006 which raises substantial
      doubt about our ability to continue as a going concern. While we have relied
      principally in the past on external financing to provide liquidity and capital
      resources for our operations, we can provide no assurance that cash generated
      from our operations together with cash received in the future from external
      financing will be sufficient to enable us to continue as a going
      concern.




***We
      will need to raise additional capital and it may not be available to us on
      favorable terms or at all. Our inability to obtain any needed additional capital
      on favorable terms could adversely affect our business, results of operations
      and financial condition*** .




We
      will
      need to raise additional capital over the next twelve months to support our
      operations, meet competitive pressures and respond to unanticipated requirements
      during and beyond that period. While there are no definitive arrangements with
      respect to sources of additional financing, management is optimistic that these
      funds can be raised through debt and/or equity offerings. However, our inability
      to obtain additional financing, when needed or on favorable terms, could
      materially adversely affect our business, results of operations and financial
      condition and could cause us to curtail or cease operations.




***We
      may fail to establish or cultivate strategic relationships to expand our
      business*** .




We
      intend
      to develop our business model and build our business initially through strategic
      relationships with large manufacturers. We may not be able successfully to
      form
      or manage such relationships, and if not, our ability to execute our business
      plan will be at risk. Further, if these partnerships are formed but are not
      successful in their execution, further revenue derived from sales of patented
      products may not materialize.


13




***Because
      we rely on a limited number of customers, any reduction in orders from any
      single customer would harm our business*** .




In
      the
      fiscal year ended December 31, 2006, sales to four major customers accounted
      for
      52% of our total revenue. We may fail to capture a share of the market for
      such
      products. Because we are dependent on a limited number of customers, any
      decrease or elimination of such customers’ purchases could materially harm our
      business.




***If
      we are not able to attract and retain key management and scientific personnel,
      our efforts to develop our products and achieve our other business objectives
      could be delayed or substantially impaired*** .




We
      are
      highly dependent on key marketing, research and development and management
      personnel, particularly Seung Kwon Noh, our president and chief executive
      officer; Jae Hong Yoo, our chief financial officer; Tae Hwan Lee, our vice
      president, domestic marketing; Se Cheon Ahn, our vice president, research and
      development; Jang Hyun Cho, our chief research scientist; and Chang Gon Kim,
      our
      principal research scientist. Although we do not have any reason to believe
      that
      we may lose the services of any of these persons in the foreseeable future,
      the
      loss of the services of any of these persons might impede the achievement of
      our
      research, development and commercialization objectives. Recruiting and retaining
      qualified scientific and business personnel will also be critical to our
      success. We may not be able to attract and retain these personnel on acceptable
      terms given the competition among numerous nutraceutical and biotechnology
      companies, academic institutions, government entities and other research
      organizations for similar personnel.




***Our
      competitors may develop products that are more effective and less
      costly*** .




The
      market for nutraceutical products is highly competitive. Many of our
      competitors, such as Venecol and Unilever, have substantially greater capital
      resources, research and development capabilities, and manufacturing and
      marketing resources, capabilities and experience than we do. Our competitors
      may
      succeed in developing products that are more effective or less costly than
      any
      products developed by us.




***Adverse
      publicity may affect our ability to attract and retain distributors for our
      products***.




Our
      products are formulated with vitamins, minerals and other ingredients that
      we
      regard as safe when taken as recommended by us and that scientific studies
      have
      suggested may involve health benefits. While we conduct quality control testing
      on our products, we generally do not conduct or sponsor clinical studies
      relating to the benefits of our products. We are dependent upon consumer
      perceptions of the safety and quality of our products and similar products
      distributed by our competitors that may not adhere to the same quality standards
      as we do. We could be adversely affected if any of our products, or any similar
      products distributed by our competitors, should prove harmful or be asserted
      to
      be harmful to consumers, or should scientific studies provide unfavorable
      findings regarding the effectiveness of such products. Our ability to attract
      and retain distributors for our products could be adversely affected by negative
      publicity relating to us or by the announcement by any government entity of
      investigatory proceedings regarding our business practices or our
      products.




***We
      face product liability risks and may not be able to obtain adequate insurance
      to
      protect ourselves against losses*** .




We
      maintain liability insurance with policy limits generally of $100,000 per
      occurrence and $100,000 per year. Our insurance coverage includes property,
      casualty, comprehensive general liability, and products liability insurance.
      We
      believe that our insurance coverage is adequate. The testing, marketing, and
      sale of health care products, however, entail an inherent risk of product
      liability. We cannot assure you that product liability claims relating to
      dietary supplement products will not be asserted against us, our licensees,
      or
      third parties with whom we operate. Many claims related to dietary supplements
      have already been brought against businesses in our industry. Further, we cannot
      assure you that such insurance will provide adequate coverage against any
      potential claims. A product liability claim or product recall could have a
      material adverse effect on our business, financial condition, or results of
      operations.




***We
      may experience difficulty in entering international
      markets*** .




The
      creation of strategic customer relationships and the marketing and sale of
      our
      functional nutrition technology and products could experience difficulty
      entering both the United States and additional international markets due to
      greater regulatory barriers, the necessity of adapting to new regulatory systems
      and problems related to entering new markets with different cultural bases
      and
      political systems. Operating in international markets exposes us to certain
      risks, including, among other things: (i) changes in or interpretations of
      foreign regulations that may limit our ability to sell certain products; (ii)
      exposure to currency fluctuations; (iii) the potential imposition of trade
      or
      foreign exchange restrictions or increased tariffs; and (iv) political
      instability. In addition, there can be no assurance that we will be able to
      enter into agreements with additional international marketing partners and
      thereby would limit the expansion of our revenue base.




***We
      rely on patents, licenses and intellectual property rights to protect our
      proprietary interests*** .




Our
      success depends in part on our ability to obtain patents, licenses and other
      intellectual property rights covering our products. There can


14


be
      no
      assurance that our licenses, patents and patent applications are sufficiently
      comprehensive to protect our products. The process of seeking further patent
      protection can be long and expensive, and there can be no assurance that we
      will
      have sufficient capital reserves to cover the expense of patent prosecution
      for
      their application or that all or even any patents will issue from currently
      pending or any future patent applications or that any of the patents when issued
      will be of sufficient scope or strength to provide meaningful protection or
      any
      commercial advantage to us. While we believe the bases on which patent
      applications were filed correspond to the patents that have been issued for
      composition and method of production and use and are reasonable given the
      issuance of the latter patents, there can be no assurance that the patents
      for
      which we have applied will be issued. We may be subject to or may be required
      to
      initiate interference proceedings with international patent and trademark
      authorities. Such proceedings could demand significant financial and management
      resources. We may receive communications alleging possible infringement of
      patents or other intellectual property rights of others. We believe that in
      most
      cases we could obtain necessary licenses or other rights on commercially
      reasonable terms, but we may be unable to do so. In addition, litigation could
      ensue or damages for any past infringements could be assessed. Litigation,
      which
      could result in substantial cost to and diversion of efforts by our management,
      may be necessary to enforce patents or our other intellectual property rights
      or
      to defend against claimed infringement of the rights of others. The failure
      to
      obtain necessary licenses or other rights or litigation arising out of
      infringement claims could have a material adverse effect on us.




***Our
      success depends in part on our successful development and sale of products
      currently in the research and development stage***.




Many
      of
      our product candidates are still in the research and development stage. The
      successful development of new products is uncertain and subject to a number
      of
      significant risks. Potential products that appear to be promising at early
      states of development may not reach the market for a number of reasons,
      including, but not limited to, the cost and time of development. Potential
      products may be found to be ineffective or cause harmful side effects, fail
      to
      receive necessary regulatory approvals, be difficult to manufacture on a large
      scale or be uneconomical or fail to achieve market acceptance. Additionally,
      our
      proprietary products may not be commercially available for a number of years,
      if
      at all.




There
      can
      be no assurance that any of our products in development will be successfully
      developed or that we will achieve significant revenues from such products even
      if they are successfully developed. Our success is dependent upon our ability
      to
      develop and market our products on a timely basis. There can be no assurance
      that we will be successful in developing or marketing such products, or taking
      advantage of the perceived demand for such products. In addition, there can
      be
      no assurance that products or technologies developed by others will not render
      our products or technologies non-competitive or obsolete.




***We
      will rely in part on international sales, which are subject to additional
      risks*** .




International
      sales may account for a significant portion of our revenues. International
      sales
      can be subject to many inherent risks that are difficult or impossible for
      us to
      predict or control, including:




·
            expected
                changes in regulatory requirements and
                tariffs;




·
            difficulties
                and costs associated with staffing and managing foreign operations,
                including foreign distributor
                relationships;




·
            longer
                accounts receivable collection cycles in certain foreign
                countries;




·
            adverse
                economic or political changes;




·
            unexpected
                changes in regulatory requirements;




·
            more
                limited protection for intellectual property in some
                countries;




·
            changes
                in our international distribution network and direct sales
                force;




·
            potential
                trade restrictions, exchange controls and import and export licensing
                requirements;




·
            potentially
                adverse tax consequences of overlapping tax structure;
                and




·
            foreign
                currency fluctuations.




***Failure
      to adequately expand to address expanding market opportunities could have a
      material adverse effect on our business and results of
      operations*** .




We
      anticipate that a significant expansion of operations will be required to
      address potential market opportunities. There can be no


15


assurances
      that we will expand our operations in a timely or sufficiently large manner
      to
      capitalize on these market opportunities. The anticipated substantial growth
      is
      expected to place a significant strain on our managerial, operational and
      financial resources and systems. While management believes it must implement,
      improve and effectively use our operational, management, research and
      development, marketing, financial and employee training systems to manage
      anticipated substantial growth, there can be no assurances that these practices
      will be successful.




***We
      do not have a separate standing audit committee, compensation committee or
      nominating and corporate governance committee, so the duties customarily
      delegated to those committees are performed by the board of directors as a
      whole, and no director is an "audit committee financial expert" as defined
      by
      the rules and regulations of the Commission***.




Our
      board
      of directors consists of four members. The board of directors as a whole
      performs the functions of an audit committee, compensation committee and
      nominating and corporate governance committee. None of our directors is
      considered "independent" under Rule 4200(a)(15) of the Nasdaq Marketplace Rules,
      and none qualifies as an “audit committee financial expert” as defined in Item
      401 of Regulation S-B. Accordingly, we will not be able to list our common
      stock
      with a nationally recognized exchange until we recruit independent directors
      to
      our board and restructure our board to comply with various requirements
      currently in place by those self-regulating organizations, and as a result,
      it
      may be difficult for you to sell our common stock.




***Our
      business is subject to the potential adverse consequences of exchange rate
      fluctuations*** .




We
      expect
      to conduct business in various foreign currencies and will be exposed to market
      risk from changes in foreign currency exchange rates and interest rates.
      Fluctuations in exchange rates between the United States Dollar and such foreign
      currencies may have a material adverse effect on our business, results of
      operations, and financial condition and could specifically result in foreign
      exchange gains and losses. The impact of future exchange rate fluctuations
      on
      our operations cannot be accurately predicted. To the extent that the percentage
      of our non-United States Dollar revenue derived from international sales
      increases in the future, our exposure to risks associated with fluctuations
      in
      foreign exchange rates will increase further. Moreover, as a result of operating
      a manufacturing facility in Korea, a substantial portion of our costs are and
      will continue to be denominated in the Korean Won. Adverse changes in the
      exchange rates of the Korean Won to the United States Dollar will affect our
      costs of goods sold and operating margins and could result in exchange
      losses.




***The
      requirements of the Sarbanes-Oxley Act, including Section 404, are burdensome,
      and our failure to comply with them could have a material adverse affect on
      our
      business and stock price*** .




Except
      with respect to the adoption of our Code of Conduct and Ethics and our
      compliance with certain requirements specifically applicable to our Annual
      Report on Form 10-KSB and our other periodic reports, our management has not
      commenced any specific procedures to comply with the requirements of the
      Sarbanes Oxley Act of 2002, including, specifically, the process necessary
      to
      implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
      which requires our management to assess the effectiveness of our internal
      controls over financial reporting and include an assertion in our annual report
      as to the effectiveness of our controls. Beginning with our Annual Report on
      Form 10-KSB for the fiscal year ending December 31, 2007, unless otherwise
      amended by the Commission, which we refer to herein as the Commission, our
      independent registered accounting firm will be required to attest to whether
      our
      assessment of the effectiveness of our internal control over financial reporting
      is fairly stated in all material respects and separately report on whether
      it
      believes we maintained, in all material respects, effective internal controls
      over financial reporting as of December 31, 2007. Because of our management's
      lack of resources, and our limited operations, we have not commenced the process
      of preparing the system and process documentation, performing an evaluation
      of
      our internal controls required for our management to make this assessment and
      for the auditors to provide their attestation report, and accordingly, have
      not
      begun testing the effectiveness of these internal controls. We expect that
      this
      process will require significant amounts of our management’s time and resources,
      as well as higher expenses in the form of higher audit and review fees, higher
      legal fees and higher internal costs to document, test and potentially remediate
      internal controls. Accordingly, with respect to Section 404 in particular,
      there
      exists a significant risk that we will not be able to meet all the requirements
      of Section 404 by the end of fiscal year 2007, when we are required to report
      on
      our internal controls and provide our auditor's opinion thereon. Additionally,
      even in the event we attempt to comply with Section 404, in the course of
      evaluation and testing, management may identify deficiencies that will need
      to
      be addressed and remediated, which could potentially have a material adverse
      effect on our stock price and could result in significant additional
      expenditures.




**Risks
      Related to Our Industry**




***Our
      failure to comply with current or future governmental regulations could
      adversely affect our business*** .




The
      formulation, manufacturing, packaging, labeling, advertising, distribution,
      and
      sale of functional foods and food additives, such as those sold by us, are
      subject to regulation by a number of federal, state and local agencies,
      including the United States Food and Drug Administration, which we refer to
      herein as the FDA, and the United States Federal Trade Commission, which we
      refer to herein as the FTC, as well as government agencies in other countries
      where we may operate. Among other matters, this regulation is concerned with
      product safety


16


and
      claims made with respect to a product's ability to provide health-related
      benefits. These agencies have a variety of procedures and enforcement remedies
      available to them, including the following:




·
            initiating
                investigations;




·
            issuing
                warning letters and cease and desist
                orders;




·
            requiring
                corrective labeling or advertising;




·
            requiring
                consumer redress, such as requiring that we offer to repurchase products
                previously sold to consumers;




·
            seeking
                injunctive relief or product seizures;
                and




·
            imposing
                civil penalties or commencing criminal
                prosecution.




United
      States federal and state agencies have in the past used these remedies in
      regulating participants in the dietary supplements industry, including the
      imposition by federal agencies of civil penalties in the millions of dollars
      against a few industry participants. In addition, publicity related to dietary
      supplements may result in increased regulatory scrutiny of the nutritional
      supplements industry.




Our
      failure to comply with applicable laws could subject us to severe legal
      sanctions, which could have a material adverse effect on our business and
      results of operations. We cannot assure you that the regulatory environment
      in
      which we operate will not change or that such regulatory environment, or any
      specific action taken against us, will not result in a material adverse effect
      on our business and operations. We cannot assure you that a state will not
      interpret claims presumptively valid under federal law as illegal under that
      state's regulations, or that future FDA regulations or FTC decisions will not
      restrict the permissible scope of such claims. Additionally, we cannot assure
      you that such proceedings or investigations or any future proceedings or
      investigations will not have a material adverse effect on our business or
      operations.




***We
      may be unable to compete effectively with competitors of perceived competing
      technologies or direct competitors that may enter our market with new
      technologies*** .




The
      market for our products is relatively new. Our ability to increase revenues
      and
      generate profitability is directly related to our ability to maintain a
      competitive advantage. We face potential direct competition from companies
      that
      may enter this market with new competing technologies and with greater
      financial, marketing and distribution resources than us. These greater resources
      could permit our competitors to introduce new products and implement extensive
      advertising and promotional programs, with which we may not be able to compete.
      As a result, we can provide no assurances that we will be able to compete
      effectively in the future.




***If
      our industry receives unfavorable publicity, our business could be
      harmed*** .




We
      believe that the nutraceutical market is affected by media attention regarding
      the consumption of dietary supplements and functional goods. Future scientific
      research or publicity could be unfavorable to the functional nutrition market
      or
      any particular product, or inconsistent with earlier favorable research or
      publicity. Future reports of research that are perceived as less favorable
      or
      that question such earlier research could hurt our business. Because of our
      dependence upon consumer perceptions, adverse publicity associated with adverse
      effects resulting from the consumption of our products or any similar products
      distributed by other companies could also hurt our business. Such adverse
      publicity could arise even if the adverse effects associated with such products
      resulted from consumers' failure to consume such products as directed. In
      addition, we may not be able to counter the effects of negative publicity
      concerning the efficacy of our products.




**Risks
      Related to Our Common Stock**




***We
      have a limited trading volume and shares eligible for future sale by our current
      stockholders may adversely affect our stock price*** .




To
      date,
      we have had a very limited trading volume in our common stock. As long as this
      condition continues, the sale of a significant number of shares of common stock
      at any particular time could be difficult to achieve at the market prices
      prevailing immediately before such shares are offered. In addition, sales of
      substantial amounts of common stock, including shares issued upon the exercise
      of outstanding options and warrants, pursuant to Rule 144 under the Securities
      Act or otherwise, could adversely affect the prevailing market price of our
      common stock and could impair our ability to raise capital at that time through
      the sale of our securities.




***Our
      common stock price is highly volatile*** .




The
      market price of our common stock is likely to be highly volatile as the stock
      market in general has been highly volatile.


17


Factors
      that could cause such volatility in our common stock may include, among other
      things:




·
            actual
                or anticipated fluctuations in our quarterly operating
                results;




·
            announcements
                of technological innovations;




·
            conditions
                or trends in our industry; and




·
            changes
                in the market valuations of other comparable
                companies.




***The
      sale of our common stock on the over-the-counter bulletin board and the
      potential designation of our common stock as a "penny stock" could impact the
      trading market for our common stock*** .




Our
      securities, as traded on the Over-the-Counter Bulletin Board, are subject to
      rules adopted by the Commission that impose special sales practice requirements
      upon broker-dealers who sell such securities to persons other than established
      customers or accredited investors. For purposes of the rule, the phrase
      "accredited investors" means, in general terms, institutions with assets in
      excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
      or having an annual income that exceeds $200,000 (or that, when combined with
      a
      spouse's income, exceeds $300,000). For transactions covered by the rule, the
      broker-dealer must make a special suitability determination for the purchaser
      and receive the purchaser's written agreement to the transaction prior to the
      sale. Consequently, the rule may affect the ability of broker-dealers to sell
      our securities and also may affect the ability of purchasers to sell their
      securities in any market that might develop therefor.




In
      addition, the Commission has adopted a number of rules to regulate "penny
      stock." Because our securities may constitute "penny stock" within the meaning
      of the rules, the rules would apply to us and to our securities. The rules
      may
      further affect the ability of owners of our common stock to sell our securities
      in any market that might develop for them.




Stockholders
      should be aware that, according to the Commission, the market for penny stocks
      has suffered in recent years from patterns of fraud and abuse. Such patterns
      include (i) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (ii)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (iii) "boiler room" practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (iv) excessive and undisclosed bid-ask differentials and markups
      by selling broker-dealers; and (v) the wholesale dumping of the same securities
      by promoters and broker-dealers after prices have been manipulated to a desired
      level, resulting in investor losses.




Our
      management is aware of the abuses that have occurred historically in the penny
      stock market. Although we do not expect to be in a position to dictate the
      behavior of the market or of broker-dealers who participate in the market,
      management will strive within the confines of practical limitations to prevent
      the described patterns from being established with respect to our
      securities.




***We
      do not foresee paying dividends in the near future*** .




We
      have
      not paid dividends on our common stock and do not anticipate paying such
      dividends in the foreseeable future.




***Our
      officers and directors own a significant portion of our common stock, which
      could limit our stockholders' ability to influence the outcome of key
      transactions*** .




As
      of
      December 31, 2006, our officers and directors and their affiliates owned
      approximately 34.25% of our outstanding voting shares. As a result, our officers
      and directors are able to exert considerable influence over the outcome of
      any
      matters submitted to a vote of the holders of our common stock, including the
      election of our board of directors. The voting power of these stockholders
      could
      also discourage others from seeking to acquire control of us through the
      purchase of our common stock, which might depress the price of our common
      stock.




**Item
      7. Financial Statements**




Our
      consolidated balance sheet as at December 31, 2006 and 2005, consolidated
      statements of operations, stockholders’ deficit and cash flows for the years
      ended December 31, 2006 and 2005, notes to our consolidated financial statements
      and the report of our independent registered public accounting firm are
      referenced below.





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




On
      September 29, 2006, we engaged a new accounting firm, Kim and Lee Corporation,
      as our independent accountants to audit our financial statements. Our Board
      of
      Directors recommended and approved the change of independent accountants.
      Accordingly, SF Partnership


18


LLP,
      or
      SF Partnership, was dismissed on September 29, 2006. The decision to change
      accountants was determined by our Board of Directors to be in our best interests
      at the time.




From
      January 1, 2005 through the date of this Annual Report on Form 10-KSB, there
      were no disagreements with SF Partnership on any matter of accounting principles
      or practices, financial statement disclosure or auditing scope or procedure
      which disagreements, if not resolved to the satisfaction of SF Partnership
      would
      have caused them to make reference to the matter in its reports on our financial
      statements.




SF
      Partnership's report on our financial statements for the fiscal years ended
      December 31, 2005 and 2004 contained an explanatory paragraph indicating that
      there was substantial doubt as to our ability to continue as a going concern.
      Other than such statement, no report of SF Partnership on our financial
      statements for either of the past two years contained an adverse opinion or
      disclaimer of opinion, or was qualified or modified as to uncertainty, audit
      scope or accounting principles. In addition, from January 1, 2005 through the
      date of this Annual Report on Form 10-KSB, SF Partnership did not advise us
      with
      respect to any of the matters described in Item 304(a)(1)(iv) of Regulation
      S-B.




We
      provided SF Partnership with a copy of this disclosure and requested SF
      Partnership to furnish us with a letter addressed to the Commission stating
      whether SF Partnership agrees with the statements that we have made in this
      Annual Report on Form 10-KSB. A copy of SF Partnership’s letter is attached to
      this Annual Report on Form 10-KSB as Exhibit 16.1.




During
      the period from January 1, 2005 to September 29, 2006, neither we, nor anyone
      acting on our behalf, consulted with Kim and Lee Corporation regarding (i)
      the
      application of accounting principles to a specified transaction, either
      completed or proposed, or the type of audit opinion that might be rendered
      on
      our financial statements, or (ii) any of the matters or events set forth in
      Item
      304(a)(2)(ii) of Regulation S−B.





**Item
      8A.**  **Controls
      and Procedures**




We
      maintain disclosure controls and procedures (as defined in Rules 13a-15(e)
      and
      15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the
      Exchange Act) that are designed to
      ensure
      that the information required to be disclosed by us in reports that we file
      or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the Commission’s rules and forms, and to
      ensure that the information required to be disclosed by us in reports that
      we
      file or submit under the Exchange Act is accumulated and communicated to our
      management, including our chief executive officer and chief financial officer,
      as appropriate, to allow timely decisions regarding required
      disclosure.




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our chief executive officer and chief financial
      officer, of the effectiveness of our disclosure controls and procedures as
      of
      the end of the period covered by this Annual Report on Form 10-KSB, pursuant
      to
      Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on that evaluation,
      our chief executive officer and chief financial officer have concluded that
      our
      disclosure controls and procedures, as of the end of the period covered by
      this
      Annual Report on Form 10-KSB, were
      effective to ensure that the information required to be disclosed by us in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the Commission’s
      rules and forms, and to ensure that the information required to be disclosed
      by
      us in reports that we file or submit under the Exchange Act is accumulated
      and
      communicated to our management, including our chief executive officer and chief
      financial officer, as appropriate, to allow timely decisions regarding required
      disclosure.




There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the fourth
      fiscal quarter ended December 31, 2006, that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




Section
      404 of the Sarbanes-Oxley Act of 2002 requires management's review and
      evaluation of our internal control over financial reporting beginning with
      our
      Annual Report on Form 10-KSB for the fiscal year ending May 31, 2008, and an
      attestation of the effectiveness of these controls by our independent registered
      public accounting firm beginning with our Annual Report on Form 10-KSB for
      the
      fiscal year ending May 31, 2009. We plan to dedicate significant resources,
      including management time and effort, and to incur substantial costs in
      connection with our Section 404 assessment. We will continue to work to improve
      our controls and procedures, and to educate and train our employees on our
      existing controls and procedures in connection with our efforts to maintain
      an
      effective controls infrastructure.





**Item
      8B. Other Information**




None




19




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





**Directors**




The
      following table and biographical summaries set forth, with respect to each
      director, his or her age, position or positions in the Company, the year in
      which he first became a director of the Company, and his principal occupations
      or employment during at least the past five years.




Name
            
            Age
            
            PositionSeung
                Kwon Noh
            
            46
            
            President,
                Chief Executive Officer and Chairman of the BoardTae
                Hwan Lee
            
            44
            
            Senior
                Vice President, Sales and Marketing, and DirectorSe
                Cheon Ahn
            
            46
            
            Senior
                Vice President, Plant and Manufacturing, and DirectorTony
                Kim
            
            34
            
            Director




*Seung
      Kwon Noh* is our
      founder and has served as our president, chief executive officer and chairman
      of
      our board of directors since our inception in July 1997. Mr. Noh is also the
      president and chief executive officer of On-Bio Corporation, a company that
      manufactures functional cooking oil. Mr. Noh also serves a director of the
      Korea
      Bio-venture Association. Mr. Noh received a bachelor of arts degree in
      microbiology from Seoul National University, a master of science degree in
      biological engineering from the Korea Advanced Institute of Science and
      Technology and a master of science degree in bio-technology from Durham
      University in the United Kingdom.




*Tae
      Hwan Lee* has
      served as our senior vice president, sales and marketing, and as a member of
      our
      board of directors since March 2004. Prior to joining us, Mr. Lee worked in
      sales and marketing for EucholBio, Inc. from April 2003 to March 2004. From
      January 2002 to December 2002, Mr. Lee worked in marketing for IGM, Inc. Prior
      to that, Mr. Lee provided marketing-related consulting services to JTB Planning,
      Inc. for the period from January 2000 through January 2002. Mr. Lee received
      a
      bachelor of arts degree in liberal arts from Korea University.




*Se
      Cheon Ahn* has
      served as our vice president, plant and manufacturing, and as a member of our
      board of directors since March 2004. Prior to being appointed vice president,
      Mr. Ahn served as our director of production from June 2001 through March 2004.
      Prior to joining us, Mr. Ahn served as the director of products for Sindongbang
      Company, Ltd. from January 2000 to March 2001. Mr. Ahn received a bachelor
      of
      arts degree in chemical engineering from Hanyang University.





*Tony
      Kim*joined
      our board of directors in April 2005. Since November 2004, Mr. Kim has been
      president and a member of the board of directors of Telos, LLC, an investment
      management company. Mr. Kim also serves on the board of directors of Red Queen
      Entertainment, a multi-media entertainment company. From February 1998 through
      April 2002, Mr. Kim was vice president of Saymee K, Inc., the parent company
      of
      several fashion brands including Drunknmunky Clothing, Hudson Jeans and Protrend
      Limited. Mr. Kim graduated from the University of California, Los Angeles with
      a
      bachelor of arts degree in sociology.




Until
      further determination by our board of directors, the full board of directors
      will undertake the duties of an audit committee, a compensation committee and
      a
      nominating and corporate governance committee.





**Executive
      Officers**




The
      following table and biographical summaries set forth, with respect to each
      of
      our executive officers, his age, position or positions with us, the period
      during which he has served as such and his principal occupations or employment
      during at least the past five years.




Name
            
            Age
            
            PositionSeung
                Kwon Noh
            
            46
            
            President,
                Chief Executive Officer and DirectorTae
                Hwan Lee
            
            44
            
            Senior
                Vice President, Sales and Marketing, and DirectorSe
                Cheon Ahn
            
            46
            
            Senior
                Vice President, Production, and DirectorJae
                Hong Yoo
            
            39
            
            Chief
                Financial Officer




Biographical
      summaries regarding Messrs. Noh, Lee and Ahn were presented above.




*Jae
      Hong Yoo* joined
      us in 2002 and serves as our chief financial officer. Prior to joining us,
      Mr.
      Yoo served as a manager of human resources for Interpark Co., Ltd. from December
      1999 to August 2001. Mr. Yoo received a bachelor of arts degree in computer
      engineering from Kwangwoon University.




None
      of
      our executive officers is a party to any employment agreements with us. Each
      of
      Mr. Lee, Mr. Ahn and Mr. Yoo is a party to employment agreements with Eugene
      Science Korea, our majority-owned subsidiary.




None
      of
      our executive officers and directors, nor any of their affiliates, beneficially
      owns any of our equity securities or rights to acquire any of our securities
      except as otherwise described herein, and no such persons have been involved
      in
      any transactions with us or any of our directors, executive officers or
      affiliates that is required to be disclosed pursuant to the Commission’s rules
      and regulations, other than with respect to the transactions that have been
      described in this report or in any prior reports filed by us with the
      Commission.


20




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires our directors and executive officers, and
      persons who own more than ten percent of a registered class of our equity
      securities, to file with the Commission initial reports of ownership and reports
      of changes in ownership of our common stock and other equity securities.
      Officers, directors and greater than ten percent shareholders are required
      by
      the rules and regulations of the Commission to furnish us with copies of all
      Section 16(a) forms they file. To our knowledge and based solely on a review
      of
      the copies of such reports furnished to us and written representations that
      no
      other reports were required, during the year ended December 31, 2006, all
      Section 16(a) filing requirements applicable to our officers, directors and
      greater than ten percent beneficial owners were complied with, except for the
      following: Mr. Kim, a director, has not yet filed a Form 4 or Form 5 relating
      to
      a grant on May 31, 2006 of an option to purchase 300,000 shares of our common
      stock.




**Code
      of Ethics**




We
      adopted a Code of Conduct and Ethics that applies to our principal executive
      officer, principal financial officer and principal accounting officer. We intend
      to make a copy of the Code of Conduct and Ethics available on our website and
      a
      copy of the Code of Conduct and Ethics may be obtained by any person, without
      charge, upon written request delivered to Eugene Science, Inc., Attn: Corporate
      Secretary, Eugene Science, Inc., 8th Floor, LG Palace Building, 165-8
      Donggyo-Dong, Mapo-Gu, Seoul, Korea. We will disclose any amendment to, or
      waiver from, a provision of the Code of Conduct and Ethics by posting such
      information on our website when we have completed the process of making the
      Code
      of Conduct and Ethics available on our website.




**Item
      10.****Executive
      Compensation**




**Ezcomm
      Enterprises (now Eugene Science)**




Ezcomm
      Enterprises did not have a bonus, profit sharing, or deferred compensation
      plan
      for the benefit of its employees, officers or directors during any of the three
      most recently completed fiscal years. Ezcomm Enterprises did not pay any
      salaries or other compensation to its officers, directors or employees in an
      amount equal to or in excess of $100,000 since its inception. Further, Ezcomm
      Enterprises did not enter into employment agreements with its officers,
      directors or any other persons. Ezcomm Enterprises did not accrue any officer
      compensation.




There
      were no option grants to any executive officers during Ezcomm Enterprises'
      fiscal year ended May 31, 2005, and no options were exercised by any executive
      officer during the fiscal year ended May 31, 2005.




Ezcomm
      Enterprises did not compensate any director in the 2004, 2005 or 2006 fiscal
      years.




**Eugene
      Science**




The
      following table sets forth the salary and bonus earned for the three fiscal
      years ended December 31, 2006, by our chief executive officer. None of our
      other
      executive officers earned total annual salary and bonus in excess of $100,000
      during the 2005 fiscal year. Our chief executive officer shall be referred
      to in
      this proxy statement as the “named executive officer.”




**SUMMARY
                COMPENSATION TABLE**Name
                and principal position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                Awards ($)
            
            Option
                Awards ($)(1)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings ($)
            
            All
                Other Compensation ($)
            
            Total
                ($)Seung
                Kwon Noh
            
            
            2006
            
            $
            145,000
            
            
            —
            
            
            —
            
            $
            342,000
            
            
            —
            
            
            —
            
            
            —
            
            $
            487,000Chief
                Executive Officer and President
            
            
            2005
            
            
            110,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            110,0002004
            
            
            110,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            110,000




(1)
            Option
                awards reflect the dollar amount recognized for financial statement
                purposes for 2006, in accordance with FAS 123(R). Assumptions used
                in the
                calculation of these amounts are included in foot note 10 to our
                audited
                financial statements for the fiscal year ended December 31, 2006
                included
                herein.




21




**Outstanding
      Equity Awards at Fiscal Year-End**




The
      following table provides information on all restricted stock, stock option
      and
      SAR awards (if any) held by our named executive officer as of December 31,
      2006. All outstanding equity awards are in shares of our common
      stock.




**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END**OPTION
                AWARDS
            
            STOCK
                AWARDSName
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options (#)
              Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options
              (#)
            
            Option
                Exercise Price
              ($)
            
            Option
                Expiration Date
            
            Number
                of Shares or Units of Stock That Have Not Vested
              (#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested
              ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested
              (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              (#)Seung
                Kwon Noh
              Chief
                Executive Officer and President
            
            
            600,000
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            $
            0.50
            
            
            05/31/2016
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —




**Director
      Compensation**




We
      currently do not pay any fees to our directors or any fees for each board or
      committee meeting which is attended in person or telephonically. We do, however,
      reimburse directors for their reasonable travel expenses to attend
      meetings.




**Employment
      Agreements**




We
      have
      not entered into an employment agreement with our named executive
      officer.





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




The
      following table sets forth certain information known to us regarding the
      beneficial ownership of our common stock as of March 31, 2007 by: (i) each
      stockholder known to us to be a beneficial owner of more than five percent
      (5%)
      of our common stock; (ii) each of our directors; (iii) our named executive
      officers; and (iv) all of our current directors and executive officers as a
      group.





**Name
                and Address (1)**
            
            **Number
                of**
              **Shares****Beneficially**
              **Owned
                (2)**
            
            **Percentage
                of**
              **Outstanding
                Shares (2)**Seung
                Kwon Noh(3)
            
            
            10,901,079
            
            
            26.64
            %Tony
                Kim(4)
            
            
            2,606,339
            
            
            6.42
            %Se
                Cheon Ahn(5)
            
            
            300,000
            
            
            *Tae
                Hwan Lee(6)
            
            
            300,000
            
            
            *H&Q
                Asia Pacific(7)
            
            
            2,767,339
            
            
            6.86
            %Telos,
                LLC(8)
            
            
            2,606,339
            
            
            6.46
            %All
                directors and executive officers as a group (5persons)(9)
            
            
            14,277,418
            
            
            34.25
            %





*
            less
                than one percent (1%).




(1)
            Unless
                otherwise indicated, the business address of each holder is: c/o
                Eugene
                Science, Inc., 8th Floor, LG Palace Building, 165-8 Donggyo-Dong,
                Mapo-Gu,
                Seoul, Korea.





22




(2)
            Beneficial
                ownership is determined in accordance with the rules of the Commission
                and
                includes voting and investment power with respect to shares. Unless
                otherwise indicated, the persons named in the table have sole voting
                and
                sole investment control with respect to all shares beneficially owned,
                subject to community property laws where applicable. The number and
                percentage of shares beneficially owned are based on 40,315,705 shares
                of
                common stock outstanding as of March 31, 2007. Shares of common stock
                subject to options and warrants currently exercisable, or exercisable
                within 60 days of March 31, 2007, are deemed beneficially owned and
                outstanding for purposes of computing the percentage of the person
                holding
                such securities, but are not considered outstanding for computing
                the
                percentage of any other person.




(3)
            Includes
                (i) 600,000 shares subject to options exercisable within 60 days
                after
                March 31, 2007, (ii) 728,346 shares beneficially owned by Mr. Noh's
                spouse, and (iii) 922,536 shares held by OnBio Corporation, an entity
                of
                which Mr. Noh is an executive officer and has an ownership interest.
                Mr.
                Noh may be deemed to beneficially own the shares held by OnBio
                Corporation, but disclaims beneficial ownership in such shares except
                to
                the extent of his pecuniary interest
                therein.




(4)
            Includes
                (i) 300,000 shares subject to options exercisable within 60 days
                after
                March 31, 2007, and (ii) 2,306,339 shares of common stock held by
                Telos,
                LLC, an entity of which Mr. Kim is a director and executive officer
                and
                has an ownership interest. Mr. Kim may be deemed to beneficially
                own the
                shares held by Telos, LLC, but disclaims beneficial ownership in
                such
                shares except to the extent of his pecuniary interest
                therein.




(5)
            Consists
                of 300,000 shares subject to options exercisable within 60 days after
                March 31, 2007.




(6)
            Consists
                of 300,000 shares subject to options exercisable within 60 days after
                March 31, 2007.




(7)
            Includes
                1,383,803 shares held by APGF3 Korea Investment and 1,383,803 shares
                held
                by KGRF Korea Investment, both of which are affiliates of H&Q Asia
                Pacific.




(8)
            Address
                is 6300 Wilshire Blvd., Suite 1730, Los Angeles, California 90048.
                Mr.
                Kim, one of our directors, is a director and executive officer and
                has an
                ownership interest in Telos, LLC.




(6)
            Includes
                1,370,000 shares subject to options exercisable within 60 days after
                March
                31, 2007.





**Equity
      Compensation Plan Information**




The
      following table sets forth information regarding outstanding options and rights
      and shares reserved for future issuance under our existing equity compensation
      plan as of December 31, 2006:





**Plan
                Category**
            
            **Number
                of Securities to be Issued upon Exercise of**
              **Outstanding
                Options**
            
            **Weighted
                Average**
              **Exercise
                Price of**
              **Outstanding
                Options**
            
            **Number
                of Securities**
              **Remaining
                Available for Future Issuance**Equity
                compensation plan approved by security holders:2006
                Stock Incentive Plan
            
            
            3,600,000
            
            
            $    
                0.57
            
            
            3,350,000Equity
                compensation plans not approved by security holders: None
            
            
            —
            
            
            —
            
            
            —




**Item
      12.****Certain
      Relationships and Related Transactions, and Director
      Independence**




***Transactions
      with Affiliated Companies***




**OnBio
      Corporation**




In
      March
      2005, we assigned our raw cooking oil supply contract to OnBio Corporation.
      Mr.
      Noh, our president, chief executive officer, chairman of the board and principal
      stockholder, is also the chief executive officer and a significant stockholder
      of OnBio Corporation.




OnBio
      Corporation is one of our suppliers for DG oil and was our largest customer
      in
      2006. At December 31, 2006, we had an account receivable from OnBio Corporation
      in the amount of $2,052,390 resulting primarily from the purchase of our raw
      cooking oil. The total amount


23


of
      the
      account receivable from OnBio Corporation was written off at the end of our
      2006
      fiscal year.




During
      our 2006 and 2005 fiscal years, both we and Onbio Corporation periodically
      provided cash advances to each other. At December 31, 2006, we had advanced
      an
      aggregate of approximately $3,506,308 to OnBio Corporation. All advances accrue
      interest at a rate of 9% per annum and are due on demand. OnBio Corporation
      is
      currently in financial difficulty. However, we believe that OnBio Corporation
      will be able to repay the outstanding advance upon the sale of shares of our
      common stock held by OnBio Corporation. We expect such sale of our common stock
      to occur in the first half of our 2007 fiscal year.




We
      provided a $418,600 term deposit at December 31, 2003 as security for a loan
      incurred by OnBio Corporation. During our 2004 fiscal year, the term deposit
      ceased and we loaned the proceeds to Onbio Corporation for repayment of the
      outstanding bank loan. At December 31, 2006, OnBio Corporation had repaid the
      entire outstanding amount due to us under this loan arrangement.




**Nutra
      Nano Tech**




Tony
      Kim,
      a member of our board of directors, is the chief executive officer of Nutra
      Nano
      Tech. We entered into a license agreement with Nutra Nano Tech which gave it
      an
      exclusive right and license to distribute, market, advertise, sell and otherwise
      exploit our CholZero-branded products, including, but not limited to, our
      CholZero capsules, CholZero green tea and CholZero seaweed. Our CholZero-branded
      products contain our patented CZ-series ingredient. As a result of this license
      agreement, every CholZero-branded product distributed in North America would
      only be distributed through Nutra Nano Tech. Nutra Nano Tech launched an
      infomercial marketing campaign for our CholZero capsules in May 2006. On
      November 3, 2006, we terminated this agreement with Nutro Nano Tech and, as
      a
      result, Nutra Nano Tech no longer retains exclusive North American distribution
      rights to our CholZero-branded products.




**Boo
      Won Sil Up**




During
      our 2006 and 2005 fiscal years, we purchased goods from Boo Won Sil Up, an
      entity controlled by the father of Mr. Noh, our president, chief executive
      officer, chairman of the board and principal stockholder. As of December 31,
      2006, we had an account payable of $64,047 due to Boo Won Sil Up.




***Transactions
      with Officers and Directors***




At
      various times during our 2006 fiscal year, we received advances from Mr. Noh,
      our president, chief executive officer, chairman of the board and principal
      stockholder, in the aggregate amount of $737,995. The advances accrue interest
      at a rate of 9% per annum and are due and payable on demand. At December 31,
      2006, we had received $220,286 in advances from Mr. Noh. These advances accrue
      interest at a rate of 9% per annum and are due and payable on
      demand.




***Director
      Independence***




None
      of
      our directors is considered "independent" under any definition of independence
      set forth by a national securities exchange or an inter-dealer quotation system
      which has requirements that a majority of the board of directors be
      independent.





**Item
      13.**  **Exhibits**




The
      exhibits set forth below are filed as part of this Annual Report on Form
      10-KSB:




**Exhibit****Number**
            
            **Description**2.1
            
            Exchange
                Agreement by and among Ezcomm Enterprises, Inc., Eugene Science (Korea)
                and certain stockholders of Eugene Science (Korea), dated September
                1,
                2005 (incorporated by reference to Exhibit 10.1 to our Current Report
                on
                Form 8-K filed with the Commission on September 7,
                2005).2.2
            
            Amendment
                No. 1 to Exchange Agreement (incorporated by reference to Exhibit
                2.2 to
                our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).3.1
            
            Certificate
                of Incorporation (incorporated by reference to Exhibit 3.11 to our
                Registration Statement on Form 10-SB filed with the Commission on
                February
                20, 2004).3.2
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit 3.12 to our Registration Statement on Form 10-SB filed with
                the
                Commission on February 20, 2004).




24




3.3
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit 3.3 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).3.4
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit A to our Information Statement on Schedule 14C filed with
                the
                Commission on December 1, 2005).3.5
            
            Bylaws
                (incorporated by reference to Exhibit 3.2 to our Registration Statement
                on
                Form 10-SB filed with the Commission with the Commission on February
                20,
                2004).4.1
            
            Warrant
                to Purchase Common Stock of Eugene Science, Inc., dated September
                30,
                2005, issued to WestPark Capital, Inc. (incorporated by reference
                to
                Exhibit 4.1 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.1
            
            Agreement
                of Property Sales Contract between Eugene Science (Korea) and Wando
                Seafood Distributions, Co., Ltd., dated January 16, 2004 (incorporated
                by
                reference to Exhibit 10.1 to our Current Report on Form 8-K filed
                with the
                Commission on October 6, 2005).10.2
            
            Memorandum
                of Understanding between Korea Ginseng Corp. and Eugene Science (Korea),
                dated March 12, 2004 (incorporated by reference to Exhibit 10.2 to
                our
                Current Report on Form 8-K filed with the Commission on October 6,
                2005).10.3
            
            Agreement
                of Product Supply between Amway Korea, Ltd. and Eugene Science (Korea),
                dated November 11, 2004 (incorporated by reference to Exhibit 10.3
                to our
                Current Report on Form 8-K filed with the Commission on October 6,
                2005).10.4
            
            Strategic
                Alliance Agreement between Archer Daniels Midland Company and Eugene
                Science (Korea), dated April 8, 2004 (incorporated by reference to
                Exhibit
                10.4 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.5
            
            Distribution
                Agreement by and between Toong Yeuan Enterprise Co., Ltd. and Eugene
                Science (Korea), dated February 18, 2003 (incorporated by reference
                to
                Exhibit 10.5 to our Current Report on Form 8-K filed with the Commission
                on October 6, 2005).10.6
            
            Distribution
                Agreement by and between Hokuyo Koeki Co., Ltd. and Eugene Science
                (Korea), dated May 21, 2002 (incorporated by reference to Exhibit
                10.6 to
                our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.7
            
            License
                Agreement between Nutra Nano Tech, Inc. and Eugene Science (Korea),
                dated
                May 20, 2005 (incorporated by reference to Exhibit 10.7 to our Current
                Report on Form 8-K filed with the Commission on October 6,
                2005).10.8
            
            Marketing
                Agreement between Hokuyo Koeki Co., Ltd. and Eugene Science (Korea),
                dated
                March 8, 2001 (incorporated by reference to Exhibit 10.8 to our Current
                Report on Form 8-K filed with the Commission on October 6,
                2005).10.9
            
            Material
                Transfer Agreement between Archer Daniels Midland Company and Eugene
                Science (Korea), dated November 19, 2001 (incorporated by reference
                to
                Exhibit 10.9 to our Current Report on Form 8-K filed with the Commission
                on October 6, 2005).10.10
            
            Investment
                Agreement by and between Hokuyo Koeki Co., Ltd. and Eugene Science
                (Korea), dated March 21, 2002 (incorporated by reference to Exhibit
                10.10
                to our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.11
            
            Share
                Subscription Agreement by and between Telos, LLC and Eugene Science
                (Korea), dated January 19, 2005 (incorporated by reference to Exhibit
                10.11 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.12
            
            Amendment
                to Subscription Agreement by and between Telos, LLC and Eugene Science
                (Korea), dated February 2, 2005 (incorporated by reference to Exhibit
                10.12 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).




25




10.13
            
            Lease
                Agreement by and between Bestian Partners Co., Ltd. and Eugene Science
                (Korea), dated June 24, 2005 (incorporated by reference to Exhibit
                10.14
                to our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.14
            
            Employment
                Agreement between Eugene Science (Korea) and Jae Hong Yoo, dated
                July 28,
                2002 (incorporated by reference to Exhibit 10.15 to our Current Report
                on
                Form 8-K filed with the Commission on October 6,
                2005).*10.15
            
            Employment
                Agreement between Eugene Science (Korea) and Se Cheon Ahn, dated
                January
                4, 2003 (incorporated by reference to Exhibit 10.16 to our Current
                Report
                on Form 8-K filed with the Commission on October 6,
                2005).*10.16
            
            Employment
                Agreement between Eugene Science (Korea) and Tae Hwan Lee, dated
                January
                7, 2001 (incorporated by reference to Exhibit 10.17 to our Current
                Report
                on Form 8-K filed with the Commission on October 6,
                2005).*10.17
            
            Distribution
                Agreement between Eugene Science (Korea) and Ceragem International,
                Inc.,
                dated September 27, 2006.**10.18
            
            Commissioned
                Production and Resource Supply Agreement between Eugene Science (Korea)
                and RexGene Biotech Co., Ltd., dated January 3, 2007.**14.1
            
            Code
                of Conduct and Ethics (incorporated by reference to Exhibit 14.1
                to our
                Annual Report on Form 10-KSB filed with the Commission on April 17,
                2006).16.1
            
            Letter
                dated April 23, 2007 from SF Partnership LLP to the Securities and
                Exchange Commission (incorporated by reference to Exhibit 16.1 to
                our
                Current Report on Form 8-K filed with the Commission on April 23,
                2007).21.1
            
            List
                of Subsidiaries.**24.1
            
            Power
                of Attorney.**31.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under
                the Securities Exchange Act of 1934.31.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under
                the Securities Exchange Act of 1934.32.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under
                the Securities Exchange Act of 1934 and 18 U.S.C. Section
                1350.32.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under
                the Securities Exchange Act of 1934 and 18 U.S.C. Section
                1350.





*
            These
                exhibits are identified as management contracts or compensatory plans
                or
                arrangements pursuant to Item 13 of Form
                10-KSB.


**
            Previously
                filed




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





The
      following table sets forth the aggregate fees billed to us by, our current
      independent registered public accounting firm, and SF Partnership, LLP, our
      former independent registered public accounting firm, for the fiscal years
      ended
      December 31, 2005 and December 31, 2006:




December
                31, 2005
            
            December
                31, 2006Audit
                Fees (1)
            
            $
            77,997
            
            $
            72,725Audit-Related
                Fees
            
            
            —
            
            
            —Tax
                Fees (2)
            
            
            5,863
            
            
            7,439All
                Other Fees (3)
            
            
            —
            
            
            —Total
            
            $
            83,860
            
            $
            80,164





(1)
            Includes
                fees for the professional services rendered for the audit of our
                annual
                financial statements included in our annual report on Form 10-KSB
                and for
                review of the financial statements included in our quarterly reports
                on
                Form 10-QSB.(2)
            Includes
                fees for the preparation and filing of our annual corporate tax
                returns.





26




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this amendment to be signed on its behalf
      by the undersigned, thereunto duly authorized.




EUGENE
                SCIENCE, INC.Date:
                October 26, 2007
            By:
            /s/ Seung
                Kwon NohSeung
                Kwon Noh
              President,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)




27







**EUGENE
      SCIENCE, INC.**


**AND
      SUBSIDIARIES**







CONSOLIDATED
      FINANCIAL STATEMENTS




DECEMBER
      31, 2006 AND
      2005




WITH




INDEPENDENT
      ACCOUNTANTS’ REPORT







28




**EUGENE
      SCIENCE, INC. AND SUBSIDIARIES**




CONSOLIDATED
      FINANCIAL STATEMENTS




DECEMBER
      31, 2006 AND
      2005




**CONTENTS**
            **PAGE****REPORTS
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
            30
                - 31**FINANCIAL
                STATEMENTS**Consolidated
                Balance Sheets
            32Consolidated
                Statements of Operations
                and Comprehensive Loss
            34Consolidated
                Statements of Stockholders’ Deficit
            35Consolidated
                Statements of Cash Flows
            36Notes
                to Consolidated Financial Statements
            37 -
                49






29




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**







To
      the
      Board of Directors and Stockholders


of
      Eugene
      Science, Inc.




We
      have
      audited the accompanying consolidate d
      balance
      sheet of Eugene
      Science, Inc. and Subsidiaries (a
      Delaware corporation)
      (the “Company”) as
      of December
      31, 2006 ,
      and the
      related consolidated statements of operations, stockholders’ deficit and
      comprehensive income, and cash fl ows
      for
      the year
      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. The financial statements of Eugene
      Science, Inc. and Subsidiaries as of December
      31, 2005 ,
      were
      audited by other auditors whose report dated March 17, 2006, on those statements
      included an explanatory paragraph that  the
      Company’s recurring losses and negative working capital raise substantial doubt
      about its ability to continue as a going conc ern
      as
      discussed in Note 1 to the consolidated financial statements.




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 2006 financial statements referred to above present fairly, in
      all
      material respects, the financial position of Eugene
      Science, Inc. and Subsidiaries as of
      December 31, 2006, and the results of its operations and its cash flows for
      the
      year then ended in conformity with accounting principles generally accepted
      in
      the United States of America.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As
      discussed in Note 1 to the consolidated financial statements, the Company has
      suffered recurring losses from operations and had working capital deficiencies
      as of December 31, 2006, which raise  substantial
      doubt about its ability to continue as a going concern. Management's plans
      in
      regard to these matters are also described in Note 1. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.











Los
      Angeles, California





March 6,
      2007








30




**INDEPENDENT
      AUDITORS’ REPORT**







To
      the
      Stockholders of


Eugene
      Science, Inc.


(Formerly
      EZcomm Enterpr ises,
      Inc.)




We
      have
      audited the consolidate d
      balance
      sheet of
      Eugene
      Science, Inc (Formerly EZcomm Enterprises, Inc.) and subsidiary (the
      “Company”) as
      of
      December 31, 2005, and the related consolidated statements of stockholders’
deficit, operations and cash fl ows
      for
      the year
      then
      ended. The 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 the Company as of December 31,
      2005, and the results of its operations, changes in its accumulated deficit
      and
      its cash flows for the year then ended, in conformity with accounting principles
      generally accepted in the United States of America.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As
      discussed in Note 1 to the consolidated financial statements, the Company has
      suffered recurring losses and negative working capital from operations and
      operates in a country whose economy is currently unstable, which raise substantial
      doubt about its ability to continue as a going concern. Management's plans
      in
      regard to these matters are also described in Note 1. The financial statements
      do not include any adjustments that might result from the outcome of this
      uncertainty.





CHARTERED
      ACCOUNTANTS


**Toronto,
      Canada**


March 17,
      2006




31




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


C onsolidated
        Balance Sheets
 December
        31, 2006 and 2005


**ASSETS****2006**
            
            **2005**Current
                assets:Cash
                and cash equivalents (Note 2)
            
            $
            9,031
            
            $
            13,466Restricted
                cash (Note 3)
            
            
            5,818
            
            
            9,890Accounts
                receivable (Notes 2 and 17)
            
            
            77,064
            
            
            94,969Inventories
                (Note 2)
            
            
            34,099
            
            
            60,586Due
                from related parties (Note 4)
            
            
            1,250,211
            
            
            970,062Receivable
                from unsettled contract (Note 6)
            
            
            942,686
            
            
            --Prepaid
                expenses and other current assets (Note 7)
            
            
            181,909
            
            
            182,014Total
                current assets
            
            
            2,500,818
            
            
            1,330,987Property
                and equipment (Note 5)
            
            
            1,168,767
            
            
            9,284,340Other
                assets:Investments
                (Note 8)
            
            
            333,851
            
            
            527,898Intangible
                assets (Note 2)
            
            
            188,181
            
            
            186,737Deposits
            
            
            83,195
            
            
            --Total
                other assets
            
            
            605,227
            
            
            714,635Total
                assets
            
            $
            4,274,812
            
            $
            11,329,962




32




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


C onsolidated
        Balance Sheets
 December
        31, 2006 and 2005


**LIABILITIES
                AND STOCKHOLDER'S DEFICIENCY****2006**
            
            **2005**Current
                liabilities:Accounts
                payable and accrued expensesTrade
            
            $
            8,151,448
            
            $
            7,860,009Related
                party (Note 17)
            
            
            --
            
            
            279,706Rental
                deposits (Note 9)
            
            
            64,516
            
            
            158,240Due
                to shareholders and officers (Note 11)
            
            
            905,955
            
            
            378,049Loan
                payable, current portion (Note 10)
            
            
            7,198,517
            
            
            10,412,491Total
                current liabilities
            
            
            16,320,436
            
            
            19,088,495Long-term
                liabilities:Accrued
                pension payable (Note 12)
            
            
            592,981
            
            
            454,678Deposits
                from customers
            
            
            317,498
            
            
            1,447,402Long-term
                debt, net of current portion (Note 10)
            
            
            22,709
            
            
            40,055Long-term
                liabilities
            
            
            933,188
            
            
            1,942,135Total
                liabilities
            
            
            17,253,624
            
            
            21,030,630Stockholders'
                deficiency:Common
                stock (Note 13)
            
            
            40,316
            
            
            31,166Additional
                paid-in-capital
            
            
            16,579,251
            
            
            16,418,734Accumulated
                other comprehensive loss
            
            
            (3,218,465
            )
            
            (1,777,866
            )Accumulated
                deficit
            
            
            (26,379,914
            )
            
            (24,372,702
            )Total
                stockholders' deficiency
            
            
            (12,978,812
            )
            
            (9,700,668
            )Total
                liabilities and stockholders' deficiency
            
            $
            4,274,812
            
            $
            11,329,962








33
 
  **EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 C onsolidated
          Statements of Operations and Comprehensive Loss
 For
          The
          Years Ended December
          31, 2006 and 2005


**2006**
            
            **2005**Net
                sales (Note 15)
            
            $
            669,329
            
            $
            886,438Cost
                of goods sold (Note 15)
            
            
            459,960
            
            
            736,469Gross
                profits
            
            
            209,369
            
            
            149,969Operating
                expenses
            
            
            2,800,761
            
            
            2,471,583Loss
                from operations
            
            
            (2,591,392
            )
            
            (2,321,614
            )Other
                income (expenses):Gain
                from sale of assets (Note 5)
            
            
            5,314,728
            
            
            --Net
                rental income
            
            
            135,027
            
            
            140,932Miscellaneous
                income
            
            
            9,475
            
            
            16,283Net
                interest expense
            
            
            (2,071,012
            )
            
            (1,890,601
            )Provision
                for uncollectable related party loans
            
            
            (2,804,038
            )
            
            (2,288,733
            )Net
                other income (expenses)
            
            
            584,180
            
            
            (4,022,119
            )Loss
                before income taxes
            
            
            (2,007,212
            )
            
            (6,343,733
            )Income
                taxes (Note 14)
            
            
            --
            
            
            --Net
                loss
            
            
            (2,007,212
            )
            
            (6,343,733
            )Comprehensive
                income (loss):Unrealized
                loss on investment
            
            
            (471,654
            )
            
            (68,252
            )Foreign
                currency translation
            
            
            (968,945
            )
            
            (32,895
            )(1,440,599
            )
            
            (101,147
            )Comprehensive
                loss
            
            $
            (3,447,811
            )
            $
            (6,444,880
            )Basic
                and diluted (loss) per share (Note 13)
            
            $
            (0.05
            )
            $
            (0.21
            )Weighted
                average number of shares outstanding
              during
                the periods - basic and diluted (Note 13)
            
            
            37,345,443
            
            
            30,888,892





34


**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 C onsolidated
        Statements of Stockholders’ Deficit
 For
        The
        Years Ended December
        31, 2006 and 2005


**Paid
                in**
            
            **Accumulated****Capital
                in**
            
            **Other****Common
                Stock**
            
            **Excess
                of**
            
            **Comprehensive**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Par
                value**
            
            **Income
                (loss)**
            
            **Deficit**
            
            **Total**Balance,
                January 1,2005
                (Note 13)
            
            
            3,536,880
            
            $
            3,537
            
            $
            15,223,558
            
            $
            (1,676,719
            )
            $
            (18,028,969
            )
            $
            (4,478,593
            )Issuance
                of common shares by subsidiary
            
            
            --
            
            
            --
            
            
            1,284,181
            
            
            --
            
            
            --
            
            
            1,284,181Common
                shares issued on acquisition of Eugene Science, Inc
            
            
            30,488,300
            
            
            27,279
            
            
            (99,161
            )
            
            --
            
            
            --
            
            
            (71,882
            )Issuance
                of shares forConsulting
                services
            
            
            350,000
            
            
            350
            
            
            10,156
            
            
            --
            
            
            --
            
            
            10,506Unrealized
                loss on available for sale securities
            
            
            --
            
            
            --
            
            
            --
            
            
            (68,252
            )
            
            --
            
            
            (68,252
            )Foreign
                currencytranslation
                adjustment
            
            
            --
            
            
            --
            
            
            --
            
            
            (32,895
            )
            
            --
            
            
            (32,895
            )Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (6,343,733
            )
            
            (6,343,733
            )Balance,
                December 31, 2005
            
            
            34,375,180
            
            $
            31,166
            
            $
            16,418,734
            
            $
            (1,777,866
            )
            $
            (24,372,702
            )
            $
            (9,700,668
            )Balance,
                January 1,2006
                (Note 13)
            
            
            34,375,180
            
            $
            31,166
            
            $
            16,418,734
            
            $
            (1,777,866
            )
            $
            (24,372,702
            )
            $
            (9,700,668
            )Issuance
                of shares for consulting services
            
            
            2,590,525
            
            
            5,800
            
            
            82,000
            
            
            --
            
            
            --
            
            
            87,800Exercise
                of non-vestedcommon
                stock options
            
            
            3,350,000
            
            
            3,350
            
            
            78,517
            
            
            --
            
            
            --
            
            
            81,867Unrealized
                loss on available for sale securities
            
            
            --
            
            
            --
            
            
            --
            
            
            (471,654
            )
            
            --
            
            
            (471,654
            )Foreign
                currencytranslation
                adjustment
            
            
            --
            
            
            --
            
            
            --
            
            
            (968,945
            )
            
            --
            
            
            (968,945
            )Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (2,007,212
            )
            
            (2,007,212
            )Balance,
                December 31, 2006
            
            
            40,315,705
            
            $
            40,316
            
            $
            16,579,251
            
            $
            (3,218,465
            )
            $
            (26,379,914
            )
            $
            (12,978,812
            )





35




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


C onsolidated
        Statements of Cash Flows
 For
        The
        Years Ended December
        31, 2006 and 2005




**2006**
            
            **2005**Cash
                flows from operating activities:Net
                loss
            
            $
            (2,007,212
            )
            $
            (6,343,733
            )Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            526,412
            
            
            704,534Provision
                for loss on uncollectable related party loans
            
            
            2,804,038
            
            
            2,288,733Net
                gain on sale of property
            
            
            (5,314,728
            )
            
            --(Increase)
                decrease in assets:Restricted
                cash
            
            
            4,072
            
            
            (139
            )Accounts
                receivable
            
            
            17,905
            
            
            835,243Inventory
            
            
            26,487
            
            
            (45,492
            )Prepaid
                expenses and other assets
            
            
            (83,090
            )
            
            (11,332
            )Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            90,250
            
            
            2,210,452Accrued
                pension payable
            
            
            138,303
            
            
            28,311Rental
                deposits
            
            
            (93,724
            )
            
            --Cash
                used in operating activities
            
            
            (3,891,287
            )
            
            (333,423
            )Cash
                flows from investing activities:Acquisition
                of fixed assets
            
            
            --
            
            
            (22,302
            )Investment
                in securities
            
            
            (277,607
            )
            
            --Intangible
                assets
            
            
            (1,444
            )
            
            --Cash
                used in investing activities
            
            
            (279,051
            )
            
            (22,302
            )Cash
                flows from financing activities:Advance
                from shareholder and officers
            
            
            527,906
            
            
            353,386Net
                proceeds from issuance of common stock
            
            
            91,150
            
            
            993,000Net
                proceeds from options exercise
            
            
            --
            
            
            291,181Net
                proceeds from sale of property
            
            
            10,992,258
            
            
            --Net
                advance to related party
            
            
            (280,149
            )
            
            (622,686
            )Deposits
            
            
            (1,129,904
            )
            
            (320,942
            )Repayment
                of loans
            
            
            (6,035,358
            )
            
            (351,914
            )Cash
                provided by financing activities
            
            
            4,165,903
            
            
            342,025Foreign
                exchange on cash and cash equivalents
            
            
            --
            
            
            236Net
                decrease in cash
            
            
            (4,435
            )
            
            (13,464
            )Cash
                and cash equivalent - beginning of year
            
            
            13,466
            
            
            26,930Cash
                and cash Equivalent - end of year
            
            $
            9,031
            
            $
            13,466Supplemental
                Information:Cash
                paid during the year for:Interest
                paid
            
            $
            164,704
            
            $
            190,588




36




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005
 
  **Note
        1 - Nature of Business and Going Concern**




***(a)***  ***Description
      of Business***




Eugene
      Science Inc. (“the Company”) was incorporated in August 1998 under the laws of
      state of Delaware, and owns 89.5% of Eugene Science, Inc. in Korea (“the Korean
      subsidiary”) which manufactures certain cholesterol lowering food ingredients.
      The Company currently has no other business.




Initially
      registered as Orcas, Ltd, the Company has had a number of name changes; it
      changed the name to Ezcomm Inc. in January 2000, and again to Ezcomm
      Enterprises, Inc. (EEI) in July 2004, and finally to the current name in
      September 2005 as it acquired the control of the Korean subsidiary.




The
      control of the Korean subsidiary was acquired in September 2005 by a share
      exchange transaction. By this exchange, EEI acquired 89.5% of Eugene Science,
      Inc. by issuing 88.5% of its own common stock to the shareholders of the Korean
      company. As a result, the Korean company has become 89.5% subsidiary of EEI
      while the shareholders of the Korean subsidiary hold 88.5% control in EEI in
      the
      United States. Immediately following the share exchange, EEI changed its name
      to
      Eugene Science, Inc. so that both companies are known under a common
      name.




The
      Korean subsidiary, located in Kyunggi-Do, Korea, was organized in July 1997
      under the laws of the Republic of Korea, and is in business of manufacturing
      and
      selling CZ TM series cholesterol-lowering functional food ingredients, beverages and capsules, and
      vegetable oil products that include those ingredients.




***(b)***
            ***Going
                Concern***




The
      Company's financial statements are presented on a going concern basis, which
      contemplates the realization of assets and satisfaction of liabilities in the
      normal course of business. The
      Company has experienced recurring losses since 2000 and has negative cash flows
      from operations. The Company’s net losses were $2,007,212 and $6,343,733 for the
      years ended December
      31, 2006 and
      2005 ,
      respectively, and working capital deficiency were $13,898,135 and $17,757,508,
      as of December
      31, 2006 and
      2005 ,
      respectively. These factors raise substantial doubt as to the Company’s ability
      to continue as a going concern.




The
      Company's ability to continue as a going concern is also contingent upon its
      ability to secure additional financing, initiating sale of its product and
      attaining profitable operations.




In
      May
      2005, plant sterols, the main ingredient of CZ TM series,
      was formally **** approved
      as a health function food ingredient by the Korean Food & Drug
      Administration, making it possible for the Company to advertise the
      cholesterol-lowering function of CZ TM and food
      enriched with CZ TM .
      The
      Company expects that the favorable change in the regulation will strongly help
      in selling CZ TM to major
      food companies. The Company has also developed new capsule products that are
      efficient and convenient in delivering the health function of CZ TM .
      The
      Company is actively developing sales channels for CZ TM and the
      capsule products.




The
      Company also plans to strengthen the cooperation with its international partners
      to restart shipping to oversea s
      markets. The Company expects to sell CZ TM to major
      food companies through its international strategic partners. For
      marketing the CZ TM capsules, the Company established a distribution channel in the United States
      in
      2006.




In
      addition, management is pursuing various sources of equity financing ,
      although there can be no assurance that the Company will be able to secure
      financing when needed or obtain such on terms satisfactory to the
      Company.





37




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005


The
      financial statements do not include any adjustments to reflect the possible
      future effects on the recoverability and classification of assets or the amounts
      and classification of liabilities that may result from the possible inability
      of
      the Company to continue as a going concern.




**Note****2
                -**
            **Significant
                Accounting Policies**




The
      following summary of significant accounting polices of the Company is presented
      to assist in understanding the Company’s financial statements. These accounting
      policies conform to the accounting principles generally accepted in the United
      States of America, and have been consistently applied in the preparation of
      the
      financial statements.




***(a)***
            ***Basis
                of Financial Statement
                Presentation***




These
                financial statements have been prepared with the assumption that
                the
                Company will be able to realize its assets and discharge its liabilities
                in the normal course of business.




***(b)***
            ***Basis
                of Consolidation*****




The
                reverse-takeover transaction between the Company and Eugene Science
                Inc.
                in Korea has been recorded as the recapitalization of the Company,
                with
                the net assets of the Company brought forward at their historical
                basis.
                The intention of the management of Eugene Science Inc. in Korea was
                to
                acquire the Company as a shell company listed on a stock market.
                As such,
                accounting for the reverse-takeover as the recapitalization of the
                Company
                is deemed appropriate.




The
      consolidated financial statements included the accounts
      of Eugene Science, Inc. (formerly Ezcomm Enterprises, Inc.) in the United
      States, Eugene Science, Inc. in Korea and its subsidiary, Ucolebio, Inc. in
      Korea. Significant
      inter company transactions, if any, have been eliminated in
      consolidation




Minority
      interests are recorded to the ex tent
      of
      their equity. Losses in excess of minority interest equity capital are charged
      against the majority interest and will be reversed when the losses
      reverse.





***(c)***
            ***Unit
                of Estimates***




Preparation
      of financial statements in accordance with accounting principles generally
      accepted in the United States of America requires management to make estimates
      and assumptions that affect the amounts reported in the financial statements
      and
      related notes to financial statements. These estimates are based on management's
      best knowledge of current events and actions the Company may undertake in the
      future. Actual results may ultimately differ from estimates, although management
      does not believe such changes will materially affect the financial statements
      in
      any individual year.




***(d)***
            ***Revenue
                Recognition***




The
      Company generates revenues from sales of manufactured goods and merchandise,
      as
      well as rental of the company's buildings.




Revenue
      from product sales is
      recognized, in accordance with Staff Accounting Bulletin No. 101 "Revenue
      Recognition in Financial Statements" ("SAB No. 101"), when delivery has occurred
      provided there is persuasive evidence of an agreement, the fee is fixed or
      determinable and collection of the related receivable is probable.




For
      manufactured finished goods, the Company recognizes revenue when there is a
      definitive sales agreement, and upon shipment of products, when title is passed
      and the amount collectible can reasonably be determined.





38




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


Notes
        to
        Consolidated Financial Statements
 December
        31, 2006 and 2005


For
      merchandise sales, the Company recognizes revenue upon shipment of products,
      when title is passed and the amount collectible can reasonably be
      determined.




For
      rental income, the Company retains substantially all of the benefits and risks
      of ownership of its income properties and therefore recognizes revenue upon
      receipt of monthly rent.





***(e)***
            ***Government
                Grants***




Government
      grants are recognized as income over the periods necessary to match them with
      the related costs that they are intended to compensate.




***(f)***
            ***Currency
                Translation***




The
                Company's functional currency is Korean Won. Adjustments occurring
                in
                translating the currency into U.S. dollars at the balance sheet date
                are
                recorded as a component of other comprehensive income
                (loss).




Foreign
                currency transactions of the Korean operations have been translated
                to
                Korean Won at the rate prevailing at the time of the transaction.
                Realized
                foreign exchange gains and losses were taken into current
                period.




***(g)***
            ***Cash
                and Cash Equivalents***




Highly
      liquid investments with maturities of three months or less when purchased are
      considered cash equivalents and recorded at cost, which approximates fair
      value.




***(h)***
            ***Allowance
                for Doubtful Accounts***





An
      allowance for doubtful accounts is computed based on the Company’s historical
      experience and management’s analysis of possible bad debts. Accounts receivable
      are shown net of allowance for doubtful accounts of $ 67,783 and
      $ 41,402 as of December
      31, 2006 and
      2005 ,
      respectively.




***(******i)***
            ***Properties
                and Equipment***




Properties
      and equipment are stated at cost. Major renewals and betterments are capitalized
      and expenditures for repairs and maintenance are charges to expense as incurred.
      Depreciation is computed using the straight-line method over the following
      periods:


Buildings
              20-40
                  yearsMachinery
              10
                  yearsVehicles
              5
                  yearsFurniture
                  and equipment
              3-5
                  years




***(******j)***
            ***Intangible
                Assets***




Intangible
      assets such as cost of obtaining industrial rights and patents are stated at
      cost, net of depreciation computed using the straight-line method over five
      to
      ten years.




***(******k)***
            ***Inventories***




Inventories
      are stated at the lower of cost or net realizable value. Net realizable value
      is
      determined by deducting selling expenses from selling price.





39




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005


The
      cost
      of inventories is determined on the first-in first-out method, except for
      materials-in-transit for which the specific identification method is used.
      The
      components of inventory at December
      31, 2006 and
      2005 were as
      follows:





**2006**
            
            **2005**Raw
                materials
            
            $
            14,725
            
            $
            20,305Finished
                goods
            
            
            19,374
            
            
            40,281Total
            
            $
            34,099
            
            $
            60,586




***(******l)***
            ***Investments***




Investments
      in available-for-sale securities are being recorded in accordance with FAS-115
      "Accounting for Certain Investments in Debt and Equity Securities". Equity
      securities that are not held principally for the purpose of selling in the
      near
      term are reported at fair market value with unrealized holding gains and losses
      excluded from earnings and reported as a separate component of stockholders'
      equity.




***(******m)***
            ***Financial
                Instruments***




Fair
      values of cash equivalents, short-term and long-term investments and short-term
      debt approximate their
      costs. The estimated fair values of other financial instruments, including
      debt,
      equity and risk management instruments, have been determined using market
      information and valuation methodologies, primarily discounted cash flow
      analysis. These estimates require considerable judgment in interpreting market
      data, and changes in assumptions or estimation methods could significantly
      affect the fair value estimates.




***(******n)***
            ***Recent
                Accounting
                Pronouncements***




In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
      ("SFAS 154"), which replaces Accounting Principles Board ("APB") Opinion No.
      20,
      "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim
      Financial Statements An Amendment of APB Opinion No. 28". SFAS No. 154 provides
      guidance on the accounting for and reporting of changes in accounting principles
      and error corrections. SFAS No. 154 requires retrospective application to prior
      period financial statements of voluntary changes in accounting principle and
      changes required by new accounting standards when the standard does not include
      specific transition provisions, unless it is impracticable to do so. SFAS No.
      154 also requires certain disclosures for restatements due to correction of
      an
      error. SFAS No. 154 is effective for accounting changes and corrections of
      errors made in fiscal years beginning after December 15, 2005, and is required
      to be adopted by the Company as of January 1, 2006. The impact that the adoption
      of SFAS No. 154 will have on the Company's results of operations and financial
      condition will depend on the nature of future accounting changes adopted by
      the
      Company and the nature of transitional guidance provided in future accounting
      pronouncements.








40




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  **Note
          3 - Restricted Cash**




Company
      had restricted cash of $ 5,818 and
      $9,890 as of December
      31, 2006 and
      2005 respectively, which was pledged as security for future purchases from a vendor.




**Note
      4 - Due from Related Party**




Loans
      receivable from an affiliate by virtue of common ownership were carried at
      $ 1,250,211 and
      $ 970,062 as of December
      31, 2006 and
      2005 ,
      respectively. These loans are pledged by marketable securities, and bear
      interest at 9% and are due on demand. The collectability of these loans appeared
      uncertain unless the pledged assets are liquidated, and for this reason the
      loans were adjusted to the realizable value of the assets pledged as of December
      31, 2006 .




**Note
      5 - Properties and Equipment**




Properties
      and equipment co nsisted
      of the following at December 31:





**2006**
            
            **2005**Land
            
            $
            --
            
            $
            4,463,706Buildings
            
            
            852,789
            
            
            3,418,584Equipment
                and vehicles
            
            
            829,372
            
            
            4,080,116Furniture
                and fixtures
            
            
            1,091,429
            
            
            961,8762,773,590
            
            
            12,924,282Less:accumulated
                depreciation
            
            
            (1,604,823
            )
            
            (3,639,942
            )Net
                property and equipment
            
            $
            1,168,767
            
            $
            9,284,340




On
      March
      3, 2006, the Company cancelled a sales agreement entered into in January 2004
      to
      sell the land and buildings. In return, the Company
      paid the purchaser approximately $2,100,000 representing return of the deposit
      and a cancellation fee. On the same date, the Company signed a new agreement
      to
      sell the land and building to a third party at approximately $11,700,000. The
      title of the property transferred on April 27, 2006. The gain realized on the
      sale was approximately $5,504,000. The proceeds from the sale were used to
      reduce a portion of the loans from Korea Trade Bank.





On
      August
      11, 2006, the Company sold certain machinery and equipment located in the
      Bucheon facilities for about $1,021,500 realizing a loss of about $189,300.





Depreciation
      expenses for the years ended December
      31, 2006 and
      2005 were
      $526,412 and $704,534, respectively.




**Note
      6 - Receivable from Unsettled Contracts**





As
                of December 31, 2006, the Company had outstanding proceeds receivable
                of
                $327,638 from the sales of land and buildings executed in April 2006
                and
                $615,048 from the sale of certain machinery and equipment executed
                in
                August 2006.






41




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  **Note
          7 - Prepaid Expenses and Other Current Assets**




Pr epaid
      expenses and other current assets consisted of the following at December
      31:





**2006**
            
            **2005**Prepaid
                fees for certain patent registration and related legal costs under
                application process
            
            $
            61,291
            
            $
            54,271Interest
                receivable on due from related parties
            
            
            120,618
            
            
            127,743Total
            
            $
            181,909
            
            $
            182,014








**Note** **8
      - Investments**




The
      following is a summary of investments at December 31:




**2006**
            
            **2005**7.50%
                equity of a unlisted company
            
            $
            322,581
            
            $
            527,5214.58%
                equity in a unlisted company
            
            
            1
            
            
            1Other
                marketable securities
            
            
            11,269
            
            
            376Total
            
            $
            333,851
            
            $
            527,898




Fifty
      three percent (53%) of the 7.5% equity investment with carrying value of
      $170,968 and $279,586 at December
      31, 2006 and
      2005 ,
      respectively, was pledged as security for a trade payable in the amount of
      $328,174 and $307,039 at December
      31, 2006 and
      2005 .




**Note** **9
      - Rental Deposits**




The
      Company leases an office space to an unrelated party and received rental
      deposits of $64,516 and $59,340 as of December
      31, 2006 and
      2005 ,
      respectively.




**Note** **10
      - Loans Payable**




Loans
              payable consisted of the following at December 31:**2006**
            
            **2005**Loanpayable
                to Korea Trade Bank with interest at 4.5% to 18%, due on demand,
                guaranteed by Korea Technology Credit Guarantee Fund and chief executive
                officer. Principal reduced by $4,000,000 in April 2006.
            
            $
            3,500,166
            
            $
            5,882,243Loan
                payable to a bank with interest at 4.5% to 18% per annum, paid off
                in June
                30, 2006.
            
            
            --
            
            
            1,978,000Note
                payable to Kook Min Bank with interest at 19% to 21%, due on demand,
                guaranteed by Korea Technology Credit Guarantee Fund and chief executive
                officer. This loan is in default.
            
            
            1,345,969
            
            
            1,973,846Note
                payable to a customer with interest at 3% due on demand. The note
                is in
                default.
            
            
            2,026,227
            
            
            --Note
                payable to Shin Han Bank with interest at 18% due on demand. The
                note is
                in default.
            
            
            306,047
            
            
            --Various
                notes payable to related party with interest at 9% to 10%, unsecured,
                and
                due on demand.
            
            
            --
            
            
            256,143Government
                loan, non-interest bearing, unsecured, payable on demand.
            
            
            42,817
            
            
            362,313Total
                notes payable
            
            
            7,221,226
            
            
            10,452,545Less:
                current portion
            
            
            (7,198,517
            )
            
            (10,412,490
            )Total
                long-term debt
            
            $
            22,709
            
            $
            40,055




42




**EUGENE
      SCIENCE, INC.** **AND SUBSIDIARIES**


Notes
      to
      Consolidated Financial Statements


December
      31, 2006 and 2005


**Note
        11 - Due to Shareholders and Officers**




Due
      to
      shareholders and officer consisted
      of the following at December 31:


**2006**
            
            **2005**Unsecured
                short term advance payable to shareholder with interest at 9% per
                annum,
                due on demand.
            
            $
            446,417
            
            $
            359,555Unsecured
                short-term advances payable to corporate officer with interest at
                9% per
                annum, due on demand.
            
            
            459,538
            
            
            18,494Total
            
            $
            905,955
            
            $
            378,049




**Note
      12 - Accrued Pension Payable**





The
      Company has an unfunded non-contributory, defined contribution pension plan
      that
      covers substantially all of its employees which is mandated by the government.
      The plans provide defined benefits based on years of service and final average
      salary. The plan provides that about 8% of each participant’s total compensation
      will be contributed to the plan. The Company is required to make contributions
      to the plan equal to the amounts accrued for pension expense. The unfunded
      accrued pension payables were $592,981 and $454,678 at December 31, 2006 and
      2005, respectively.




Total
      pension expenses for the years ended December
      31, 2006 and
      2005 were
      $ 201,843 and
      $155,088, respectively.





43




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  **Note
          13 - Capital Stock**








Total
                shares authorized:480,000,000 shares of Common Stock, par value $0.00120,000,000 shares of Preferred Stock, par value $0.001Shares
                issued and outstanding:
            
            **Shares**
            
            **Amount**Common
                stockDecember
                31, 2006
            
            
            40,315,705
            
            $
            40,316December
                31, 2005
            
            
            34,375,180
            
            $
            31,166Preferred
                stock-
                none issued and outstanding
            
            
            --
            
            $
            --







On
      March
      3, 2005, the Korean subsidiary issued 2,500,000 shares of common stock,
      representing 8% ownership, for $993,000 to an investor.




On
      September 30, 2005, in accordance with a Share Exchange Agreement dated
      September 1, 2005, the Company entered into a reverse-takeover transaction
      with
      Eugene Science, Inc. in Korea, whereby 89.5% of the outstanding shares of the
      Korean subsidiary were exchanged for 304,882,998 shares of the Company. As
      a
      result of the transaction, the shareholders of Eugene Science, Inc. in Korea
      acquired 88.5% of the Company’s voting stock. While the Company is the legal
      parent, Eugene Science, Inc. in Korea, as a result of the reverse-takeover,
      became the parent company for accounting purposes.




The
      financial statements have been retroactively adjusted to reflect the
      reverse-takeover transaction.




On
      October 12, 2005, the Company issued 3,500,000 common shares for
      $350,000.




On
      January 13, 2006, the company had a reverse stock split whereby one new common
      share was exchanged for ten common shares. The financial statements have been
      retroactively restated to reflect the reverse split.




On
      February 21, 2006, the company issued 1,000,000 shares of common stock for
      $83,000.




On
      September 19, 2006, the company issued 390,000 shares of common stock for
      consulting services provided.




On
      October 1, 2006, the company issued 1,200,000 shares of common stock for various
      consulting services provided.




On
      October 1, 2006, in accordance of 2006 Stock Incentive Plan, the company issued
      3,350,000 shares of common stock to employees and directors.







**Stock
      Compensation Plan**




The
      Company has accounted for its stock options and warrants in accordance with
      SFAS
      123(R) "Accounting for Stock - Based Compensation" and SFAS 148 "Accounting
      for
      Stock - Based compensation - Transition and Disclosure." Value of options
      granted has been estimated by the Black Scholes option pricing model. The
      assumptions are evaluated annually and revised as necessary to reflect market
      conditions and additional experience. The following weighted-average assumptions
      were used and a discussion of our methodology for developing each of the
      assumptions used in the valuation model follows:





44




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005


**2006**Dividend
                yield
            
            
            0.00
            %Expected
                volatility
            
            
            80
            %Risk-free
                interest rate
            
            
            4.3
            %Expected
                life of the option term (in years)
            
            
            10Forfeiture
                rate
            
            
            7.0
            %








Dividend
      Yield - The Company has not declared or paid dividends in the past and has
      no
      plan for dividend payments in the future.





Expected
      Volatility - Volatility is a measure of the amount by which a financial variable
      such as a share price has fluctuated (historical volatility) or is expected
      to
      fluctuate (expected volatility) during a period. The Company uses the historical
      volatility since its expected volatility because the current business strategy,
      which is not expected to change materially, is fundamentally consistent with
      past strategy. The volatility has averaged at 276%.





Risk-Free
      Interest Rate - This is the U.S. Treasury rate for the week of each stock option
      grant during the quarter having a term that most closely resembles the expected
      life of the stock option.





Expected
      Life of the Stock Option Term - This is the period of time that the stock
      options granted are expected to remain unexercised. Stock options granted during
      the fiscal year have a maximum term of ten years. The Company estimates the
      expected life of the stock option term using a lattice model with inputs
      regarding estimated exercise behavior that are consistent with actual past
      behavior for similar stock options.





Forfeiture
      Rate - This is the estimated percentage of the stock options granted and
      expected to be forfeited or canceled on an annual basis before becoming fully
      vested. The Company estimates the forfeiture rate based on past turnover data
      ranging anywhere from one to three years with further consideration given to
      the
      class of employees to whom the options were granted.





In
      February 2006, the Board of Directors of the Company adopted 2006 Stock
      Incentive Plan (the “2006 Plan”). Under this Plan, employees and directors of
      the Company and affiliated company may receive options to purchase common stock.
      A maximum of 4,000,000 shares have been authorized to be granted under the
      2006
      Plan.





In
      May
      2006, the Plan granted 3,600,000 stock options for common stock having a $0.01
      nominal par value each and exercise price of $0.50 to $1.36. In October 2006,
      3,350,000 stock options were exercised, 250,000 options were canceled and no
      option is outstanding as of December 31, 2006.




The
      following table summarizes the stock option activity during the years ended
      December 31:




**Shares**
            
            **Weighted**
              **average****price**Outstanding,
                beginning of year
            
            
            --
            
            
            --Granted
            
            
            3,600,000
            
            $
            0.57Exercised
            
            
            (3,350,000
            )
            $
            0.57Cancelled
            
            
            (250,000
            )
            
            --Outstanding,
                end of year
            
            
            --




45




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  The
          Company issued 300,000 stock options to a non-employee during the year
          ended
          December 31, 2006. These stock options had a vesting period of 12 months.
          The
          fair value of these stock options was recorded as deferred compensation
          and was
          amortized over the performance period. Under variable plan accounting,
          the value
          of the unvested stock options was re-measured and recognized in operations
          at
          each period reporting date until fully vested.





For
      disclosure requirements set forth above under Statement 123, during the year
      ended December 31, 2006, the Company recognized about $78,500 of additional
      stock-based compensation for options vested.








**Stock
      Options of the Korean Subsidiary**




The
      following weighted-average assumptions were used in the valuation model for
      the
      stock option of the subsidiary:





**Years
                ended December 31,****2006**
            
            **2005**Dividend
                yield
            
            
            0.0
            %
            
            0.00
            %Expected
                volatility
            
            
            80
            %
            
            80
            %Risk-free
                interest rate
            
            
            4.3
            %
            
            7.7
            %Expected
                life of the option term (in years)
            
            
            3
            
            
            3




In
      1999
      the Board of Directors of the Korea subsidiary adopted an option plan to allow
      employees to purchase common stock of the Company.




In
      October 1999, the share option plan granted 928,350 options for the common
      stock
      having a $0.0869 nominal par value each and an exercise price of $0.12. In
      2000,
      236,240 options were cancelled. In 2005, the balance of the 692,110 options
      was
      exercised.




In
      December 1999, 659,169 options were granted having a $0.0869 nominal par value
      each and an exercise price of $0.26. In 2005, the balance of the 659,169 options
      was exercised.




In
      October 2000, 971,999 options were granted having a $0.0869 nominal par value
      each and an exercise price of $1.93. 5,087, 162,848, 40,712, 244,272 options
      were cancelled in 2000, 2001, 2002 and 2003, respectively. As of December 31,
      2006, 519,080 options are still outstanding.




In
      May
      2001, 71,246 options were granted having a $0.0869 nominal par value each and
      an
      exercise price of $1.93. In 2002, 20,356 options were cancelled. As of December
      31, 2006, 50,890 options are still outstanding.




In
      March
      2002, 1,000,000 options were granted having a $0.0869 nominal par value each
      and
      exercise price of $1.96. 330,000, 110,000, 100,000 options were cancelled in
      2002, 2003, and 2005, respectively. In addition, 31,190 options were granted
      in
      2005. There was also a change in the exercise price to $1.84. As of December
      31,
      2006, 491,190 options are still outstanding.




In
      September 2002, 220,000 options were granted having a $0.0869 nominal par value
      each and an exercise price of $1.96. During 2005, 14,916 options were granted.
      In addition, the exercise price of the options was reduced to
      $1.84.




In
      March
      2003, 350,000 options were granted having a $0.0869 nominal par value each
      and
      an exercise price of $1.96. In 2003 and 2004, 180,000 and 20,000 stock options
      were cancelled respectively. During 2005, 10,170 options were granted and the
      exercise price was reduced to $1.84. As of December 31, 2006, 160,170 stock
      options are still outstanding.





46




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005


The
      options vest gradually over a period of 2 to 3 years from the date of grant.
      The
      term of each option does not exceed 7 years from the date of grant. 285,806
      and
      651,360 options have vested in 2004 and 2005 respectively. However, as the
      exercise price of the options was substantially higher than the fair market
      value, the options have no value and no benefits have been recorded since
      inception of the 2000 plan.





The
      stock
      options have not been included in the calculation of the diluted earnings per
      share as their inclusion would be anti-dilutive.




The
      following table summarizes the stock option activity during the years ended
      December 31:




**2006**
            
            **2005****Shares**
            
            **Weighted-Average
                Excise Price**
            
            **Shares**
            
            **Weighted-Average
                Excise Price**Outstanding,
                beginning of period
            
            
            1,456,246
            
            $
            1.88
            
            
            2,851,249
            
            $
            1.12Granted
            
            
            --
            
            
            --
            
            
            56,276
            
            
            1.84Exercised
            
            
            --
            
            
            --
            
            
            (1,351,279
            )
            
            1.05Cancelled
            
            
            --
            
            
            --
            
            
            (100,000
            )
            
            1.88Outstanding,
                end of period
            
            
            1,456,246
            
            $
            1.88
            
            
            1,456,246
            
            $
            1.88Weighted
                average remaining contractual life of common stock options
            
            
            4
                years
            
            
            
            
            
            5
                years




**Note
      14 - Income Taxes**




The
      Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
      Income Taxes". This Standard prescribes the use of the liability method whereby
      deferred tax asset and liability account balances are determined based on
      differences between financial reporting and tax bases of assets and liabilities
      and are measured using the enacted tax rates. The effects of future changes
      in
      tax laws or rates are not anticipated. Corporate income tax rates applicable
      to
      the Company in 2006 and 2005 were 16.5% of the first 100 million Korean Won
      ($84,000) of taxable income and 29.7% on the excess. For the United States
      operation, the corporate tax rate is approximately 34%. Tax losses from the
      Korean subsidiary can be carried forward for five years. The U.S. tax losses
      can
      be carried forward for fifteen years. The company has accumulated approximately
      $18,815,000 of taxable losses, which can be used to offset future taxable
      income. The utilization of the losses expires in years 2006 through
      2010.




Under
      SFAS No. 109 income taxes are recognized for the following: a) amount of tax
      payable for the current year, and b) deferred tax liabilities and assets for
      future tax consequences of events that have been recognized differently in
      the
      financial statements than for tax purposes.




The
      Company has deferred income tax assets arising from research and development
      expenses. For accounting purposes, these amounts are expenses when incurred.
      Under Korean tax laws, these amounts are deferred and amortized on a
      straight-line basis over 5 years.








47




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  The
          Company has deferred income tax assets as follows:





**2006**
            
            **2005**Deferred
                income tax assets:Research
                and development expenses amortizedover
                5 years for tax purposes
            
            $
            422,410
            
            $
            207,040Other
                timing differences
            
            
            2,876
            
            
            10,397Net
                operating loss carryforwards
            
            
            2,919,449
            
            
            2,453,3453,344,735
            
            
            2,670,782Valuation
                allowance fordeferred
                income tax assets
            
            
            (3,344,735
            )
            
            (2,670,782
            )$
            --
            
            $
            --




The
      Company provided a valuation allowance equal to the deferred income tax assets
      because it is not presently more likely than not that they will be
      realized.





**Note
      15 - Business Segment Information**




Sales
                and cost of goods sold of the Company’s segments for the years endedDecember
                31, 2006and 2005were as follows:





2006
            
            2005Sales:Manufacturing
            
            $
            354,810
            
            $
            419,837Merchandise
            
            
            314,519
            
            
            466,601$
            669,329
            
            $
            886,438Cost
                of Sales:Manufacturing
            
            $
            225,761
            
            $
            366,799Merchandise
            
            
            234,199
            
            
            369,670$
            459,960
            
            $
            736,469




**Note
      16 - Major Customers**




In
      2006,
      the Company had two major customers which accounted for 49% of the total
      revenue, of which one single customer accounted for 41%. In 2005, sales to
      two
      of the major customers accounted for 40% of the total revenue.








48




**EUGENE
        SCIENCE, INC.** **AND SUBSIDIARIES**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006 and 2005
  
  **Note
          17 - Related Party Transactions**





Significant
                transactions with companies related or affiliates by common control
                for
                the years ended and as ofDecember
                31, 2006and 2005are summarized as follows:





Sales
            
            Net
                rental/
              Interest
                income
            
            Purchases
            
            Accounts
                Receivable
            
            Prepaid
              Assets
            
            Accounts
              Payable
            
            Rental
              DepositCompany
                related by common control2006
            
            $
            48,297
            
            $
            337,186
            
            $
            244,048
            
            $
            71,301
            
            $
            61,291
            
            $
            250,370
            
            $
            --2005
            
            $
            119,919
            
            $
            533,935
            
            $
            370,616
            
            $
            --
            
            $
            54,271
            
            $
            279,706
            
            $
            98,900Companies
                affiliated by common control2006
            
            $
            198
            
            $
            1,415
            
            $
            --
            
            $
            1,597
            
            $
            --
            
            $
            --
            
            $
            --2005
            
            $
            31,215
            
            $
            1,759
            
            $
            79,508
            
            $
            2,758
            
            $
            --
            
            $
            120,734
            
            $
            --




These
      transactions were in the normal course of business and recorded at an exchange
      value established and agreed upon by the above mentioned parties,
      whic h
      approximates fair market value.








49


**Exhibit
      Index**




**Exhibit****Number**
            
            **Description**2.1
            
            Exchange
                Agreement by and among Ezcomm Enterprises, Inc., Eugene Science (Korea)
                and certain stockholders of Eugene Science (Korea), dated September
                1,
                2005 (incorporated by reference to Exhibit 10.1 to our Current Report
                on
                Form 8-K filed with the Commission on September 7,
                2005).2.2
            
            Amendment
                No. 1 to Exchange Agreement (incorporated by reference to Exhibit
                2.2 to
                our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).3.1
            
            Certificate
                of Incorporation (incorporated by reference to Exhibit 3.11 to our
                Registration Statement on Form 10-SB filed with the Commission on
                February
                20, 2004).3.2
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit 3.12 to our Registration Statement on Form 10-SB filed with
                the
                Commission on February 20, 2004).3.3
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit 3.3 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).3.4
            
            Certificate
                of Amendment to Certificate of Incorporation (incorporated by reference
                to
                Exhibit A to our Information Statement on Schedule 14C filed with
                the
                Commission on December 1, 2005).3.5
            
            Bylaws
                (incorporated by reference to Exhibit 3.2 to our Registration Statement
                on
                Form 10-SB filed with the Commission with the Commission on February
                20,
                2004).4.1
            
            Warrant
                to Purchase Common Stock of Eugene Science, Inc., dated September
                30,
                2005, issued to WestPark Capital, Inc. (incorporated by reference
                to
                Exhibit 4.1 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.1
            
            Agreement
                of Property Sales Contract between Eugene Science (Korea) and Wando
                Seafood Distributions, Co., Ltd., dated January 16, 2004 (incorporated
                by
                reference to Exhibit 10.1 to our Current Report on Form 8-K filed
                with the
                Commission on October 6, 2005).10.2
            
            Memorandum
                of Understanding between Korea Ginseng Corp. and Eugene Science (Korea),
                dated March 12, 2004 (incorporated by reference to Exhibit 10.2 to
                our
                Current Report on Form 8-K filed with the Commission on October 6,
                2005).10.3
            
            Agreement
                of Product Supply between Amway Korea, Ltd. and Eugene Science (Korea),
                dated November 11, 2004 (incorporated by reference to Exhibit 10.3
                to our
                Current Report on Form 8-K filed with the Commission on October 6,
                2005).10.4
            
            Strategic
                Alliance Agreement between Archer Daniels Midland Company and Eugene
                Science (Korea), dated April 8, 2004 (incorporated by reference to
                Exhibit
                10.4 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.5
            
            Distribution
                Agreement by and between Toong Yeuan Enterprise Co., Ltd. and Eugene
                Science (Korea), dated February 18, 2003 (incorporated by reference
                to
                Exhibit 10.5 to our Current Report on Form 8-K filed with the Commission
                on October 6, 2005).10.6
            
            Distribution
                Agreement by and between Hokuyo Koeki Co., Ltd. and Eugene Science
                (Korea), dated May 21, 2002 (incorporated by reference to Exhibit
                10.6 to
                our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.7
            
            License
                Agreement between Nutra Nano Tech, Inc. and Eugene Science (Korea),
                dated
                May 20, 2005 (incorporated by reference to Exhibit 10.7 to our Current
                Report on Form 8-K filed with the Commission on October 6,
                2005).10.8
            
            Marketing
                Agreement between Hokuyo Koeki Co., Ltd. and Eugene Science (Korea),
                dated
                March 8, 2001 (incorporated by reference to Exhibit 10.8 to our Current
                Report on Form 8-K filed with the Commission on October 6,
                2005).




50




10.9
            
            Material
                Transfer Agreement between Archer Daniels Midland Company and Eugene
                Science (Korea), dated November 19, 2001 (incorporated by reference
                to
                Exhibit 10.9 to our Current Report on Form 8-K filed with the Commission
                on October 6, 2005).10.10
            
            Investment
                Agreement by and between Hokuyo Koeki Co., Ltd. and Eugene Science
                (Korea), dated March 21, 2002 (incorporated by reference to Exhibit
                10.10
                to our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.11
            
            Share
                Subscription Agreement by and between Telos, LLC and Eugene Science
                (Korea), dated January 19, 2005 (incorporated by reference to Exhibit
                10.11 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.12
            
            Amendment
                to Subscription Agreement by and between Telos, LLC and Eugene Science
                (Korea), dated February 2, 2005 (incorporated by reference to Exhibit
                10.12 to our Current Report on Form 8-K filed with the Commission
                on
                October 6, 2005).10.13
            
            Lease
                Agreement by and between Bestian Partners Co., Ltd. and Eugene Science
                (Korea), dated June 24, 2005 (incorporated by reference to Exhibit
                10.14
                to our Current Report on Form 8-K filed with the Commission on October
                6,
                2005).10.14
            
            Employment
                Agreement between Eugene Science (Korea) and Jae Hong Yoo, dated
                July 28,
                2002 (incorporated by reference to Exhibit 10.15 to our Current Report
                on
                Form 8-K filed with the Commission on October 6,
                2005).*10.15
            
            Employment
                Agreement between Eugene Science (Korea) and Se Cheon Ahn, dated
                January
                4, 2003 (incorporated by reference to Exhibit 10.16 to our Current
                Report
                on Form 8-K filed with the Commission on October 6,
                2005).*10.16
            
            Employment
                Agreement between Eugene Science (Korea) and Tae Hwan Lee, dated
                January
                7, 2001 (incorporated by reference to Exhibit 10.17 to our Current
                Report
                on Form 8-K filed with the Commission on October 6,
                2005).*10.17
            
            Distribution
                Agreement between Eugene Science (Korea) and Ceragem International,
                Inc.,
                dated September 27, 2006.**10.18
            
            Commissioned
                Production and Resource Supply Agreement between Eugene Sciene (Korea)
                and
                RexGene Biotech Co., Ltd., dated January 3, 2007.**14.1
            
            Code
                of Conduct and Ethics (incorporated by reference to Exhibit 14.1
                to our
                Annual Report on Form 10-KSB filed with the Commission on April 17,
                2006).16.1
            
            Letter
                dated April 23, 2007 from SF Partnership LLP to the Securities and
                Exchange Commission (incorporated by reference to Exhibit 16.1 to
                our
                Current Report on Form 8-K filed with the Commission on April 23,
                2007).21.1
            
            List
                of Subsidiaries.**24.1
            
            Power
                of Attorney.**31.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under
                the Securities Exchange Act of 1934.31.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
                under
                the Securities Exchange Act of 1934.32.1
            
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under
                the Securities Exchange Act of 1934 and 18 U.S.C. Section
                1350.32.2
            
            Certification
                of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b)
                under
                the Securities Exchange Act of 1934 and 18 U.S.C. Section
                1350.





*
            These
                exhibits are identified as management contracts or compensatory plans
                or
                arrangements pursuant to Item 13 of Form
                10-KSB.


**
            Previously
                filed


51