U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB








x
            Quarterly
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
                for the quarterly period ended December 31,
                2006





Transition
      report under Section 13 or 15(d) of the Exchange Act for the Transition Period
      from ________ to ________.





Commission
      file number 0-27545





QUICK-MED
      TECHNOLOGIES, INC.


(Exact
      Name of Small Business Issuer as Specified in Its Charter)







Nevada
            
            65-0797243(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)





3427
      SW 42 nd Way,
      Gainesville, Florida 32608


(Address
      of Principal Executive offices)





(352)
      379-0611


(Issuer’s
      Telephone Number, Including Area Code)





(Former
      Name, Former Address and Former Fiscal Year,


if
      Changed Since Last Report)





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







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





Applicable
      Only to Issuers Involved in Bankruptcy


Proceedings
      During the Preceding Five Years





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
      securities under a plan confirmed by court. Yes_______________  No_______________







Number
      of
      shares of common stock outstanding as of February 5, 2007:
      30,395,412








**QUIICK-MED
                TECHNOLOGIES, INC.**
              
              INDEX
                TO FORM 10-QSBPART
                I
            **FINANCIAL
                INFORMATION**Item
                1. Financial StatementsCondensed
                Balance Sheet as of December 31, 2006
                (unaudited)
            1Condensed
                Statements of Operations for the****three
                and six months ended December 31, 2006 and 2005
                (unaudited)
            2Condensed
                Statement of Changes in Stockholders’ Deficit for the three
                months****ended
                December 31, 2006 (unaudited)
            3Condensed
                Statements of Cash Flows for the six months
                ended December 31, 2006 and 2005 (unaudited)
            4-5Notes
                to Condensed Financial Statements
            6-11Item
                2. Management’s Discussion and Analysis of Financial
                Condition and Results of Operations
            12Item
                3. Controls and Procedures
            19PART
                II
            **OTHER
                INFORMATION**Item
                1. Legal Proceedings
            20Item
                2. Unregistered Sales of Equity Securities and Use
                of
                Proceeds
            20Item
                3. Defaults Upon Senior Securities
            25Item
                4. Submission of Matters to a Vote of Security
                Holders
            25Item
                5. Other Information
            25Item
                6. Exhibits
            25SIGNATURES
            26











**PART I.**
            **FINANCIAL
                INFORMATION**




**ITEM
                1.**
            **FINANCIAL
                STATEMENTS**


**QUICK-MED
        TECHNOLOGIES, INC.**
 **CONDENSED
        BALANCE SHEET**
 **AS
        OF DECEMBER 31, 2006**
 **(UNAUDITED)**






**ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              120,108Accounts
                  receivable
              
              
              339,302Total
                  current assets
              
              
              459,410Property
                  and equipment, net
              
              
              15,182Other
                  assets:Prepaid
                  expenses
              
              
              4,995Intangible
                  asset, net
              
              
              359,016Total
                  other assets
              
              
              364,011Total
                  assets
              
              $
              838,603**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  liabilities:Accounts
                  payable
              
              $
              521,183Accrued
                  expenses
              
              
              7,705Total
                  current liabilities
              
              
              528,888License
                  payable
              
              
              160,000Long-term
                  liability - note payable - director
              
              
              195,452Long-term
                  liability - convertible note payable - director
              
              
              1,268,625Total
                  liabilities
              
              
              2,152,965Commitments
                  and contingenciesStockholders'
                  deficit:Common
                  stock, $0.0001 par value; 100,000,000authorized
                  shares; 30,395,412 shares issuedand
                  outstanding
              
              
              3,040Additional
                  paid-in capital
              
              
              11,652,110Outstanding
                  stock options
              
              
              1,709,652Accumulated
                  deficit
              
              
              (14,679,164
              )Total
                  stockholders' deficit
              
              
              (1,314,362
              )Total
                  liabilities and stockholders' deficit
              
              $
              838,603


See
              accompanying notes to condensed financial statements.
 -
              1
              -
 
 Index





**QUICK-MED
      TECHNOLOGIES, INC.**


**CONDENSED
      STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS**


**ENDED
      DECEMBER 31, 2006 AND 2005**


**(UNAUDITED)**






**Three
                  Months Ended**
              
              
              **Six
                  Months Ended****December
                  31,**
              
              
              **December
                  31,****2006**
              
              
              **2005**
              
              
              **2006**
              
              
              **2005**Revenues
              
              $
              841,476
              
              $
              274,708
              
              $
              1,307,903
              
              $
              632,557Expenses:Cost
                  of revenues
              
              
              169,183
              
              
              42,108
              
              
              262,495
              
              
              113,178Research
                  and development
              
              
              410,051
              
              
              259,777
              
              
              703,351
              
              
              606,006General
                  and administrative expenses
              
              
              496,263
              
              
              242,487
              
              
              732,664
              
              
              629,438Licensing
                  and patent expenses
              
              
              56,698
              
              
              58,810
              
              
              191,823
              
              
              120,594Depreciation
                  and amortization
              
              
              15,666
              
              
              12,744
              
              
              29,277
              
              
              24,510Total
                  expenses
              
              
              1,147,861
              
              
              615,926
              
              
              1,919,610
              
              
              1,493,726Loss
                  from operations
              
              
              (306,385
              )
              
              (341,218
              )
              
              (611,707
              )
              
              (861,169
              )Other
                  income (expense):Interest
                  income
              
              
              465
              
              
              4,739
              
              
              549
              
              
              7,594Interest
                  expense
              
              
              (22,254
              )
              
              (19,186
              )
              
              (44,501
              )
              
              (38,372
              )Other
                  income
              
              
              -
              
              
              -
              
              
              166,500
              
              
              -Loss
                  before income taxes
              
              
              (328,174
              )
              
              (355,665
              )
              
              (489,159
              )
              
              (891,947
              )Provision
                  (benefit) for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              $
              (328,174
              )
              $
              (355,665
              )
              $
              (489,159
              )
              $
              (891,947
              )Net
                  loss per share (basic and diluted)
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.02
              )
              $
              (0.03
              )Weighted
                  average commonshares
                  outstanding (basic and diluted)
              
              
              30,337,012
              
              
              30,096,008
              
              
              30,273,958
              
              
              29,975,635








See
              accompanying notes to condensed financial statements.
 -
              2
              -
 
 Index


**QUICK-MED
        TECHNOLOGIES, INC.**
 **CONDENSED
        STATEMENT OF CHANGES IN STOCKHOLDERS’
DEFICIT**
 **FOR
        THE THREE MONTHS ENDED DECEMBER 31, 2006**
 **(UNAUDITED)**




**Additional****Common
                  Stock**
              
              
              **Paid-In**
              
              
              **Accumulated**
              
              
              **Outstanding****Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Deficit**
              
              
              **Stock
                  Options**
              
              
              **Total**Balance,
                  September 30, 2006
              
              
              30,264,901
              
              
              3,026
              
              $
              11,527,297
              
              $
              (14,350,990
              )
              $
              1,461,940
              
              $
              (1,358,727
              )Stock
                  options granted for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              247,712
              
              
              247,712Stock
                  issued for services
              
              
              130,511
              
              
              14
              
              
              124,813
              
              
              -
              
              
              
              
              
              124,827Net
                  loss, December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              (328,174
              )
              
              -
              
              
              (328,174
              )Balance,
                  December 31, 2006
              
              
              30,395,412
              
              
              3,040
              
              $
              11,652,110
              
              $
              (14,679,164
              )
              $
              1,709,652
              
              $
              (1,314,362
              )

















See
              accompanying notes to condensed financial statements.
 -
              3
              -
 
 Index


**QUICK-MED
        TECHNOLOGIES, INC.**
 **CONDENSED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE SIX MONTHS ENDED DECEMBER 31, 2006 AND 2005**
 **(UNAUDITED)**
  **2006**
                
                
                **2005**Cash
                    flows from operating activities:Net
                    loss
                
                $
                (489,159
                )
                $
                (891,947
                )Adjustments
                    to reconcile net loss to netcash
                    provided by (used in) operating activities:Depreciation
                    and amortization
                
                
                29,277
                
                
                24,510Stock
                    granted for services
                
                
                136,308
                
                
                119,514Stock-based
                    compensation
                
                
                314,026
                
                
                336,182(Increase)
                    decrease in:Accounts
                    receivable
                
                
                (294,301
                )
                
                (98,659
                )Prepaid
                    expenses
                
                
                (15
                )
                
                4,204Increase
                    (decrease) in:Accounts
                    payable
                
                
                302,236
                
                
                (9,097
                )Accrued
                    interest
                
                
                (18,002
                )
                
                (18,560
                )Other
                    current liabilities
                
                
                -
                
                
                110,833Net
                    cash used in operating activities
                
                
                (19,630
                )
                
                (423,020
                )Cash
                    flows from investing activities:Purchase
                    of fixed assets
                
                
                (3,102
                )
                
                (5,329
                )Patents
                
                
                (108,804
                )
                
                (2,512
                )Net
                    cash used in investing activities
                
                
                (111,906
                )
                
                (7,841
                )Cash
                    flows from financing activities:Issuance
                    of common stock for cash, net
                
                
                -
                
                
                33,553Proceeds
                    from stock option exercise
                
                
                5,000
                
                
                29,750Proceeds
                    from note payable - officer
                
                
                7,000
                
                
                -Repayment
                    of note payable - officer
                
                
                (7,000
                )
                
                -Increase
                    in notes payable - director
                
                
                62,502
                
                
                -Net
                    cash provided by financing activities
                
                
                67,502
                
                
                63,303Net
                    decrease in cash and cash equivalents
                
                
                (64,034
                )
                
                (367,558
                )Cash
                    and cash equivalents at beginning of period
                
                
                184,142
                
                
                844,309Cash
                    and cash equivalents at end of period
                
                $
                120,108
                
                $
                476,751

















See
              accompanying notes to condensed financial statements.
 -
              4
              -
 
 Index





**QUICK-MED
        TECHNOLOGIES, INC.**
 **CONDENSED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE SIX MONTHS ENDED DECEMBER 31, 2006 AND 2005
        (CONTINUED)**
 **(UNAUDITED)**
  **2006**
                
                
                **2005****Supplementary
                    Information:**Cash
                    paid for:Interest
                
                $
                -
                
                $
                56,932Income
                    taxes
                
                $
                -
                
                $
                -Non-cash
                    disclosures of investing andfinancing
                    activities:Stock
                    options granted for services
                
                $
                314,026
                
                $
                215,222






















See
              accompanying notes to condensed financial statements.
 -
              5
              -
 
 Index
 **QUICK-MED
                TECHNOLOGIES, INC.**
 **NOTES
                TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**





***NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES***





*Basis
      of Presentation*





The
      accompanying unaudited condensed financial statements of Quick-Med Technologies,
      Inc. (the “Company”) have been prepared in accordance with generally accepted
      accounting principles for interim financial information and with the
      instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include
      all the information and footnotes required by generally accepted accounting
      principles for complete financial statements. In the opinion of the management
      of the Company, the accompanying unaudited financial statements contain all
      the
      adjustments (which are of a normal recurring nature) necessary for a fair
      presentation. Operating results for the six months ended December 31, 2006
      are
      not necessarily indicative of the results that may be expected for the year
      ending June 30, 2007. For further information, refer to the financial statements
      and the footnotes thereto contained in the Company’s Annual Report on Form
      10-KSB for the year ended June 30, 2006, as filed with the Securities and
      Exchange Commission.





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





Cash
      and Cash Equivalents





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





Use
      of
      Estimates





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





*Intangible
      Assets*





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





*Property
      and Equipment*





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





*Accounts
      Receivable and Allowance for Doubtful Accounts*





Accounts
      receivable as of December 31, 2006 represents amounts due from Engelhard
      Corporation, which was subsequently acquired by BASF Catalysts, LLC, a
      wholly-owned subsidiary of BASF (“BASF”), and is reported in the balance sheet
      reduced by an allowance for doubtful accounts for estimated losses resulting
      from receivables not considered to be collectible.








-
              6
              -
 
 Index
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**





***NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)***







Research
      and Development Costs





Research
      and development costs are expensed as incurred.





Earnings
      Per Share





Basic
      net
      loss per common share are computed by dividing net loss applicable to common
      shareholders by the weighted-average number of common shares outstanding during
      the period. Diluted net loss per common share is determined using the
      weighted-average number of common shares outstanding during the period, adjusted
      for the dilutive effect of common stock equivalents, consisting of shares that
      might be issued upon exercise of common stock options and warrants. The
      weighted-average numbers of common shares outstanding exclude common stock
      equivalents of 7,578,196 and 6,204,703 for the periods ended December 31, 2006
      and 2005, respectively, because their inclusions would be
      anti-dilutive.





Revenue
      Recognition




The
      Company recognizes the revenue of its royalties from the sale of products by
      a
      cosmetic and personal care division of Engelhard Corporation, subsequently
      acquired by BASF Catalysts, LLC, a wholly-owned subsidiary of BASF, under the
      master agreement for product development, manufacturing and distribution (the
      “Master Agreement”). The Company also recognizes the revenue from the
      non-refundable exclusivity license fee derived from Engelhard Corporation under
      the Master Agreement on a pro rata basis over the term of the related exclusive
      license agreement. Revenue from the research agreement is recognized on a pro
      rata basis over the term of the agreement. Revenue
      from the small business innovation research program is recognized based on
      the
      research work performed in accordance with the program
      requirements.





Concentration
      of credit risk of financial instruments





Financial
      instruments that potentially subject the Company to credit risk consist of
      cash
      equivalents and accounts receivable. As of December 31, 2006, the Company’s cash
      levels exceeded the federally insured limit by $78,677, but were maintained
      with a high quality institution and management is regularly monitoring its
      cash
      position. As of December 31, 2006, all of the Company’s accounts receivable is
      due from BASF. The credit risk of the receivable is considered limited given
      the
      customer credit rating and the receivable balance was collected subsequent
      to
      December 31, 2006.





Reclassifications





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





Recently
      Issued Accounting Pronouncements





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





In
      September 2006, the SEC issued Staff Accounting Bulletin (‘SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 requires that
      companies utilize a “dual approach” to assessing the quantitative effects of
      financial statement misstatements.





-
              7
              -
 
 Index
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**








***NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)***





The
      dual
      approach includes both an income statement focused and balance sheet focused
      assessment. The Company is assessing the impact of the adoption of SAB No.
      108,
      but does not expect that it will have a significant impact on its financial
      position or results of operations.





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








***NOTE
      2 - STOCK OPTIONS AND WARRANTS***





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





The
      Company adopted Financial Accounting Standards Board ("FASB") standard SFAS
      123R, "Share-Based Payment," ("SFAS 123R") on July 1, 2005, and adopted the
      modified prospective approach as its implementation method to its outstanding
      and unvested share-based payment awards at that time. The fair value of stock
      options was determined using the Black-Scholes option-pricing model. The fair
      value of the restricted stock awards was based on the closing price of the
      Company's Common Stock on the date of grant. For the six months ended December
      31, 2006, the Company recorded costs related to this pronouncement, which
      include the effects of any grants made during the period, of approximately
      $186,329 or $0.01 per share on a basic and diluted basis.





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


options
      was $0.72 per share based on the Black-Scholes option-pricing model. The options
      and warrants expire five years from the date of grant.





The
      weighted average grant date fair value of options granted during the six months
      ended December 31, 2006 were estimated on the date of grant using the
      Black-Scholes option-pricing model with the assumptions noted in the following
      table. Expected volatilities are based on historical volatility of common stock,
      and other factors. The expected term of the options represents the period of
      time that options granted are expected to be outstanding and is derived from
      historical terms and other factors.





Assumptions
      utilized to value options are as follows:


Risk-free interest rate
              4.75% to 6%Expected life (years)
              5Expected volatility
              50% to 138%Expected dividends
              None













-
              8
              -
 
 Index
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**





***NOTE
      2 - STOCK OPTIONS AND WARRANTS (CONTINUED)***





During
      the quarter ended December 31, 2006, the Company issued 790,770 stock options
      to
      the board members, the management, the employees, and the consultants for their
      services. These options have an exercise price of $1.05 per share. The stock
      options were vested one-third immediately, one-third will be vested on December
      20, 2007 and the remaining one-third will be vested on December 20, 2008,
      assuming the person receiving the equity awards is employed by the Company
      at
      the time of vesting. The weighted average grant date fair value of options
      was
      $0.62 per share based on the Black-Scholes option-pricing model. The options
      expire five years from the date of grant.




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





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





A
      summary
      of options as at December 31, 2006 and 2005 is shown below:





**December
                  31, 2006**
              
              
              **December
                  31, 2005****Number**
              
              
              **Weighted-Average**
              
              
              **Number**
              
              
              **Weighted-Average****of
                  Shares**
              
              
              **Exercise
                  Price**
              
              
              **of
                  Shares**
              
              
              **Exercise
                  Price**Outstanding
                  at beginning of period
              
              
              2,779,834
              
              $
              1.33
              
              
              3,069,834
              
              $
              1.73Granted
              
              
              790,770
              
              
              1.05
              
              
              710,000
              
              
              0.80Exercised
              
              
              (33,334
              )
              
              0.15
              
              
              (175,000
              )
              
              0.17Expired
                  or forfeited
              
              
              (15,000
              )
              
              0.80
              
              
              (825,000
              )
              
              2.61Outstanding
                  at end of period
              
              
              3,522,270
              
              $
              1.28
              
              
              2,779,834
              
              $
              1.33Exercisable
                  at end of period
              
              
              2,774,509
              
              
              
              
              
              2,306,501Available
                  for issuance at end of period
              
              
              444,396
              
              
              
              
              
              1,045,166




On
      September 5, 2005 the Company issued common stock warrants to consultants in
      recognition of their performance. These
      warrants were accounted for in accordance with the provisions of SFAS
      123R. For the
      September 5, 2005 options, the vesting provisions were vested one third
      immediately on September 9, 2005, one third was vested on July 1, 2006, and
      one
      third to be vested on July 1, 2007. The warrants were valued on the date of
      grant using the Black-Scholes option-pricing model.





Assumptions
      utilized to value warrants are as follows:




Risk-free
                interest rate
            6.00%Expected life (years)
            5Expected volatility
            75% to 138%Expected dividends
            None















-
              9
              -
 
 Index
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**








***NOTE
      2 - STOCK OPTIONS AND WARRANTS (CONTINUED)***





The
      following is a summary of warrants granted, exercised, canceled and outstanding
      involving the grants as shown below:





**December
                  31, 2006**
              
              **December
                  31, 2005****Number**
              
              **Weighted-Average**
              
              **Number**
              
              **Weighted-Average****of
                  Shares**
              
              **Exercise
                  Price**
              
              **of
                  Shares**
              
              **Exercise
                  Price**Outstanding
                  at beginning of period
              
              
              913,968
              
              $
              0.37
              
              
              718,048
              
              
              0.24Granted
              
              
              16,621
              
              
              1.08
              
              
              178,346
              
              
              0.72Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -Expired
                  or forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding
                  at end of period
              
              
              930,589
              
              $
              0.37
              
              
              896,394
              
              $
              0.35Exercisable
                  at end of period
              
              
              901,422
              
              
              
              
              
              559,715





During
      the period ended December 31, 2006, the Company issued 16,621 common stock
      warrants to consultants as part of the payment for their services. These
      warrants were accounted for in accordance with the provisions of SFAS 123R.
      These warrants are vested immediately with fair market values ranging from
      $0.69
      per share to $1.25 per share and the total cost of approximately
      $14,000.








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





In
      September 2005, the Company issued 33,334 shares of restricted common stock
      for
      an aggregate exercise price of approximately $5,000 or $0.15 per share resulting
      from the exercise of a stock option.





In
      July,
      August and September 2006, the Company issued 3,773 shares of restricted common
      stock for payment of services provided by a consultant.





In
      September 2006 the Company issued 6,579 shares of restricted common stock for
      payment of services provided by a consultant for services rendered for the
      quarter ended September 30, 2006.





In
      October, November and December 2006, the Company issued 4,413 shares of
      restricted common stock for payment of services provided by a
      consultant.





In
      November 2006, the Company issued 45,000 shares of restricted common stock
      to
      the Vice President of Research and Development and Commercialization as part
      of
      his compensation package.





In
      December 2006, the Company issued 75,000 shares of restricted common stock
      as
      further consideration to a licensor for granting the Company certain licensing
      rights and license to other intellectual properties.





In
      December 2006, the Company issued 6,098 shares of restricted common stock for
      payment of services provided by a consultant for services rendered for the
      quarter ended December 31, 2006.
















-
              10
              -
 
 Index
 **QUICK-MED
              TECHNOLOGIES, INC.**
 **NOTES
              TO CONDENSED FINANCIAL STATEMENTS**
 **(UNAUDITED)**








***NOTE
      4 - RELATED PARTY TRANSACTIONS***





In
      September 2003, the Company negotiated a successor agreement with its Chairman
      regarding the line of credit, which expired July 1, 2003 totaling $1,300,200,
      excluding interest. The line of credit of $750,000 and the short term borrowing
      of $550,200 were consolidated into a single convertible note for up to
      $1,500,000 excluding accrued interest, at an interest rate of 6% and due July
      1,
      2004. The convertible note is secured by the assets and revenues of the Company
      and is senior to all other debt obligations. The note plus accrued interest
      will
      be convertible, in full or in part, at the option of the holder for a term
      of up
      to 5 years beginning at September 1, 2003 at a conversion rate of $0.38 per
      share. The conversion rate was determined as 15% above the average share price
      over the prior 20 trading days ($0.33 per share). The note has an anti-dilution
      provision in the event that the Company sells stock to other investors at less
      than $0.20 per share. In January 2006, the Chairman agreed to extend the
      maturity date of the note until October 1, 2007. In January 2007, the Chairman
      agreed to extend the maturity date of the note until April 1, 2008. On July
      1,
      2006, we paid the accrued interest by issuing a note payable to the Chairman
      for
      the amount of $18,768 at the 8% interest rate per annum with a maturity date
      of
      July 1, 2007, which was extended to April 1, 2008.





The
      Chairman converted $500,000 and $826,087 of the convertible note into 1,315,790
      and 2,173,913 shares of restricted common stock on November 30 and December
      31,
      2004, respectively, in accordance with the terms of the Stock Purchase
      Agreement. These amounts were converted at a conversion price applicable to
      the
      convertible debt of $0.38 per share. At December 31, 2006, the convertible
      note
      outstanding balance was $1,268,625, convertible into 3,338,487 shares of
      restricted common stock.





For
      the
      period ended September 30, 2006, the Company paid the accrued interest on the
      convertible note of $19,186 by issuing a note payable for the interest amount
      to
      the Chairman. The note payable bears an 8% interest rate per annum and a
      maturity date of January 1, 2008.




During
      the period ended September 30, 2006, the Company received a short-term loan
      in
      the amount of $7,000 from an officer of the Company, which was repaid by
      September 30, 2006.





For
      the
      period ended December 31, 2006, the Company paid the accrued interest on the
      convertible note of $19,186 by issuing a note payable for the interest amount
      to
      the Chairman. The note payable bears an 8% interest rate per annum and a
      maturity date of April 1, 2008.








***NOTE
      5 - SUBSEQUENT EVENTS***





On
      February 5, 2007, Quick-Med Technologies, Inc. (the “Company”) and Hanesbrands
      Inc. (“HBI”) entered into a Development and Exclusive Option Agreement (the
“Agreement”) effective as of February 1, 2007. Under the Agreement, the Company
      granted to HBI an exclusive option (the “Option”) for a period of six months
      (“Option Period”) to obtain an exclusive license to the Company’s technology
      relating to certain HBI products (the “License Agreement”). In consideration for
      the Option, HBI will pay the Company $45,000 every three month period during
      the
      Option Period. During the Option Period, HBI will run and complete certain
      studies. Upon the conclusion of these studies, HBI will provide the Company
      with
      notice of the final decision with respect to entering into the License
      Agreement.








-
          11
          -
 Index





**ITEM
                2.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND PLAN OF OPERATION**







The
      following discussion should be read in conjunction with our financial statements
      and related notes appearing elsewhere in this Form 10-QSB and our Annual Report
      on Form 10-KSB for our fiscal year ended June 30, 2006. The terms “Quick-Med”,
      "the Company," "we," "our" or "us" refer to Quick-Med Technologies, Inc., a
      Nevada corporation.  This discussion contains forward-looking statements
      based on our current expectations, assumptions, and estimates. The words or
      phrases "believe," "expect," "may," "anticipates," or similar expressions are
      intended to identify "forward-looking statements." Actual results could differ
      materially from those projected in the forward-looking statements as a result
      of
      a number of risks and uncertainties pertaining to our business, including
      without limitation: (a) because we have a limited operating history and our
      technologies are still evolving, we may not be able to successfully manage
      our
      business or achieve profitability; (b) our technology and product development
      processes, which include regulatory approvals, are lengthy and expensive and
      there is no assurance that will have sufficient resources to complete
      development related to these processes; (c) our history of losses make it
      difficult for you to evaluate our current and future business and prospects
      and
      future financial results; (d) we have negative cash flow from operations and
      an
      accumulated deficit that raises substantial doubt about our ability to continue
      as a going concern; (e) our future business is dependent upon third parties
      to
      market, manufacture, and distribute our technologies and/or products or jointly
      developed products; (f) there is no assurance that our technologies or products
      will be accepted in the marketplace; (g) we do not currently carry product
      liability insurance; and therefore, should we be subject to a product liability
      claim, our financial condition may be adversely affected; (h) our operations
      are
      currently funded by our revenues and our prior debt and equity financings;
      however, there are no assurances that these revenues and financings will be
      sufficient to ensure our future financial performance; (i) we have substantial
      debt obligations due to our Chairman of the Board, who had funded our
      operations, debt obligations that are secured by our assets and revenues and
      are
      senior obligations; and (j) there is no assurance that we will be able to
      attract and retain highly skilled scientific, technical and management
      personnel, who are critical to our success and (k) other risk factors discussed
      in our annual report for the fiscal year ended June 30, 2006 and other periodic
      filings, which may be accessed at http://www.sec.gov.  Statements made
      herein are as of the date of the filing of this Form 10-QSB with the Securities
      and Exchange Commission and should not be relied upon as of any subsequent
      date.
      Unless otherwise required by applicable law, we do not undertake, and we
      specifically disclaim any obligation, to update any forward-looking statements
      to reflect occurrences, developments, unanticipated events or circumstances
      after the date of such statement.




**Overview**





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





We
      specialize in the research and development of biomedical products and devices
      for antimicrobial applications. We conduct research efforts or collaborate
      with
      third parties as necessary to develop products and administer the patent
      process. We do not expect to produce nor directly market its products. Instead,
      we intend to partner with clients for those activities.





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





(1)
            Licenses
                of proprietary technology to industry partners;


(2)
            Research
                and development contracts with government agencies;


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


(4)
            Research
                and development support agreements.





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





-
          12
          -
 Index




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





·
            Healthcare
                and medical;


·
            Apparel;


·
            Cosmetic;
                and


·
            Personal
                care companies.





Recent
      Developments





On
      February 5, 2007, Quick-Med Technologies, Inc. (the “Company”) and Hanesbrands,
      Inc. (“HBI”) entered into a Development and Exclusive Option Agreement (the
“Agreement”) effective as of February 1, 2007. Under the Agreement, the Company
      granted to HBI an exclusive option (the “Option”) for a period of six months
      (“Option Period”) to obtain an exclusive license to the Company’s technology
      relating to certain
      products produced by HBI (the
“License Agreement”). In consideration for the Option, HBI will pay the Company
      $45,000 every three month period during the Option Period. During the Option
      Period, HBI will run and complete certain studies. Upon the conclusion of these
      studies, HBI will provide the Company with notice of the final decision with
      respect to entering into the License Agreement.








Uncertainties
      and Trends





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




·  Acceptance
      of our technologies or future technologies in the marketplace, by prospective
      licensees;


·
            Our
                licensees’ abilities to develop our technologies; and market and
                distribute products incorporating such technologies under a strategic
                partnership agreement;


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


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


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


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


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





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




**Capital
      Expenditures and Requirements**





From
      2000
      to 2006, we have spent approximately $510,000 on the acquisition of patents
      and
      exclusive license agreements. We owe an additional $160,000 to Dr. Richard
      Galardy which is due when certain milestones are met in connection with a
      September 2000 license agreement we have with Dr. Galardy and Dr. Damian
      Grobeiny. This license agreement provides that we compensate Dr. Galardy and
      Dr.
      Grobeny with our common stock and cash for the exclusive license of the
      Ilomastat technology invented by them.





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





**Critical
      Accounting Policies and Estimates**





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






-
          13
          -
 Index





**Results
      of Operations**





***Comparison
      of Six Months Ended December 31, 2006 and 2005***





Revenues. During
      the six months ended December 31, 2006 we had $1,307,903 of revenues, compared
      to $632,557 of revenues for the six months ended December 31, 2005, representing
      a 107% increase in our revenues. Our revenues during the six months ended
      December 31, 2006 consisted of $1,307,903, which represented our royalties
      from
      the product sales by a cosmetic and personal care division of BASF Catalysts,
      LLC, a wholly-owned subsidiary of BASF (“BASF”), in connection with a master
      agreement we have with BASF for product development, manufacturing and
      distribution (the “Master Agreement”). Our revenues during the six months ended
      December 31, 2005 consisted of: (a) $630,057, which represented our royalties
      from the product sales and the license fee for exclusivity by a cosmetic and
      personal care division of BASF Catalysts, LLC; and (b) $2,500 which represented
      a pro rata share of the fees related to a research agreement unrelated to our
      core technologies.





In
      August
      2006, we finalized a certain Letter of Intent (“LOI”) with BASF to amend the
      Master Agreement to grant BASF an exclusive license to develop and market our
      Ilomastat product for the field of over-the-counter anti-aging cosmetics and
      nonexclusive license for the field of over-the-counter acne treatments and
      skin
      moisturizers in the cosmetics market. In consideration for this license, as
      amended, we receive certain minimum royalty payments through the LOI effective
      period of August 1, 2007, while the license agreement, as amended, is being
      finalized.





Operating
      Losses. Operating losses for the six months ended December 31, 2006 decreased by 29%
      or
      $249,462 to ($611,707) for the six months ended December 31, 2006 from
      ($861,169) for the six months ended December 31, 2005. The decrease in operating
      losses was primarily due to an increase in revenues of $675,346 offset by an
      increase in expenses of $425,884 for the six months ended December 31, 2006.
      The
      increase in expenses was primarily due to the following: (a) an increase of
      $97,345 or 16% in research and development expenses; (b) an increase of $103,226
      or 16% in general and administrative expenses; (c) an increase 71,229 of 59%
      in
      licensing and patent expenses; and (d) an increase of $149,317 or 132% in cost
      of revenues for those comparable prior periods, as described in more detail
      below.





Research
      and Development Expense. Research
      and development expense increased by $97,345 or 16% to $703,351 for the six
      months ended December 31, 2006, from $606,006 for the six months ended December
      31, 2005. The increase in research and development expense is primarily
      attributable to an addition of two (2) scientists, increased compensation to
      our
      head of research and development department and research team, increased
      research projects, and increased usage of scientific consulting
      services.





General
      and Administrative Expense .
      General
      and administrative expense increased by $103,226 or 16% to $732,664 for the
      six
      months period ended December 31, 2006, from $629,438 for the six months period
      ended December 31, 2005. This
      increase in our general and administrative expenses is primarily attributed
      to
      an increase of $137,395 in financing related expenses, and personnel recruiting
      fees. Further, there were additional consulting expenses incurred in 2006,
      increased promotional and sales expenses related to product sales under the
      master agreement for product development, manufacturing and distribution as
      mentioned above offset by a reduction in other operating expenses.





Licensing
      and Patent Expense .
      Licensing and patent expense increased by $71,229 or 59% to $191,823 for the
      period ended December 31, 2006 from $120,594 for the period ended December
      31,
      2005. This increase was primarily due to increased utilization of the consulting
      legal patent services, and legal licensing services including licensing
      negotiation.





Other
      Income. During
      the six months ended December 31, 2006, we had $166,500 in other income, which
      represented a payment from a
      cosmetic and personal care division of BASF Catalysts, LLC, for the
      transfer of all
      right, title and interest of the formulations utilized our proprietary compound,
      that were customized by BASF for the customers held by us back to BASF. However,
      we did not transfer the intellectual property rights of our proprietary
      compound. There was no such transaction during the six months ended December
      31,
      2005.







-
          14
          -
 Index




Interest
      Income. During
      the six months ended December 31, 2006, we had $549 in interest
      income , a
      decrease of $7,045 or 93% from $7,594 for the six months ended December 31,
      2005. The amounts represented interest earned on our certificate of deposits
      and
      money market account funded by the revenues and or equity financings during
      the
      periods.





Interest
      Expense. Interest
      expense for the six months ended December 31, 2006 increased $6,129 or 16%
      to
      $44,501 compared to $38,372 the six months ended December 31, 2005. This
      increase was due to an increase of approximately $160,000 or 13% in the average
      outstanding loan balance due to our Chairman of the Board, to approximately
      $1,430,000, compared to approximately $1,270,000 average outstanding balance
      for
      the comparable 2005 period.




Net
      Loss. Net loss
      for the six months ended December 31, 2006 was ($489,159) or ($0.02) per share
      compared to ($891,947) or ($0.03) per share for the six months ended December
      31, 2005. This decrease is primarily attributable to an increase in revenues,
      a
      one-time payment for the transfer of the intellectual property as described
      above, offset by the increases in research and development expenses, general
      and
      administrative expenses, and licensing and patent expenses.





***Comparison
      of Three Months Ended December 31, 2006 and 2005***





Revenues. During
      the three months ended December 31, 2006 we had $841,476 of revenues, compared
      to $274,708 of revenues for the three months ended December 31, 2005,
      representing a 206% increase in our revenues. Our revenues during the three
      months ended December 31, 2006 consisted of $841,476, which represented our
      royalties from the product sales by a cosmetic and personal care division of
      BASF Catalysts, LLC, in connection with a master agreement we have with BASF
      for
      product development, manufacturing and distribution. Our revenues during the
      three months ended December 31, 2005 consisted of $274,708, which represented
      our royalties from the product sales and the license fee for exclusivity by
      a
      cosmetic and personal care division of BASF Catalysts, LLC.





Operating
      Losses. Operating losses for the three months ended December 31, 2006 decreased by
      10%
      or $34,833 to ($306,385) for the three months ended December 31, 2006 from
      ($341,218) for the three months ended December 31, 2005. The decrease in
      operating losses was primarily due to an increase in revenue of $566,768 offset
      by an increase in expenses of $531,935 for the three months ended December
      31,
      2006. The increase in expenses was primarily due to the following: (a) an
      increase of $150,274 or 58% in research and development expenses; (b) an
      increase of $253,776 or 105% in general and administrative expenses; (c) a
      decrease of $2,112 or 4% in licensing and patent expenses; and (d) an increase
      of $127,075 or 302% in cost of revenues for those comparable prior periods,
      as
      described in more detail below.





Research
      and Development Expense. Research
      and development expense increased by $150,274 or 58% to $410,051 for the three
      months ended December 31, 2006, from $259,777 for the three months ended
      December 31, 2005. The increase in research and development expense is primarily
      attributable to an increase of $73,669 in share-based compensation expense
      as we
      issued stock options to our employees during the quarter ended December 31,
      2006. In the previous fiscal year, we issued the stock options to our employees
      during the quarter ended September 30, 2006. In addition, we have two more
      scientists during this quarter as compared to prior period quarter, increased
      compensation to our head of research and development department and research
      team, increased research projects, and increased usage of scientific consulting
      services.




General
      and Administrative Expense .
      General
      and administrative expense increased by $253,776 or 105% to $496,263 for the
      three months period ended December 31, 2006, from $242,487 for the three months
      period ended December 31, 2005. This
      increase in our general and administrative expenses is primarily attributed
      to
      an increase of $112,640 in share-based compensation expense as we paid our
      directors and consultants for their services with our stock options in 2006.
      In
      prior period, we paid our directors and consultants for their services during
      the quarter ended September 30, 2006. In addition, we incurred approximately
      $137,395 in financing related expenses and personnel recruiting fees. Further,
      there were additional consulting expenses incurred in 2006, and increased
      promotional and sales expenses related to product sales under the master
      agreement for product development, manufacturing and distribution as mentioned
      above offset by a reduction in other operating expenses.





Licensing
      and Patent Expense .
      Licensing and patent expense decreased by $2,112 or 4% to $56,698 for the period
      ended December 31, 2006 from $58,810 for the period ended December 30, 2005.
      This decrease was primarily due to a better ultilization of the consulting
      legal
      patent services and legal licensing services including licensing
      negotiation.






-
          15
          -
 Index





Interest
      Income. During
      the three months ended December 31, 2006, we had $465 in interest
      income , a
      decrease of $4,274 or 90% from $4,739 for the three months ended December 31,
      2005. The amounts represented interest earned on our certificate of deposits
      and
      money market account funded by the revenues and or equity financings during
      the
      periods.





Interest
      Expense. Interest
      expense for the three months ended December 31, 2006 increased $3,068 or 16%
      to
      $22,254 compared to $19,186 the three months ended December 31, 2005. This
      increase was due to an increase of approximately $174,000 or 13% in the average
      outstanding loan balance due to our Chairman of the Board, to approximately
      $1,444,000, compared to approximately $1,270,000 average outstanding balance
      for
      the comparable 2005 period.




Net
      Loss. Net loss
      for the three months ended December 31, 2006 was ($328,174) or ($0.01) per
      share
      compared to ($355,665) or ($0.01) per share for the three months ended December
      31, 2005. This decrease is primarily attributable to an increase in revenues
      offset by increases in research and development expenses, general and
      administrative expense, and licensing and patent expenses.





**Liquidity
      and Capital Resources**





Our
      auditors have issued a going concern opinion on our audited financial statements
      for the fiscal years ended June 30, 2006 and 2005 as we have experienced
      recurring losses and negative cash flows from operations in these periods.
      In
      addition, we have a net capital deficiency. These matters raise substantial
      doubt about our ability to continue as a going concern.





Total
      cash on hand at December 31, 2006 was $120,108 as compared with $205,042 at
      September 30, 2006. Further, we collected approximately $339,302 from BASF
      related to the outstanding receivable balance at December 31, 2006. In September
      2006, we received confirmation of the SBIR Phase II grant, which we believe
      will
      provide us approximately $770,000 over the next two years. As of February 6,
      2007, we received approximately $20,000 in cash as part of the SBIR grant.





Equity
      Financing and our Cash Requirements





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





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





In
      February 2005, we issued 150,000 shares of restricted common stock for an
      aggregate purchase price of $87,000 in cash.




In
      June
      2005, we issued 16,666 shares of restricted common stock for aggregate exercise
      price of $2,500 in cash from an exercise of an employee stock
      option.




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




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




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




In
      February 2006, we issued 100,000 shares of restricted common stock for an
      aggregate purchase price of $80,000 in cash.





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






-
          16
          -
 Index





Based
      on
      our cash position at December 31, 2006, we cannot continue to satisfy our
      current cash requirements for a period of twelve (12) months through our
      existing capital. We anticipate total estimated patent related legal fees,
      operating and research and development expenditures of approximately $149,000
      per month or an aggregate of approximately $1,788,000 over the next twelve
      (12)
      months, in the following areas:





·
            Research
                and development expenditures of approximately $75,000 per month or
                an
                aggregate $900,000 over the next twelve (12) months, which will consist
                of
                the following estimated monthly expenditures: (a) $50,000 in payroll
                for
                scientists; (b) $10,000 for outside research and development expenditures;
                and (c) $15,000 for chemical supplies, and laboratory operating expenses,
                including rent expense.


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


·
            Operating
                expenses of approximately $54,000 per month or an aggregate $648,000
                over
                the next twelve (12) months, including officer and director insurance,
                general liability insurance, rent, consulting fees, utilities, legal
                and
                accounting fees, and payroll.





Our
      current cash balance of $120,108 as of December 31, 2006, coupled with
      collection on accounts receivable of $339,302, and the receipt of $20,000 from
      SBIT grant, will satisfy our cash requirements for approximately three (3)
      months assuming no further receipt of revenues. However, we incurred expenses
      related to one-time projects of approximately $200,000 that are to be paid
      either by means of equity and or debt financing or cash on hand and receipt
      of
      revenues. If we are unable to satisfy these obligations by equity and or debt
      financing, we will be able to satisfy our cash requirements for approximately
      less than two (2) months assuming no further receipts.




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





As
      of
      December 31, 2006, we have a long-term note payable outstanding to our Chairman
      of the Board totaling $138,312 including accrued interest of $5,362 at the
      8%
      interest rate per annum and a maturity date of October 1, 2007, which was
      extended to April 1, 2008. In addition, we have notes outstanding to our
      Chairman of the Board totaling $1,268,625. During the year ended June 30, 2005,
      the short-term note with our Chairman of the Board was consolidated with the
      long-term convertible note under the same terms. The maturity date was extended
      to July 1, 2006 from July 1, 2004. Subsequently, the maturity date was extended
      to October 1, 2007.  On
      November 30 and December 31, 2004, a total of $1,326,087 of the long-term
      convertible note was converted into 3,489,703 shares of our restricted common
      stock. During
      the quarter ended December 31, 2005, we paid the accrued interest of $56,932
      on
      our notes outstanding to our Chairman. In January and April 2006, we paid
      the quarterly interest payment of $19,186 and $18,769, respectively, on our
      notes to our Chairman. At June 30, 2006, the accrued interest on the long term
      note to our Chairman was $18,864. On July 1, 2006, we paid the accrued interest
      by issuing a note payable to our Chairman for the amount of $18,864 at the
      8%
      interest rate per annum with a maturity date of July 1, 2007, which was extended
      to April 1, 2008. On October 1, 2006, we issued a long-term note payable to
      our
      Chairman for the outstanding accrued interest amount of $19,186, representing
      the interest on the convertible note for the quarter ended September 30, 2006,
      at the 8% interest rate per annum with a maturity date of January 1, 2008.
      In
      August 2006, we issued a short term note payable of $7,000 to an officer at
      the
      8% interest rate per annum and we repaid the note payable in full in September
      2006.) On January 1, 2007, we paid the accrued interest on the convertible
      note
      for the quarter ended December 31, 2006 by issuing a long-term note payable
      to
      our Chairman for the $19,090, at the 8% interest rate per annum with a maturity
      date of April 1, 2008.







-
          17
          -
 Index




If
      we are
      unable to successfully repay or restructure our loan to our Chairman of the
      Board, we may have to liquidate our business and undertake any or all the steps
      outlined below.




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


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


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


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


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


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


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





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





If
      we
      have any liabilities that we are unable to satisfy and we qualify for protection
      under the U.S. Bankruptcy Code, we may voluntarily file for reorganization
      under
      Chapter 11 or liquidation under Chapter 7. Our creditors may also file a Chapter
      7 or Chapter 11 bankruptcy action against us. If our creditors or we file for
      Chapter 7 or Chapter 11 bankruptcy, our creditors will take priority over our
      stockholders. If we fail to file for bankruptcy under Chapter 7 or Chapter
      11
      and we have creditors; such creditors may institute proceedings against us
      seeking forfeiture of our assets, if any.





We
      do not
      know and cannot determine which, if any, of these actions we will be forced
      to
      take. If any of these foregoing events occur, you could lose your entire
      investment in our shares.




At December
      31, 2006, we had a negative working capital of $69,478 that primarily consists
      of: (a) cash of $120,108; (b) accounts receivable of $339,302; (c) accounts
      payable of $521,183, and (d) the accrued expenses of $7,705. 
At December 31, 2006, we had a stockholders’ deficit of $1,314,362, a
      substantial portion of which is due to non-cash stock compensation expense
      and
      non-cash interest expense from the notes payable conversions.







Cash
      used
      in operating activities was $19,630 for the six months ended December
      31, 2006. Net cash used in investing activities was $111,906.   Net
      cash provided by financing activities was $67,502 of which $5,000 from the
      exercise of 33,334 stock options, the borrowing and repayment of $7,000 to
      an
      officer, and the issuance of a note payable of $62,502 to our
      Chairman.





To
      date,
      we have funded our activities principally from our revenues, our borrowings
      and
      the issuance of shares of restricted common stock including: (a) revenues of
      approximately $2,530,000; (b) investments from an institutional investor
      for net proceeds of $1,810,000 and accredited investors for net proceeds of
      $167,000; (c) financings from our Chairman of the Board totaling $850,000;
      (d)
      stockholder loans totaling $2,806,055 including related accrued interest, and
      (e) a $650,000 bridge loan from a merchant banking firm. All of these funds
      have
      been loaned with interest rates ranging from 6% to 8% per annum. The loan from
      the investment-banking firm was converted in November 2002 into restricted
      common stock at $1.00 per share.





During
      the six months ended December 31, 2006, we borrowed a total of approximately
      $67,502 through: (a) $62,502 from our Chairman as described above, and (b)
      $7,000 from one of the officers, which was subsequently paid in full in
      September 2006.









-
          18
          -
 Index








**Item
      3. Controls and Procedures**





*Evaluation
      of Disclosure Controls and Procedures*




Based
      on
      our management’s evaluation, with the participation of our Principal Executive
      Officer and Chief Financial Officer, of our disclosure controls and procedures
      (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
      "Exchange Act")), our Principal Executive Officer and our Chief Financial
      Officer have concluded that as of December 31, 2006, the end of the period
      covered by this Quarterly Report on Form 10-QSB, such disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      by
      us in reports that we file or submit under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in
      Securities and Exchange Commission rules and forms.







*Changes
      in Internal Controls over Financial Reporting*




As
      of the
      end of our quarter ended December 31, 2006, there was no change in the our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.































-
          19
          -
 Index





**PART
      II**


**OTHER
      INFORMATION**





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





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





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





On
      October 31, 2006, we issued 1,589 shares of our common stock to Ms. Sally MacKay
      in exchange for approximately $2,145, which we owed to Ms. MacKay for services
      rendered to us. The shares granted to Ms. MacKay were valued at price of $1.35
      per share, for an aggregate price of approximately $2,145. We relied upon
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”)
      for the offer and sale. We believed that Section 4(2) was available because
      the
      offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the stock certificate representing the shares issued
      to
      Ms. MacKay stating that the securities were not registered under the Securities
      Act and are subject to restrictions on their transferability and
      resale.




On
      November 30, 2006, we issued 1,589 shares of our common stock to Ms. Sally
      MacKay in exchange for approximately $1,446, which we owed to Ms. MacKay for
      services rendered to us. The shares granted to Ms. MacKay were valued at price
      of $0.91 per share, for an aggregate price of approximately $1,446. We relied
      upon Section 4(2) of the Securities Act for the offer and sale. We believed
      that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the stock certificate
      representing the shares issued to Ms. MacKay stating that the securities were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.




On
      December 20, 2006, we granted an option to acquire 54,615 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. Michael R. Granito for his services as a member
      of the board of directors, audit, licensing and executive committees. We relied
      upon section 4(2) of the Securities Act for the offer and sale. We believed
      that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these securities issued to Mr. Granito stating the securities
      were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.




On
      December 20, 2006, we granted an option to acquire 50,000 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. David S. Lerner for his services as a member
      of
      the board of directors, licensing and executive committees. In addition, we
      granted to Mr. Lerner an option to acquire 35,000 shares of restricted common
      stock at an exercise price of $1.05 per share, the then current market value
      of
      our common stock. These stock options were issued to Mr. Lerner, our President,
      as a performance bonus. We relied upon section 4(2) of the Securities Act for
      the offer and sale. We believed that Section 4(2) was available because the
      offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Mr. Lerner stating the securities were not registered under the Securities
      Act
      and are subject to restrictions on their transferability and resale.







-
          20
          -
 Index







On
      December 20, 2006, we granted an option to acquire 50,000 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. Paul G. Cerjan for his services as a member
      of
      the board of directors, compensation and executive committees. We relied upon
      section 4(2) of the Securities Act for the offer and sale. We believed that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these stock options issued to Mr. Cerjan stating the securities
      were not registered under the Securities Act and are subject to restrictions
      on
      their transferability and resale.




On
      December 20, 2006, we granted an option to acquire 45,385 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. Gerald M. Olderman for his services as a member
      of the board of directors, and compensation committee. In addition, we granted
      to Mr. Olderman an option to acquire 30,000 shares of restricted common stock
      at
      an exercise price of $1.05 per share, the then current market value of our
      common stock. These stock options were issued to Mr. Olderman, our Vice
      President of Research and Development and Commercialization, as a performance
      bonus. We relied upon section 4(2) of the Securities Act for the offer and
      sale.
      We believed that Section 4(2) was available because the offer and sale did
      not
      involve a public offering and there was not general solicitation or general
      advertising involved in the offer or sale. We placed restrictive legends on
      the
      certificates representing the stock options issued to Mr. Olderman stating
      the
      securities were not registered under the Securities Act and are subject to
      restrictions on their transferability and resale.





On
      December 20, 2006, we granted an option to acquire 54,615 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. George E. Friel for his services as a member
      of
      the board of directors, audit, compensation and executive committees. We relied
      upon section 4(2) of the Securities Act for the offer and sale. We believed
      that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these stock options issued to Mr. Friel stating the securities
      were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.




On
      December 20, 2006, we granted an option to acquire 40,770 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. Gregory S. Schultz for his services as a member
      of the board of directors. In addition, we granted to Mr. Schultz an option
      to
      acquire 40,770 shares of restricted common stock for his services as our Vice
      President of Laboratory and Clinical Research at an exercise price of $1.05
      per
      share, the then current market value of our common stock. We relied upon section
      4(2) of the Securities Act for the offer and sale. We believed that Section
      4(2)
      was available because the offer and sale did not involve a public offering
      and
      there was not general solicitation or general advertising involved in the offer
      or sale. We placed restrictive legends on the certificates representing the
      stock options issued to Mr. Schultz stating the securities were not registered
      under the Securities Act and are subject to restrictions on their
      transferability and resale.







On
      December 20, 2006, we granted an option to acquire 100,000 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Mr. Richard F. Caffrey for his services as a member
      of the board of directors, audit and licensing committees. We relied upon
      section 4(2) of the Securities Act for the offer and sale. We believed that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these stock options issued to Mr. Caffrey stating the securities
      were not registered under the Securities Act and are subject to restrictions
      on
      their transferability and resale.







-
          21
          -
 Index




On
      December 20, 2006, we granted an option to acquire 84,615 shares of restricted
      common stock at an exercise price of $1.05 per share, the then current market
      value of our common stock to Ms. Cheryl L. Turnbull for her services as a member
      of the board of directors, audit and licensing committees. We relied upon
      section 4(2) of the Securities Act for the offer and sale. We believed that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the certificates
      representing these stock options issued to Mr. Turnbull stating the securities
      were not registered under the Securities Act and are subject to restrictions
      on
      their transferability and resale.




On
      December 20, 2006, we granted to Mr. Nam Nguyen an option to acquire 20,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Mr. Nguyen as a performance bonus in connection with Mr. Nguyen’s position as
      our Chief Financial Officer. We relied upon Section 4(2) of the Securities
      Act
      for the offer and sale. We believed that Section 4(2) was available because
      the
      offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Mr. Nguyen stating the securities were not registered under the Securities
      Act
      and are subject to restrictions on their transferability and
      resale.





On
      December 20, 2006, we granted to Ms. Natasha Sorobey an option to acquire 15,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Ms. Sorobey as a performance bonus in connection with her position as our
      Corporate Secretary. We relied upon Section 4(2) of the Securities Act for
      the
      offer and sale. We believed that Section 4(2) was available because the offer
      and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Ms. Sorobey stating the securities were not registered under the Securities
      Act
      and are subject to restrictions on their transferability and
      resale.





On
      December 20, 2006, we granted to Mr. Christopher Batich an option to acquire
      10,000 shares of restricted common stock at an exercise price of $1.05 per
      share, the then current market value of our common stock. These stock options
      were issued to Mr. Batich in connection with his position as our Consultant
      for
      Bioengineering and Material Science. We relied upon Section 4(2) of the
      Securities Act for the offer and sale. We believed that Section 4(2) was
      available because the offer and sale did not involve a public offering and
      there
      was not general solicitation or general advertising involved in the offer or
      sale. We placed restrictive legends on the certificates representing the stock
      options issued to Mr. Batich stating the securities were not registered under
      the Securities Act and are subject to restrictions on their transferability
      and
      resale.





On
      December 20, 2006, we granted to Mr. Roy Carr an option to acquire 25,000 shares
      of restricted common stock at an exercise price of $1.05 per share, the then
      current market value of our common stock. These stock options were issued to
      Mr.
      Carr as a performance bonus in connection with his position as our Director
      of
      Medical Devices. We relied upon Section 4(2) of the Securities Act for the
      offer
      and sale. We believed that Section 4(2) was available because the offer and
      sale
      did not involve a public offering and there was not general solicitation or
      general advertising involved in the offer or sale. We placed restrictive legends
      on the certificates representing the stock options issued to Mr. Carr stating
      the securities were not registered under the Securities Act and are subject
      to
      restrictions on their transferability and resale.






-
          22
          -
 Index





On
      December 20, 2006, we granted to Mr. William Toreki, III an option to acquire
      35,000 shares of restricted common stock at an exercise price of $1.05 per
      share, the then current market value of our common stock. These stock options
      were issued to Mr. Toreki as a performance bonus in connection with his position
      as our laboratory Director and Senior Polymer Scientist. We relied upon Section
      4(2) of the Securities Act for the offer and sale. We believed that Section
      4(2)
      was available because the offer and sale did not involve a public offering
      and
      there was not general solicitation or general advertising involved in the offer
      or sale. We placed restrictive legends on the certificates representing the
      stock options issued to Mr. Toreki stating the securities were not registered
      under the Securities Act and are subject to restrictions on their
      transferability and resale.





On
      December 20, 2006, we granted to Mr. Bernd Liesenfeld an option to acquire
      30,000 shares of restricted common stock at an exercise price of $1.05 per
      share, the then current market value of our common stock. These stock options
      were issued to Mr. Liesenfeld as a performance bonus in connection with his
      position as our Senior Material Scientist. We relied upon Section 4(2) of the
      Securities Act for the offer and sale. We believed that Section 4(2) was
      available because the offer and sale did not involve a public offering and
      there
      was not general solicitation or general advertising involved in the offer or
      sale. We placed restrictive legends on the certificates representing the stock
      options issued to Mr. Liesenfeld stating the securities were not registered
      under the Securities Act and are subject to restrictions on their
      transferability and resale.





On
      December 20, 2006, we granted to Ms. Susan Leander an option to acquire 25,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Ms. Leander as a performance bonus in connection with her position as our
      Material Scientist. We relied upon Section 4(2) of the Securities Act for the
      offer and sale. We believed that Section 4(2) was available because the offer
      and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Ms. Leander stating the securities were not registered under the Securities
      Act
      and are subject to restrictions on their transferability and
      resale.





On
      December 20, 2006, we granted to Mr. David Moore an option to acquire 25,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Mr. Moore as a performance bonus in connection with his position as our
      Senior Microbiologist. We relied upon Section 4(2) of the Securities Act for
      the
      offer and sale. We believed that Section 4(2) was available because the offer
      and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Mr. Moore stating the securities were not registered under the Securities Act
      and are subject to restrictions on their transferability and
      resale.





On
      December 20, 2006, we granted to Ms. Albina Mikhaylova an option to acquire
      10,000 shares of restricted common stock at an exercise price of $1.05 per
      share, the then current market value of our common stock. These stock options
      were issued to Ms. Mikhaylova as a performance bonus in connection with her
      position as our Senior Scientist. We relied upon Section 4(2) of the Securities
      Act for the offer and sale. We believed that Section 4(2) was available because
      the offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the certificates representing the stock options issued
      to
      Ms. Mikhaylova stating the securities were not registered under the Securities
      Act and are subject to restrictions on their transferability and
      resale.





On
      December 20, 2006, we granted to Ms. Jillian Vella an option to acquire 5,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Ms. Vella as a performance bonus in connection with her position as our
      Microbiologist. We relied upon Section 4(2) of the Securities Act for the offer
      and sale. We believed that Section 4(2) was available because the offer and
      sale
      did not involve a public offering and there was not general solicitation or
      general advertising involved in the offer or sale. We placed restrictive legends
      on the certificates representing the stock options issued to Ms. Vella stating
      the securities were not registered under the Securities Act and are subject
      to
      restrictions on their transferability and resale.






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          23
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 Index





On
      December 20, 2006, we granted to Mr. David A. Lane an option to acquire 5,000
      shares of restricted common stock at an exercise price of $1.05 per share,
      the
      then current market value of our common stock. These stock options were issued
      to Mr. Lane as a performance bonus in connection with his position as our Lab
      Technician. We relied upon Section 4(2) of the Securities Act for the offer
      and
      sale. We believed that Section 4(2) was available because the offer and sale
      did
      not involve a public offering and there was not general solicitation or general
      advertising involved in the offer or sale. We placed restrictive legends on
      the
      certificates representing the stock options issued to Mr. Lane stating the
      securities were not registered under the Securities Act and are subject to
      restrictions on their transferability and resale.





On
      December 31, 2006, we granted to Mr. Nam Nguyen an option to acquire 6,450
      shares of restricted common stock at an exercise price of $1.00 per share,
      the
      then average closing trading price for the month of December 2006. These stock
      options were issued to Mr. Nguyen as a partial payment for his services as
      our
      Chief Financial Officer for December 2006. We relied upon Section 4(2) of the
      Securities Act for the offer and sale. We believed that Section 4(2) was
      available because the offer and sale did not involve a public offering and
      there
      was not general solicitation or general advertising involved in the offer or
      sale. We placed restrictive legends on the certificates representing the stock
      options issued to Mr. Nguyen stating the securities were not registered under
      the Securities Act and are subject to restrictions on their transferability
      and
      resale.







On
      December 31, 2006, we issued 1,235 shares of our common stock to Ms. Sally
      MacKay in exchange for approximately $1,235, which we owed to Ms. MacKay for
      services rendered to us. The shares granted to Ms. MacKay were valued at price
      of $1.00 per share, for an aggregate price of approximately $1,235. We relied
      upon Section 4(2) of the Securities Act for the offer and sale. We believed
      that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the stock certificate
      representing the shares issued to Ms. MacKay stating that the securities were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.




On
      December 31, 2006, we issued a warrant to GSP Consulting, Inc. (“GSP”) entitling
      GSP to acquire 8,519 shares of common stock at an exercise price ranging from
      $0.91 to $1.35 per share, the then-current market value of our common stock.
      This warrant was issued to GSP as partial payment for services rendered to
      us by
      GSP from October to December 2006. We relied upon Section 4(2) of the Securities
      Act for the offer and sale. We believed that Section 4(2) was available because
      the offer and sale did not involve a public offering and there was not general
      solicitation or general advertising involved in the offer or sale. We placed
      restrictive legends on the stock certificate representing the warrant issued
      to
      GSP stating that the securities were not registered under the Securities Act
      and
      are subject to restrictions on their transferability and resale.




On
      December 31, 2006, we issued 6,098 shares of our common stock to Mr. Dennis
      Everhart in exchange for approximately $7,500, which we owed to Mr. Everhart
      for
      services rendered to us. The shares granted to Mr. Everhart were valued at
      price
      of $1.23 per share, for an aggregate price of approximately $7,500. We relied
      upon Section 4(2) of the Securities Act for the offer and sale. We believed
      that
      Section 4(2) was available because the offer and sale did not involve a public
      offering and there was not general solicitation or general advertising involved
      in the offer or sale. We placed restrictive legends on the stock certificate
      representing the shares issued to Mr. Everhart stating that the securities
      were
      not registered under the Securities Act and are subject to restrictions on
      their
      transferability and resale.










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          24
          -
 Index











**Item
      3. Defaults Upon Senior
      Securities**





None.





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





None.








**Item
      5. Other Information.**





None





**Item
      6. Exhibits**





Exhibits2.1
            Merger
                Agreement dated March 19, 2001 between Above AverageInvestments
                Ltd. and Quick-Med Technologies, Inc. (1)2.2
            Amendment
                to Merger Agreement (1)3.1
            Articles
                of Incorporation (1)3.2
            Bylaws
                (1)10.1
            Amendment
                to Research and Development Agreement with Engelhard
                (2)31.1
            Certification
                of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a),
                filed herewith.31.2
            Certification
                of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a),
                filed
                herewith.32.1
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                filed
                herewith.32.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                herewith.99.3
            Assignment
                of Patent for Wound Care (1)99.4
            Assignment
                of Patent for Mustard Gas (1)99.5
            Assignment
                of Patent for Anti-wrinkle cream
                (1)





NOTES:


(1)  Incorporated
      by reference to the Company's registration statement on Form SB-2 (file no.
      333-41672)





(2)
            Incorporated
                by reference to the Company’s Form 8-K filed on August 11,
                2006












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          25
          -
 Index











SIGNATURES








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





Quick-Med
                Technologies, Inc.___________________________(Registrant)





Date
            February
                14, 2007
            By:
                /s/ David S. LernerDavid
                S. LernerPresident
                and Principal Executive Officer





Date
            February
                14, 2007
            By:
                /s/ Nam H. NguyenNam
                H. NguyenChief
                Financial Officer




































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