Eugene Science (EUSI) 10QSB 2006 Q2 Quarterly report (small business)

UNITED STATES

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 JUNE 30, 2006

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO __________________

Commission file number 000-50601

EUGENE SCIENCE, INC.

(Name of small business issuer as specified in its charter)

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

16-7 SMJUNG-DONG, OJUNG-GU, BUCHEON, KYONGGI-DO KOREA

(Address of principal executive offices)

Issuer’s telephone number: 82-32-676-6283

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). ¨

The number of outstanding shares of the issuer’s common stock as of August 21, 2006 was 35,375,705.

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

PART I—FINANCIAL INFORMATION

EUGENE SCIENCE, INC.

CONSOLIDATED FINANCIAL STATEMENTS

PERIODS ENDED JUNE 30, 2006 AND 2005

(UNAUDITED)

CONTENTS

Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets	2
Consolidated Statements of Stockholders' Deficit	3
Consolidated Statements of Operations	4- 5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7-19

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of

Eugene Science, Inc.

We have reviewed the accompanying consolidated balance sheets of Eugene Science, Inc. and subsidiary (the "Company") as at June 30, 2006 and 2005, and the related consolidated statements of stockholders' deficit, operations, and cash flows for the periods then ended. These interim consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

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

Toronto, Canada August 14, 2006 CHARTERED ACCOUNTANTS

- 1 -

EUGENE SCIENCE, INC.

Consolidated Balance Sheets

June 30, 2006 and 2005

Unaudited

	2006			2005
ASSETS
Current
Cash and cash equivalents (note 3)	$	25,911		$	58,018
Accounts receivable - net of allowance for doubtful accounts $48,083; 2005 - $317,492 (note 15)		938,307			2,405,186
Inventory (note 4)		46,667			39,168
Advances to a related company (note 5)		1,237,086			1,169,500
Prepaid and sundry assets (note 15)		377,747			194,088
		2,625,718			3,865,960
Properties and Equipment (note 6)		2,843,927			9,384,235
Investments (note 7)		452,353			531,470
Intangible Assets		176,467			176,323
	$	6,098,465		$	13,957,988
LIABILITIES
Current
Accounts payable	$	8,284,629		$	6,628,336
Accounts payable to related party		360,868			-
Rental deposits (note 8)		168,610			154,880
Loans payable - current portion (note 9)		6,021,838			10,215,951
Advances from a related company (note 10)		19,706			-
Advances from shareholder (note 11)		671,318			-
		15,526,969			16,999,167
Accrued Severance		621,137			475,907
Deposit		-			1,561,868
Loans Payable (note 9)		42,679			313,879
		16,190,785			19,350,821
STOCKHOLDERS' DEFICIENCY
Capital Stock(note 12)		32,166			3,537
Paid in Capital		16,500,734			16,216,558
Accumulated Other Comprehensive Income (Loss)		(2,494,133	)		(1,676,818	)
Accumulated Deficit		(24,131,087	)		(19,936,110	)
		(10,092,320	)		(5,392,833	)
	$	6,098,465		$	13,957,988

APPROVED ON BEHALF OF THE BOARD

“Dr. S. K. Noh”
Director	Director

(The accompanying notes are an integral part of these consolidated financial statements)

- 2 -

EUGENE SCIENCE, INC.

Consolidated Statements of Stockholders' Deficit

Six Months Ended June 30, 2006 and 2005

Unaudited

	Number of Shares		Capital Stock		Paid in Capital in Excess of Par Value		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Deficit
Balance, January 1, 2005 (note 12)		3,536,880	$	3,537	$	15,223,558	$	(1,676,719	)	$	(18,028,969	)	$	(4,478,593	)
Issuance of shares by subsidiary		-		-		993,000		-			-			993,000
Unrealized loss on investments		-		-		-		(52,828	)		-			(52,828	)
Foreign exchange on translation		-		-		-		52,729			-			52,729
Net loss		-		-		-		-			(1,907,141	)		(1,907,141	)
Balance, June 30, 2005		3,536,880	$	3,537	$	16,216,558	$	(1,676,818	)	$	(19,936,110	)	$	(5,392,833	)
Balance, January 1, 2006 (note 12)		34,375,180	$	31,166	$	16,418,734	$	(1,777,866	)	$	(24,372,702	)	$	(9,700,668	)
Unrealized loss on investments		-		-		-		(107,114	)		-			(107,114	)
Issuance of shares for consulting services (note 12)		1,000,000		1,000		82,000		-			-			83,000
Foreign exchange on translation		-		-		-		(609,153	)		-			(609,153	)
Net earnings		-		-		-		-			241,615			241,615
Balance, June 30, 2006		35,375,180	$	32,166	$	16,500,734	$	(2,494,133	)	$	(24,131,087	)	$	(10,092,320	)

(The accompanying notes are an integral part of these consolidated financial statements)

- 3 -

EUGENE SCIENCE, INC.

Consolidated Statements of Operations

Six Months Ended June 30, 2006 and 2005

Unaudited

	2006			2005
Revenue
Manufacturing	$	272,455		$	294,791
Merchandise		70,385			221,523
		342,840			516,314
Cost of Sales
Manufacturing		108,659			238,229
Merchandise		56,411			175,541
		165,070			413,770
Gross Profit		177,770			102,544
Expenses
Salaries, employee benefits, and retirement allowance		608,115			473,195
Professional fees		239,483			153,644
Research and development		212,689			215,022
Repairs and maintenance		32,210			42,466
Travel		29,993			86,215
Utilities		27,243			25,566
Bad debts		18,866			8,147
Advertising and promotion		17,883			16,409
Taxes and dues		49,425			-
Insurance		6,629			4,043
Office and general		9,192			28,827
Depreciation		158,932			195,858
		1,410,660			1,249,392
Operating Loss		(1,232,890	)		(1,146,848	)
Other Income (Expenses)
Gain on sale of property (note 6)		5,490,547			-
Net rental income		79,253			69,549
Miscellaneous income		-			16,268
Interest expense - net		(1,177,221	)		(835,351	)
Provision for uncollectible loan to related party		(2,918,074	)		-
Loss on disposition of equipment		-			(10,759	)
		1,474,505			(760,293	)
Net Earnings (Loss)	$	241,615		$	(1,907,141	)
Basic Earnings (Loss) Per Share	$	0.01		$	(0.54	)
Weighted Average Number of Shares (note 12)		35,091,023			3,536,880

(The accompanying notes are an integral part of these consolidated financial statements)

- 4 -

EUGENE SCIENCE, INC.

Consolidated Statements of Operations

Three Months Ended June 30, 2006 and 2005

Unaudited

	2006			2005
Revenue
Manufacturing	$	169,997		$	51,201
Merchandise		50,400			48,881
		220,397			100,082
Cost of Sales
Manufacturing		41,095			1,950
Merchandise		40,475			39,227
		81,570			41,177
Gross Profit		138,827			58,905
Expenses
Salaries, employee benefits, and retirement allowance		273,783			243,145
Professional fees		175,732			93,056
Research and development		99,625			46,142
Repairs and maintenance		16,058			26,952
Travel		14,451			39,303
Utilities		12,581			10,776
Bad debts		8,709			(35,220	)
Advertising and promotion		7,093			13,882
Taxes and dues		49,425			-
Insurance		4,078			(4,368	)
Office and general		(4,174	)		18,900
Depreciation		73,936			86,054
		731,297			538,622
Operating Loss		(592,470	)		(479,717	)
Other Income (Expenses)
Gain on sale of assets		5,490,547			-
Net rental income		42,289			31,330
Miscellaneous income		-			5,583
Interest - other		46,708			44,518
Interest expense - net		(737,782	)		(551,947	)
Provision for uncollectible loan to related party		(2,809,180	)		-
Loss on disposition of equipment		-			(10,759	)
		2,032,582			(481,275	)
Net Earnings (Loss)	$	1,440,112		$	(960,992	)
Basic Earnings (Loss) Per Share	$	0.04		$	(0.27	)
Weighted Average Number of Shares (note 12)		35,091,023			3,536,880

(The accompanying notes are an integral part of these consolidated financial statements)

- 5 -

EUGENE SCIENCE, INC.

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2006 and 2005

Unaudited

	2006			2005
Cash Flows from Operating Activities
Net earnings (loss)	$	241,615		$	(1,907,141	)
Adjustments for:
Provision for uncollectible loan to related party		2,918,074			-
Depreciation		284,093			351,436
Gain on sale of property		(5,490,547	)		-
Gain on disposition of equipment		-			10,759
Change in non-cash working capital
Accounts receivable		(825,346	)		301,581
Inventory		13,919			(24,616	)
Accounts payable to related party		81,162			-
Accounts payable		(92,202	)		906,329
Accrued severance		166,459			53,585
Prepaid and sundry assets		(197,221	)		(25,089	)
Rental deposits		10,370			-
		(2,889,624	)		(333,156	)
Cash Flows from Investing Activities
Acquisition of property and equipment		-			(13,037	)
Investments		(33,168	)		53,772
Intangible assets		-			(9,822	)
		(33,168	)		30,913
Cash Flows from Financing Activities
Advances to a related company		(3,180,133	)		(255,472	)
Deposit		(1,447,402	)		(197,060	)
Loans payable		(4,934,463	)		(210,002	)
Proceeds from disposition of property		12,089,892
Advances from shareholder		311,763			(6,234	)
Advances from a related company		1,215			-
Issuance of common stock		83,000			993,000
		2,923,872			324,232
Foreign Exchange on Cash and Cash Equivalents		1,475			(652	)
Net Increase in Cash and Cash Equivalents		2,555			21,337
Cash and Cash Equivalents - beginning of period		23,356			36,681
Cash and Cash Equivalents - end of period	$	25,911		$	58,018

(The accompanying notes are an integral part of these consolidated financial statements)

- 6 -

EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

1. Description of Business and Going Concern

a) Description of Business

Eugene Science Inc. (formerly "Ezcomm Enterprises, Inc.") was incorporated on August 26, 1998 under the name Orcas Ltd., under the laws of the state of Delaware. As Orcas Ltd., the Company was in the business of building and promoting arcade video games and vending machines. The Company underwent a reverse merger and abandoned this enterprise to develop a loyalty reward program based in Taipei, Taiwan. On January 18, 2000, the Company changed its name to Ezcomm Inc. to reflect this change in business. On July 19, 2004, Ezcomm Inc. changed its name to Ezcomm Enterprises, Inc. The Company has been inactive since inception.

On September 30, 2005, in accordance with a Share Exchange Agreement dated September 1, 2005, the Company entered into a reverse-takeover transaction with Eugene Science, Inc. (Korea), whereby 89.5% of all the outstanding shares of the Korean subsidiary were exchanged for 272,790,948 shares of the Company. As a result of the transaction, the shareholders of Eugene Science, Inc. (Korea) will control 88.5% of the Company. While the Company is the legal parent, Eugene Science, Inc. (Korea) as a result of the reverse-takeover, became the parent company for accounting purposes.

Eugene Science, Inc. (Korea), a company operating in Bucheon, Kyunggi-Do, Korea, was founded on July 1, 1997 under the laws of the Republic of Korea to manufacture and sell bio-technology products.

Eugene Science, Inc. (Korea) manufactures CZTM series cholesterol-lowering functional food ingredients, beverages and capsules fortified with CZTM series ingredients, and ordinary corn oil. The merchandise sales include the purchase and resale of vegetable oil products which include the ingredients of CZTM series.

b) Going Concern   The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses since 2000 and has negative cash flows from operations that raise substantial doubt as to its ability to continue as a going concern. For the years ended June 30, 2006 and 2005, the Company experienced net earnings of $241,615 and losses of $1,907,141 and negative working capital of $12,901,251 and $13,133,207 respectively.   The Company's ability to continue as a going concern is also contingent upon its ability to secure additional financing, initiating sale of its product and attaining profitable operations.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

1. Description of Business and Going Concern (cont'd)

b) Going Concern (cont'd)   In May 2005, plant sterols, the main ingredient of CZTM series, was formallyapproved as a health function food ingredient by the Korean Food & Drug Administration, making it possible for the Company to advertise the cholesterol-lowering function of CZTM and food enriched with CZTM. The Company expects that the favorable change in the regulation will strongly help in selling CZTM to major food companies. The Company has also developed new capsule products that are efficient and convenient in delivering the health function of CZTM. The Company is actively developing sales channels for CZTM and the capsule products.   The Company also plans to strengthen the cooperation with its international partners to restart shipping to overseas markets. The Company expects to sell CZTM to major food companies through its international strategic partners such as Archer Daniels Midland Company. In regards to CZTM capsules, the Company also plans to provide a large volume to the United States market starting early 2006 through marketing companies in the United States.   In addition, management is pursuing various sources of equity financing. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or obtain such on terms satisfactory to the Company, if at all.   The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

2. Summary of Significant Accounting Policies   The accounting policies of the Company are in accordance with generally accepted accounting principles of the United States of America, and their basis of application is consistent. Outlined below are those policies considered particularly significant:

a) Basis of Financial Statement Presentation   These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

b) Basis of Consolidation   The merger of the Company and Eugene Science Inc. (Korea) has been recorded as the recapitilization of the Company, with the net assets of the Company brought forward at their historical basis. The intention of the management of Eugene Science Inc. (Korea) was to acquire the Company as a shell company listed on Nasdaq. Management does not intend to pursue the business of the Company. As such, accounting for the merger as the recapitilization of the Company is deemed appropriate.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

2. Summary of Significant Accounting Policies (cont'd)

b) Basis of Consolidation (cont'd)   The consolidated financial statements included the operations of: Eugene Science, Inc. (Formerly Ezcomm Enterprises, Inc.) Eugene Science, Inc. (Korea) Ucolebio, Inc. (a subsidiary of Eugene Science, Inc. (Korea)).   Minority interests are recorded to the extent of their equity. Losses in excess of minority interest equity capital are charged against the majority interest and will be reversed when the losses reverse.

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

d) Revenue Recognition   The Company generates revenues from sales of manufactured goods and merchandise, as well as rental of the company's buildings.   Revenues from products sales are recognized in accordance with Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101") when delivery has occurred provided there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivable is probable.   The Company retains substantially all of the benefits and risks of ownership of its income properties and therefore accounts for leases with its tenants as operating leases.

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

f) Currency Translation

The Company's functional currency is Korean won. Adjustments to translate those statements into U.S. dollars at the balance sheet date are recorded in other comprehensive income.

Foreign currency transactions of the Korean operation have been translated to Korean Won at the rate prevailing at the time of the transaction. Realized foreign exchange gains and losses have been charged to income in the year.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

2. Summary of Significant Accounting Policies (cont'd)

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

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

Buildings	20-40 years
Machinery	10 years
Furniture and equipment	3-5 years

i) Intangible Assets   Intangible assets such as cost of obtaining industrial rights and patents are stated at cost, net of depreciation computed using the straight-line method over 5 to 10 years.

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

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

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

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

2. Summary of Significant Accounting Policies (cont'd)

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

3. Cash and Cash Equivalents   Included in cash and cash equivalents is a bond in the amount of $10,538 (2005 - $9,680) pledged as security for payment on future purchases from a vendor. The bond is restricted for use.

4. Inventory   Inventory includes $33,320 (2005 - $38,966) of finished goods, $13,347 (2005 -$202) of raw materials.

5. Advances to a Related Company   Advances to a related company which has the same major shareholder and chief executive officer bear interest at 9% per annum and are due on demand. The Company is in financial difficulty and collectability of the advances is uncertain. There is an agreement with the related party to sell its investments in the Company to repay the advances as described in note 15. In the period ended June 30, 2006, the loan was written down to the fair market value of the shares of the company being pledged.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

6. Properties and Equipment   Properties and equipment are comprised as follows:

	Cost		2006 Accumulated Depreciation		Cost		2005 Accumulated Depreciation
Land	$	-	$	-	$	4,368,926	$	-
Buildings		835,769		123,753		3,345,996		722,450
Equipment		4,349,150		2,241,444		3,987,649		1,656,962
Furniture and fixtures		1,024,908		1,000,703		941,452		880,376
	$	6,209,827	$	3,365,900	$	12,644,023	$	3,259,788
Net carrying amount			$	2,843,927			$	9,384,235

Depreciation expense on buildings and equipment leased to a related company in the amount of $119,299 (2005 - $118,400) has been allocated to net rental income. In addition, depreciation on equipment used for research and development in the amount of $34,918 (2005 - $55,874) has been allocated to research and development expenses.

On March 3, 2006, the Company cancelled a sales agreement entered into in January 2004 to sell the land and buildings. In return, the company paid the purchaser approximately $2,100,000 representing repayment of the deposit and a cancellation fee. On the same date, the Company signed a new agreement to sell the land and building to another purchaser for approximately $11,700,000. The title of the land and building transferred April 27, 2006. The gain on the sale of the property is approximately $5,490,000. In accordance with the new agreement, the proceeds from the sale of the property were used to repay a portion of the bank loans.

7. Investments

			2006		2005
Private company	7.5	%	$	451,952	$	531,102
Company with same major shareholder and CEO	4.58	%		1		1
Other marketable securities				400		367
			$	452,353	$	531,470

The Company has pledged 53% of the investment in the private company with carrying value of $239,534 (2005 - $281,484) as security for a trade payable in the amount of $327,159 (2005 - $344,760).

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

8. Rental Deposits   A rental deposit of $63,229 (2005 - $58,080) is secured by a charge on the land and buildings as described in note 6.

9. Loans Payable

					2006		2005
	Current		Long-term		Total		Total
Bank loans	$	1,619,045	$	-	$	1,619,045	$	5,757,868
Bank loan #2		-		-		-		1,931,934
Note payable #1		2,107,620		-		2,107,620		2,302,494
Note payable #2		1,322,691		-		1,322,691		-
Notes payable (#3, 4, 5, 6, 7, 8, 9 & 10)		641,750		-		641,750		162,326
Government loans (#1, 2 & 3)		330,731		42,679		373,410		375,208
	$	6,021,837	$	42,679	$	6,064,516	$	10,529,830

Bank Loans

The bank loans bear interest at 4.5% to 21% and are due on demand. A bank loan of $299,938 (2005 - $276,774) is guaranteed by the chief executive officer as at June 30, 2006. Bank loans of approximately $4,000,000 secured by the land and building as described in note 6 were repaid with the proceeds from the sale of property during the quarter.

Bank Loan #2

The bank loan bears interest at 18% per annum and is due June 30, 2006. Bank loan was repaid during the quarter.

Note Payable #1

Note payable #1 to Korea Technology Credit Guarantee Fund, a government operated fund, bears interest at 21% per annum, is guaranteed by the chief executive officer, and is due on demand. As of the year end, the Company is in default of its payment.

Note Payable #2

Note payable #2 to Korea Technology Credit Guarantee Fund, a government operated fund, bears interest at 18% per annum and is due June 30, 2006. As of the period end, the Company is in default of its payment.

Notes Payable #3, 4, 5, 6, 7, 8, 9 and 10

The notes payable bear interest at 9% to 10% are unsecured, and due on demand.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

9. Loans Payable (cont'd)   Government Loan #1   The loan is non-interest bearing, unsecured, repayable in three annual payments of $21,798 and matured in February 2006. The Company is in arrears on the 2004, 2005 and 2006 annual payments.   Government Loan #2   The loan amount is non-interest bearing, unsecured, and is repayable when the projects related to the loan have been completed.   Government Loan #3   Loan is non-interest bearing, unsecured, and is repayable on demand as the Company completed the contract in 2005.

10. Advances from a Related Company   The advances from a company controlled by a person related to the chief executive officer bears interest at 9%, and is due on demand.

11. Advances from Shareholder   The advances from the chief executive officer, who is also a 32% shareholder, bears interest at 9% per annum and is repayable on demand.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

12. Capital Stock

Authorized:
480,000,000 common shares, par value $0.001
20,000,000 preferred shares, par value $0.001
	2006		2005
Issued:
35,375,180 (2005 - 3,536,880) common shares	$	32,166	$	3,537

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

On September 30, 2005, in accordance with a Share Exchange Agreement dated September 1, 2005, the Company entered into a reverse-takeover transaction with Eugene Science, Inc. (Korea), whereby 89.5% of all the outstanding shares of the Korean subsidiary were exchanged for 304,882,998 shares (30,488,300 post reverse split shares) of the Company. As a result of the transaction, the shareholders of Eugene Science, Inc. (Korea) will control 88.5% of the Company. While the Company is the legal parent, Eugene Science, Inc. (Korea), as a result of the reverse-takeover, became the parent company for accounting purposes.

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

On October 12, 2005, the Company issued 3,500,000 common shares, (350,000 common shares post reverse split) for $350,000 for consulting services provided.

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

On February 21, 2006 the company issued 1,000,000 restricted common shares for $83,000 for consulting services provided.

Stock Warrants and Options of the Korean Subsidiary

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

	2006	2005
Interest rate	7.7%	7.7%
Expected volatility	80.0%	80.0%
Expected life in years	4	5

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

12. Capital Stock (cont'd)   In 1999 the Board of Directors of the Korea subsidiary adopted an option plan to allow employees to purchase ordinary shares of the Company.   In October 1999, the share option plan granted 928,350 stock options for the common stock of the Company having a $0.0869 nominal par value each and an exercise price of $0.12. In 2000, 236,240 stock options were cancelled. In 2005, the balance of the 692,110 options were exercised.   In December 1999, 659,169 stock options were granted having a $0.0869 nominal par value each and an exercise price of $0.26. In 2005, the balance of the 659,169 options were exercised.   In October 2000, 971,999 stock options were granted having a $0.0869 nominal par value each and an exercise price of $1.93. In 2000, 5,087, in 2001, 162,848, in 2002, 40,712, and in 2003, 244,272 stock options were cancelled. As at March 31, 2006, 519,080 options are still outstanding.   In May 2001, 71,246 stock options were granted having a $0.0869 nominal par value each and an exercise price of $1.93. In 2002, 20,356 stock options were cancelled. As at March 31, 2006, 50,890 options are still outstanding.   In March 2002, 1,000,000 stock options were granted having a $0.0869 nominal par value each and exercise price of $1.96. 330,000, 110,000, 100,000 stock options were cancelled in 2002, 2003, and 2005 respectively. In addition, 31,190 options were granted in 2005. There was also a change in the exercise price to $1.84. As at March 31, 2006, 491,190 options are still outstanding.   In September 2002, 220,000 stock options were granted having a $0.0869 nominal par value each and an exercise price of $1.96. During 2005, 14,916 options were granted. In addition, the exercise price of the options was reduced to $1.84.   In March 2003, 350,000 stock options were granted having a $0.0869 nominal par value each and an exercise price of $1.96. In 2003 and 2004, 180,000 and 20,000 stock options were cancelled respectively. During 2005, 10,170 options were granted and the exercise price was reduced to $1.84. As at March 31, 2006, 160,170 stock options are still outstanding.   The options vest gradually over a period of 2 to 3 years from the date of grant. The term of each option shall not be more than 7 years from the date of grant. 285,806 and 651,360 options have vested in 2004 and 2005 respectively. However, as the exercise price of the options was substantially higher than the fair market value, therefore the options have no value and no benefits have been recorded since the 2000 plan.   The stock options have not been included in the calculation of the diluted earnings per share as their inclusion would be antidilutive.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

12. Capital Stock (cont'd)   The following table summarizes the stock option activity during the six months ended June 30, 2006 and 2005:

	2006		2005
Outstanding, beginning of period		1,456,246		2,751,249
Granted		-		-
Exercised		-		-
Cancelled		-		-
Outstanding, end of period		1,456,246		2,751,249
Weighted average fair value of options granted during the period	$	-	$	-
Weighted average exercise price of common stock options, beginning of period	$	1.88	$	1.12
Weighted average exercise price of common stock options granted in the period	$	-	$	-
Weighted average exercise price of common stock options, end of period	$	1.88	$	1.12
Weighted average remaining contractual life of common stock options		4 years		5 years

13. Income Taxes   The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. Corporate income tax rates applicable to the Company in 2006 and 2005 are 16.5 percent of the first 100 million Korean Won ($84,000) of taxable income and 29.7 percent on the excess. For the United States operation, the corporate tax rate is approximately 34%. Tax losses from the Korean subsidiary can be carried forward for five years to offset future taxable income. The U.S. tax losses can be carried forward for fifteen years to offset future taxable income. The company has accumulated approximately $15,958,355 of taxable losses, which can be used to offset future taxable income. The utilization of the losses expires in years 2006 to 2010.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

13. Income Taxes (cont'd)   Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company has deferred income tax assets arising from research and development expenses. For accounting purposes, these amounts are expenses when incurred. Under Korean tax laws, these amounts are deferred and amortized on a straight-line basis over 5 years.   The Company has deferred income tax assets as follows:

	2006			2005
Deferred income tax assets
Research and development expenses amortized over 5 years for tax purposes	$	207,040		$	313,080
Other timing differences		10,397			64,895
Net operating loss carryforwards		2,594,470			2,641,295
Valuation allowance for deferred income tax assets		(2,811,907	)		(3,019,270	)
	$	-		$	-

 

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

14. Major Customers   In 2006, the Company had four major customers which accounted for 93% of the total revenue, of which one single customer accounted for 44%. In 2005, sales to two of the major customers accounted for 86% of the total revenue.

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EUGENE SCIENCE, INC.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Unaudited

15. Related Party Transactions

	Finished Goods Sales		Net Rental/ Interest Income		Purchases		Accounts Receivable		Prepaid Assets		Accounts Payable		Rental Deposit
Company #1 - same major shareholder and chief executive officer
- 2005	$	93,627	$	45,057	$	176,319	$	2,359,804	$	-	$	-	$	98,462
- 2006	$	12,305	$	183,394	$	56,333	$	-	$	-	$	360,867	$	105,381
Company #2 - controlled by a relative of chiefexecutive officer
- 2005	$	31,475	$	-	$	-	$	2,700	$	-	$	-	$	-
- 2006	$	-	$	-	$	-	$	2,939	$	-	$	-	$	-
Company #3 - controlled by a relative of chief executive officer
- 2005	$	887	$	-	$	40	$	3,035	$	-	$	-	$	-
- 2006	$	196	$	-	$	43,716	$	1,043	$	-	$	114,727	$	-

The Company with the same major shareholder and chief executive officer has negative working capital of approximately $4 million and a loss of approximately $1 million in the year ended December 31, 2005. The related company has an agreement with the Company to sell its investment in the Korean subsidiary and use the proceeds to repay its loan and accounts payables. As a result, the company has written off the receivables to the extend of the expected proceeds from the sale of the shares.

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

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Item 2. Management’s Discussion and Analysis or Plan of Operation.

This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Discussions containing forward-looking statements may be found in the material set forth under “Management’s Discussion and Analysis or Plan of Operation” and in other sections of this Quarterly Report on Form 10-QSB. Words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report on Form 10-QSB, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report on Form 10-QSB. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations. Readers are urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including, without limitation, the audited financial statements and the notes thereto and disclosures made under the captions “Management’s Discussion and Analysis or Plan of Operation,” “Consolidated Financial Statements” and “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.

Overview

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

Going Concern

Our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern, in its report for the fiscal year ended December 31, 2005, based on significant operating losses that we incurred and the fact that we do not have adequate working capital to finance our day-to-day operations. The Company's continued existence depends upon the success of our efforts to raise additional capital necessary to meet our obligations as they become due and to obtain sufficient capital to execute our business plan. We intend to obtain capital primarily through issuances of debt or equity. There can be no degree of assurance that we will be successful in completing additional financing transactions.

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

Results of Operations

Revenues

Comparison of the Three Months Ended June 30, 2006 and 2005

Revenues increased 120% to $220,397 for the three months ended June 30, 2006, as compared to revenues of $100,082 for the three months ended June 30, 2005. This increase is attributable primarily to the sale and distribution of our dietary supplements, such as our CholZero capsules, in the United States, which began during the second quarter of 2006. Our merchandise revenues have not changed measurably from the comparable period of the prior year.

Comparison of the Six Months Ended June 30, 2006 and 2005

Revenues decreased 33% to $342,840 for the six months ended June 30, 2006, as compared to revenues of $516,314 for the six months ended June 30, 2005. This decrease is attributable primarily to a decrease in our merchandise revenues from the sale of crude cooking oils. We have temporarily stopped our crude cooking oil trading in order to concentrate on our primary business area, manufacturing and distributing our cholesterol-lowering products. The increase in sales of our cholesterol-lowering dietary supplements has been reflected in the increase in revenues for the three months ended June 30, 2006 as compared to revenues during the three months ended June 30, 2005.

Operating Expenses

Comparison of the Three Months Ended June 30, 2006 and 2005

Cost of Sales

Cost of sales increased 98% to $81,570 for the three months ended June 30, 2006, as compared to cost of sales of $41,177 for the three months ended June 30, 2005. This increase is attributable primarily to an increase in our manufacturing revenues for the three months ended June 30, 2006 as compared to the same period of the prior year. We have not had a significant change in our merchandise cost of sales for the three months ended June 30, 2006 as compared to the same period of the prior year. Our gross margin for the three months ended June 30, 2006 was approximately 37% of our gross revenues, as compared to a gross margin of approximately 59% of our gross revenues for the three months ended June 30, 2005. The change in our gross margin is due primarily to a decrease in our manufacturing gross margin.

Total Expenses

Our total expenses for the three months ended June 30, 2006 were $731,297 as compared to $538,622 for the three months ended June 30, 2005, an increase of $192,675. This change is due primarily to an increase in professional fees, salaries and research and development expenses owed by us.

Other Income (Expenses)

Other income increased to $2,032,582 for the three months ended June 30, 2006, as compared to other expenses of $481,275 for the three months ended June 30, 2005. This increase in other income resulted primarily from a gain on the sale of our real property in Bucheon, Kyonggi-Do, Korea. Interest expense increased 33% to $737,782 for the three months ended June 30, 2006, as compared to interest expense of $551,947 for the three months ended June 30, 2005. This increase is attributable primarily to interest expenses incurred as a result of the cancellation of a contract regarding sale of our real property in Bucheon, Kyonggi-Do, Korea, and to interest expenses on our outstanding debt. Upon the sale of our real property in Bucheon, Kyonggi-Do, Korea, we had to cancel an existing sales agreement with Wando Fisheries Co. Ltd., or Wando Fisheries, and repay the outstanding principal balance and all accrued and unpaid interest under a loan from Wando Fisheries in order to sell our real property to another buyer. In addition, all of our bank loans were in default as of June 30, 2006. The interest rates on such loans range from 15% to 18%. We are currently in negotiations with our lenders to settle our outstanding debts, and we intend to enter into settlement agreements with such lenders during the second half of our 2006 fiscal year.

Comparison of the Six Months Ended June 30, 2006 and 2005

Cost of Sales

Cost of sales decreased 60% to $165,070 for the six months ended June 30, 2006, as compared to cost of sales of $413,770 for the six months ended June 30, 2005. This decrease is attributable primarily to a decrease in both our manufacturing cost of sales and our merchandise cost of sales in response of a decrease in our manufacturing and merchandise revenues. The decrease in our merchandise cost of sales was greater than that of our manufacturing cost of sales because of a decrease in our crude cooking oil sales, which constituted most of the merchandise revenues for the six months ended June 30, 2005. Our gross margin for the six months ended June 30, 2006 was approximately 52% of our gross revenues, as compared to a gross margin of approximately 20% of our gross revenues for the six months ended June 30, 2005. The change in our gross margin is due primarily to a higher margin rate from sale of our dietary supplements, such as our CholZero capsules, which increased for the six months ended June 30, 2006.

Total Expenses

Our total expenses for the six months ended June 30, 2006 were $1,410,660 as compared to $1,249,392 for the six months ended June 30, 2005, an increase of 13%, or $161,268. This change is due primarily to an increase in professional fees and salaries owed by us and to an increase in our bad debts.

Other Income (Expenses)

Other income increased to $1,474,505 for the six months ended June 30, 2006, as compared to other expenses of $760,293 for the six months ended June 30, 2005. This increase in other income resulted primarily from a gain on the sale of our real property in Bucheon, Kyonggi-Do, Korea. Interest expense increased 40% to $1,177,221 for the six months ended June 30, 2006, as compared to interest expense of $835,351 for the six months ended June 30, 2005. This increase is attributable primarily to interest expanses incurred as a result of the cancellation of a contract regarding the sale of our real property and interest expenses incurred upon our loans. Upon the sale of our real property in Bucheon, Kyonggi-Do, Korea, we had to cancel an existing sales agreement with Wando Fisheries and repay the outstanding principal balance and all accrued and unpaid interest under a loan from Wando Fisheries.

Liquidity and Capital Resources

Comparison of the Six Months Ended June 30, 2006 and 2005

For the six months ended June 30, 2006, we had cash and cash equivalents of approximately $25,911 and negative working capital of approximately $12,901,251. For the six months ended June 30, 2005, we had cash and cash equivalents of approximately $58,018 and negative working capital of approximately $13,133,207. This decrease in our cash and working capital was due primarily to the repayment of certain bank loans during the six months ended June 30, 2006 upon the sale of our real property in Bucheon, Kyonggi-Do, Korea.

Cash Used In Operating Activities

Net cash used in operating activities increased 767% to $2,889,624 for the six months ended June 30, 2006, as compared to net cash of $333,156 used in operating activities during the six months ended June 30, 2005. This increase of $2,556,468 resulted primarily from a gain on the sale of our real property in Bucheon, Kyonggi-Do, Korea during the six months ended June 30, 2006.

Cash Used In/Provided By Investing Activities

Net cash used in investing activities increased 207% to $33,168 for the six months ended June 30, 2006, as compared to net cash of $30,913 provided by investing activities during the six months ended June 30, 2005. This increase of $64,081 resulted primarily from a decrease in the carrying value of the companies in which we have invested.

Cash Provided By Financing Activities

Net cash provided by financing activities increased 801% to $2,923,872 for the six months ended June 30, 2006, as compared to net cash provided by financing activities of $324,232 during the six months ended June 30, 2005. This increase of $2,559,640 resulted primarily from the sale of our real property in Bucheon, Kyonggi-Do, Korea.

Bank Loans

Since 1999, we have borrowed an aggregate principal amount of $3,889,259 from the Industrial Bank of Korea. These loans bear interest at rates of 4.5% to 18% per annum and are due and payable on demand. A portion of these loans was secured by our real property. Loans in the aggregate principal amount of $1,301,919 are guaranteed by the Korea Technology Credit Guarantee Fund, or KOTEC, a government-operated fund. During the six months ended June 30, 2006, we repaid all of the outstanding principal and a portion of the accrued and unpaid interest owed under these loans. At June 30, 2006, the accrued and unpaid interest owed under these loans was approximately $1,272,633. We were in default under these loans as of December 31, 2004 and, as such, the Industrial Bank of Korea requested that our real property be auctioned to repay the loan. The Industrial Bank of Korea later agreed to cancel the auction and released our property as security upon our payment of administrative costs in the amount of $173,000. As noted above, we used the proceeds from the sale of our real property in Bucheon, South Korea to repay all outstanding principal and a portion of the accrued and unpaid interest owed to the Industrial Bank of Korea.

In December 2004, we obtained a short-term loan from the National Agricultural Cooperative Federation, or NACF, in the principal amount of $1,946,105. This loan has an interest rate of 4.6% per annum and was due on December 22, 2005. This loan is guaranteed by KOTEC. At June 30, 2006, the loan had not been repaid to NACF and the aggregate outstanding principal balance and accrued and unpaid interest on such loan was approximately $1,322,691.

In September 2002, we obtained a short-term loan from ChoHeung Bank in the principal amount of $278,805. This loan has an interest rate of 9.5%, was due on August 1, 2004 and was personally guaranteed by Mr. Noh, our president, chief executive officer, board member and principal stockholder. At June 30, 2006, the aggregate principal balance and accrued and unpaid interest on such loan was approximately $418,168. In July 2001 and December 2002, we entered into loan arrangements with Kookmin Bank. Each loan is for $1,000,000, is unsecured and has interest rates of 6.22% and 11.22% per annum, respectively. Both loans were due and payable on November 15, 2004. At June 30, 2006, the aggregate principal balance and accrued and unpaid interest on such loans was approximately $2,063,843.

Notes

On October 9, 2004, we issued KOTEC a note in connection with its payout as guarantor of our convertible debenture described below. The note bears interest at a rate of 21% per annum, is guaranteed by Mr. Noh, our president, chief executive officer, board member and significant stockholder, and is due and payable on demand. To date, KOTEC has made no demands for payment of this note. At June 30, 2006, the outstanding balance of the note was approximately $2,107,620. Interest payments on the note are classified in our financial statements as “Accounts Payable.”

In October 2003, we issued a note in the principal amount of $47,772, bearing interest at a rate of 9% per annum, to Jae Ho Lee, the president of UcoleBio Corp., an entity in which Eugene Science Korea, our subsidiary, has a 73% ownership interest. The note is due and payable on demand and, to date, Mr. Lee has made no demands to us for payment of this note. The outstanding balance of this note was $51,627 at June 30, 2006.

In February 2002, we issued a note in the principal amount of $100,000, bearing interest at a rate of 8% per annum, to Kyungioils Co., Ltd. The note is due and payable on demand and, to date, no demands have been made to us for payment of this note. The outstanding balance on this note was $19,706 at June 30, 2006.

Government Loans

On March 2, 2003, we received a non-interest bearing, unsecured loan from the South Korean government in the principal amount of $61,779. Pursuant to its terms, the loan was to be repaid in three annual installments of $20,593, beginning February 26, 2004. The loan matured in its entirety in February 2006. At June 30, 2006, we were $66,764 in arrears under this loan.

We received a $316,181 loan from the South Korean government in connection with certain research and development projects over the period from 1999 to 2002. The projects were not successful and, therefore, we are obligated to repay to the South Korean government the principal amount of the loan. We repaid $21,034 of the amount due under this loan in our 2004 fiscal year. At June 30, 2006, we were $306,646 in arrears under this loan arrangement.

Critical Accounting Policies

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

BASIS OF PRESENTATION. The consolidated financial statements include our accounts and the accounts of UcoleBio Corp, a company in which Eugene Science Korea holds a 74% ownership interest. Intercompany accounts and transactions have been eliminated on consolidation. These consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the year.

UNIT OF MEASUREMENT. The United States Dollar has been used as the unit of measurement in our consolidated financial statements.

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

REVENUE RECOGNITION. We generate revenues from sales of manufactured goods and merchandise, as well as rental of the company's buildings. Revenues from products sales are recognized in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," or SAB No. 101, when delivery has occurred provided there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivable is probable.

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

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

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

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

Building	20-40 years
Machinery	10 years
Vehicles	5 years
Furniture and equipment	3-5 years

INTANGIBLE ASSETS. Intangible assets such as costs of obtaining industrial rights and patents are stated at cost, net of depreciation computed using the straight-line method over 5 to 10 years.

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

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

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

Recent Accounting Pronouncements

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

Risk Factors

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

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

As a result of our substantial historical operating losses, limited revenues and working capital and our capital needs, our auditors added a going concern qualification in their report contained in our audited consolidated financial statements for the fiscal year ended December 31, 2005 which raises substantial doubt about our ability to continue as a going concern. While we have relied principally in the past on external financing to provide liquidity and capital resources for our operations, we can provide no assurance that cash generated from our operations together with cash received in the future from external financing will be sufficient to enable us to continue as a going concern.

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

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

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

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

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

In the six months ended June 30, 2006, sales to four major customers accounted for 90% of our total revenue. We may fail to capture a share of the market for such products. Because we are dependent on a limited number of customers, any decrease or elimination of such customers’ purchases could materially harm our business.

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

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

We may experience difficulty in entering international markets.

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

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

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

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

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

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

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

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

•expected changes in regulatory requirements and tariffs;

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

•longer accounts receivable collection cycles in certain foreign countries;

•adverse economic or political changes;

•unexpected changes in regulatory requirements;

•more limited protection for intellectual property in some countries;

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

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

•potentially adverse tax consequences of overlapping tax structure; and

•foreign currency fluctuations.

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

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

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

Our Board of Directors consists of four members. The Board of Directors as a whole performs the functions of an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. None of the directors is considered "independent" under Rule 4200(a)(15) of the National Association of Securities Dealers listing standards, and neither qualifies as an audit committee financial expert as defined in Item 401 of Regulation S-B. Accordingly, we will not be able to list our common stock with a nationally recognized exchange until we recruit independent directors to the Board and restructure our Board to comply with various requirements currently in place by those self-regulating organizations, and as a result, it may be difficult for you to sell our common stock.

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

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

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

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

Risks related to our industry

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

The formulation, manufacturing, packaging, labeling, advertising, distribution, and sale of functional foods and food additives, such as those sold by us, are subject to regulation by a number of federal, state and local agencies, including the United States Food and Drug Administration, or FDA, and the United States Federal Trade Commission, or FTC, as well as government agencies in other countries where we may operate. Among other matters, this regulation is concerned with product safety and claims made with respect to a product's ability to provide health-related benefits. These agencies have a variety of procedures and enforcement remedies available to them, including the following:

·   initiating investigations;

·   issuing warning letters and cease and desist orders;

·   requiring corrective labeling or advertising;

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

·   seeking injunctive relief or product seizures; and

·   imposing civil penalties or commencing criminal prosecution.

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

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

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

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

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

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

Risks related to our common stock

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

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

Our common stock price is highly volatile.

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

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

·   actual or anticipated fluctuations in our quarterly operating results;

·   announcements of technological innovations;

·   changes in financial estimates by securities analysts;

·   conditions or trends in our industry; and

·   changes in the market valuations of other comparable companies.

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

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

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

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

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

We do not foresee paying dividends in the near future.

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

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

As of June 30, 2006, our officers and directors and their affiliates owned approximately 35.64% of our outstanding voting shares. As a result, our officers and directors are able to exert considerable influence over the outcome of any matters submitted to a vote of the holders of our common stock, including the election of our Board of Directors. The voting power of these stockholders could also discourage others from seeking to acquire control of us through the purchase of our common stock, which might depress the price of our common stock.

Item 3. Controls and Procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report, pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this quarterly report, were effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires management's review and evaluation of our internal controls, and an attestation of the effectiveness of these controls by our independent registered public accounting firm beginning with our Annual Report on Form 10-KSB for the fiscal year ending December 31, 2007. We plan to dedicate significant resources, including management time and effort, and to incur substantial costs in connection with our Section 404 assessment. The evaluation of our internal controls will be conducted under the direction of our principal executive officer and principal financial officer. We will continue to work to improve our controls and procedures, and to educate and train our employees on our existing controls and procedures in connection with our efforts to maintain an effective controls infrastructure.

PART II-OTHER INFORMATION

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

On April 13, 2006, the majority of our stockholders, by written consent in lieu of a meeting, approved and adopted our 2006 Stock Incentive Plan, which reserved 4,000,000 shares of our common stock for issuance pursuant to the terms and conditions of the plan.

Item 6. Exhibits.

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

Exhibit Number	Description
10.1	2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
10.2	Form of Stock Option Agreement (I) under the 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
10.3	Form of Stock Option Agreement (II) under the 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

SIGNATURES

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

	EUGENE SCIENCE, INC.
Date: August 21, 2006	By:	/s/ SEUNG KWON NOH
		Seung Kwon Noh President, Chief Executive Officer and Director (Principal Executive Officer)

Date: August 21, 2006	By:	/s/ JAE HONG YOO
		Jae Hong Yoo Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit Index

Exhibit Number	Description
10.1	2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
10.2	Form of Stock Option Agreement (I) under the 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
10.3	Form of Stock Option Agreement (II) under the 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on May 31, 2006).
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.