UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

¨	TRANSITION REPORT PURSUANT TO 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.

(Exact name of registrant as specified in its charter)

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

8TH FLOOR, LG PALACE BUILDING, 165-8 DONGGYO-DONG, MAPO-GU, SEOUL, KOREA

(Address of principal executive offices)

Registrant’s telephone number, including area code: 82-2-338-6284

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company þ

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

The number of shares of the registrant’s common stock outstanding as of March 31, 2008 was 46,846,434 shares.

EUGENE SCIENCE, INC. AND SUBSIDIRIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

CONTENTS	PAGE

FINANCIAL STATEMENTS

Consolidated Balance Sheets	4

Consolidated Statements of Operations and Comprehensive Loss	6

Consolidated Statements of Stockholders’ Deficit	7

Consolidated Statements of Cash Flows	8

Notes to Consolidated Financial Statements	9 - 23

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND 2007

(Unaudited)

ASSETS

	2008		2007

Current assets:
Cash and cash equivalents (Note 2)	$	17,223	$	19,915
Restricted cash (Note 3)		-		9,177
Accounts receivable (Notes 2 and 17)		177,563		69,738
Inventories (Note 2)		21,279		15,175
Due from related parties (Note 4)		60,697		-
Receivable from unsettled contract (Note 6)		629,972		771,149
Prepaid expenses and other current assets (Note 7)		190,591		108,829

Total current assets		1,097,325		993,983

Property and equipment (Note 5)		1,386,428		1,130,434

Other assets:
Investments (Note 8)		334		405
Intangible assets (Note 2)		126,654		176,059
Deposits		7,313		85,434

Total other assets		134,301		261,898

Total assets	$	2,618,054	$	2,386,315

See accompanying notes to the consolidated financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND 2007

(Unaudited)

LIABILITIES AND STOCKHOLDER'S DEFICIT

	2008			2007
Current liabilities:
Accounts payable and accrued expenses	$	2,916,470		$	3,288,807
Accrued interest payable		4,653,863			4,685,672
Deposit from customers		126,413			145,251
Loan payable, current portion (Note 9)		4,747,906			7,112,750
Convertible debenture (Note 10)		2,659,235			-
Due to related parties (Note 11)		198,483			706,875

Total current liabilities		15,302,370			15,939,355

Long-term liabilities:
Accrued severance benefits (Note 12)		290,299			679,912
Rental deposits		60,692			63,755
Long-term debt, net of current portion (Note 9)		2,044,422			22,440

Long-term liabilities		2,395,413			766,107

Total liabilities		17,697,783			16,705,462

Stockholders' deficit:
Common stock (Note 13)		41,116			40,316
Additional paid-in-capital		16,579,251			16,579,251
Accumulated other comprehensive loss		(2,439,514	)		(2,128,228	)
Accumulated deficit		(29,260,582	)		(28,810,486	)

Total stockholders' deficit		(15,079,729	)		(14,319,147	)

Total liabilities and stockholders' deficit	$	2,618,054		$	2,386,315

See accompanying notes to the consolidated financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

	2008			2007

Net sales (Note 15)	$	123,420		$	154,767

Cost of goods sold (Note 15)		81,327			37,740

Gross profits		42,093			117,027

Operating expenses		432,184			408,754

Operating losses		(390,091	)		(291,727	)

Other income (expenses):
Loss from sale of property		-			(275	)
Net rental expense		-			(7,120	)
Miscellaneous income (expense)		10,845			(2,982	)
Net interest expenses		(46,960	)		(295,375	)
loss from sale of investment securities		-			(476,914	)
Allowance for related party loans		-			(1,356,179	)

Net other expenses		(36,115	)		(2,138,845	)

Loss before income taxes		(426,206	)		(2,430,572	)

Income taxes (Note 14)		-			-

Net losses		(426,206	)		(2,430,572	)

Other comprehensive losses:
Foreign currency translation adjustment		829,780			1,090,237

Comprehensive income (loss)	$	403,574		$	(1,340,335	)

Basic and diluted loss per share	$	(0.01	)	$	(0.06	)

Weighted average number of shares outstanding during the periods – basic and diluted (Note 13)		41,115,705			40,315,705

See accompanying notes to the consolidated financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

					Paid in		Accumulated
					Capital in		Other
	Common Stock				Excess of		Comprehensive			Accumulated
	Shares		Amount		Par value		Income (loss)			Deficit			Total

Balance, January 1, 2007 (Note 13)		40,315,705	$	40,316	$	16,579,251	$	(3,218,465	)	$	(26,379,914	)	$	(12,978,812	)

Foreign currency translation adjustment		-		-		-		1,090,237			-			1,090,237

Net loss		-		-		-		-			(2,430,572	)		(2,430,572	)

Balance, March 31, 2007		40,315,705	$	40,316	$	16,579,251	$	(2,128,228	)	$	(28,810,486	)	$	(14,319,147	)

Balance, January 1, 2008 (Note 13)		41,115,705	$	41,116	$	16,579,251	$	(3,307,874	)	$	(28,834,376	)	$	(15,521,883	)

Foreign currency translation adjustment		-		-		-		868,360			-			868,360

Net loss		-		-		-		-			(426,206	)		(426,206	)

Balance, March 31, 2008		41,115,705	$	41,116	$	16,579,251	$	(2,439,514	)	$	(29,260,582	)	$	(15,079,729	)

See accompanying notes to the consolidated financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

	2008			2007
Cash flows from operating activities:
Net loss	$	(426,206	)	$	(2,430,572	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		57,620			28,668
Provision for loss on uncollectible related party loans		-			1,356,179
Loss on investment		-			476,914
(Increase) decrease in assets:
Restricted cash		-			(3,359	)
Accounts receivable		(2,059	)		7,326
Inventory		18,673			18,924
Prepaid expenses and other assets		(34,466	)		73,080
Increase (decrease) in liabilities:
Accounts payable		(25,564	)		(176,969	)
Accrued pension payable		(25,933	)		86,931
Accrued interest payable		(194,358	)		-
Cash used in operating activities		(632,293	)		(562,878	)

Cash flows from investing activities:
Investment in securities		38,652			(133,803	)
Deposit		(1,942	)		(3,000	)
Intangible assets		15,034			12,122
Cash provided by (used in) investing activities		51,744			(124,681	)

Cash flows from financing activities:
Net advances from (to) shareholder and officers		125,029			(199,080	)
Net advance to related party		-			(105,968	)
Net deposits from (to) customer		27,462			(172,247	)
Proceeds receivable from sale of assets		20,987			1,261,433
Loan payable		(891,755	)		(86,036	)
Convertible debenture		409,235			-
Cash provided by (used in) financing activities		(309,042	)		698,102

Foreign currency translation adjustment		868,360			341
Net increase (decrease) in cash and cash equivalents		(889,591	)		10,543
Cash and cash equivalent – beginning of period		38,454			9,031

Cash and cash equivalent – end of period	$	17,223		$	19,915

Supplemental Information:
Cash paid during the period for: Interest paid	$	-		$	-

See accompanying notes to the consolidated financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Note 1 – Nature of Business and Going Concern

Description of Business

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

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

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

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

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. With the loss continuing, the Company’s net loss amounted to $426,000 for the period ended March 31, 2008 and its working capital deficiency was $14,205,000 as of March 31, 2008. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

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

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

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

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

Note 2 – Significant Accounting Policies

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

Basis of Financial Statement Presentation

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

Basis of Consolidation

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

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

Minority interests are recorded to the 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.

Use of Estimates

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

Revenue Recognition

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

Revenue from product sales is recognized in accordance with Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101").

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

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

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

Government Grants

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

Currency Translation

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

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

Cash and Cash Equivalents

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

Allowance for Doubtful Accounts

Allowance for doubtful accounts is computed based on the Company’s historical experience and management’s analysis of possible bad debts. Accounts receivable are shown net of allowance for doubtful accounts of $-0- and $66,984 at March 31, 2008 and 2007, respectively.

Properties and Equipment

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

Building and improvements		20-40 years
Machinery and equipment		10 years
Vehicles		5 years
Office furniture and fixtures		3-5 years

Intangible Assets

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

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. The components of inventories at March 31, 2008 and 2007 were as follows:

	2008		2007

Raw materials	$	2,885	$	-
Finished goods		18,394		15,175

Total	$	21,279	$	15,175

Investments

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

Financial Instruments

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

Concentration of Credit Risk

SFAS No. 105, Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk, requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash, cash equivalents and short-term investments with major Korean financial institutions.

The Company provides credit to its customers in the normal course of operations. It carries out, on a continuing basis, credit checks of its customers, and maintains allowance for credit losses contingent upon management’s forecasts. For other receivables, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.

Concentration of credit risk arises when a group of clients having similar characteristics such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Comprehensive Income

The Company records its other comprehensive income under SFAS No. 130, Reporting of Comprehensive Income. SFAS 130 which establishes standards for reporting and presentation of comprehensive income and its components. The Company’s other comprehensive income represents unrealized gain or loss on available-for-sale marketable securities and foreign currency translation adjustment.

Earnings per Share

SFAS No. 128, “Earnings per Share” requires disclosure on the financial statements of basic and diluted earnings per share. Basic earning (loss) per share is computed by dividing the net earning (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earning (loss) per share is determined using the weighted average number of common shares outstanding during the year, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonable estimated.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standard Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are effective for the fiscal years beginning after December 15, 2006. The Company does not expect that the adoption of FIN 48 will have a significant effect on its financial statements.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB No 108”). SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. Under SAB No. 108, the Company should quantify errors using both a balance sheet and income statement approach (“dual approach”) and evaluate whether either approach results in a misstatement that is material when all relevant quantitative and qualitative factors are considered. The adoption of SAB 108 did not have any impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrevocable; and it is applied only to entire instruments and not to portions of instruments. SFAS No. 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157 "Fair Value Measurements.” Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. The Company is currently evaluating the impact, if any, adoption of SFAS No. 159 will have on its financial statements.

Reclassification

Certain accounts in the 2007 consolidated financial statements have been reclassified for comparative purposes to conform with the presentation in the current year consolidated financial statements. Total equity and net income are unchanged due to these reclassifications.

Note 3 – Restricted Cash

The Company had a restricted cash of $9,177 at March 31, 2007, which was pledged as security for future purchases from a vendor. No restricted cash at March 31, 2008.

Note 4 – Due from Related Party

Loans receivable from an affiliate by virtue of common ownership were carried at $60,697 as of March 31, 2008. These loans are pledged by marketable securities, and bear interest at 9% and are due on demand.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Note 5 – Properties and Equipment

Properties and equipment consisted of the following at March 31:

	2008		2007

Buildings	$	814,761	$	896,837
Equipment and vehicles		880,675		772,519
Furniture and fixtures		894,049		1,078,559
Construction in progress		245,342		-
		2,834,827		2,747,915

Less: accumulated depreciation		1,448,399		1,617,481

Net property and equipment	$	1,386,428	$	1,130,434

Depreciation expenses for the periods ended March 31, 2008 and 2007 were $34,061 and $28,668, respectively.

Note 6 – Receivables from Sale of Assets

As of March 31, 2008 and 2007, the Company had outstanding proceeds receivable of $629,972 and $771,149, respectively, from the sales of real estate property and machinery and equipment in August 2006. The receivable is due on demand and no interest has been accrued on the outstanding balance.

Note 7 – Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following at March 31:

	2008		2007

Prepaid fees for certain patent registration and related legal costs	$	60,583	$	65,583
Advance payment to vendors		130,008		43,246

Total	$	190,591	$	108,829

Note 8 – Investments

The following is a summary of investments at March 31:

	2008		2007

Other marketable securities	$	334	$	405

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Note 9 – Loans Payable

Loans payable consisted of the following at March 31:

	2008		2007
Notes payable to Kook Min Bank with interest at 18% to 21%, unsecured, due on demand, and guaranteed by chief executive officer. These loans are in default.	$	1,266,182	$	1,330,097

Note payable to Korea Technology Credit Guarantee Fund (KOTEC), a government operated fund, with interest at 21%, and guaranteed by corporate officer. The loan was restructured in July 2007 and the detail terms are noted below. *(A)*		2,023,060		2,114,160

Note payable to National Agricultural Cooperative Federation (NACF) with interest at 4.6% to 18%, unsecured, due on demand and guaranteed by KOTEC and corporate officer. The loan is in default.		1,269,623		1,344,731

Note payable to Shinhan Bank with interest at 18% due on demand. The loan is in default.		287,905		302,437

Note payable to a customer (Hokuyo) with interest at 3%, unsecured, and due on demand. The note is in default.		1,905,280		2,001,455

Government loan, non-interest bearing, unsecured, payable on demand.		40,278		42,310

Total notes payable		6,792,328		7,135,190

Less: current portion		4,747,906		7,112,750

Long-term debt, net of current	$	2,044,422	$	22,440

(A)– In July 2007, the Company executed a Debt Rescheduling Agreement with Korea Technology Credit Guarantee Fund (KOTEC), in which the Company made a partial payment of $82,000 and KOTEC agreed to convert the remaining balance into a long term debt. The new loan is payable in monthly installments of $18,527 (KRW 17,093,620) over 10-year period beginning in 2010.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Following is a summary of principal maturities of notes payable over the next five years:

Years ending December 31,	Amount

2008	$	4,679,808
2009		-
2010		92,635
2011		222,324
2012 and thereafter		1,797,561

Total	$	6,792,328

Note 10 – Convertible Debenture

In July 2007, the Company issued $2,250,000 secured convertible notes with warrants to purchase 3,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share. The notes bear interest at 10% per annum, and, at the option of the purchasers, are convertible into shares of the common stock during the first six months following the issue date of the notes at a conversion price of $0.65. The Company intends to use the proceeds to complete the build out of its new 22,000-square-foot corporate production and research facility scheduled for opening in late November, restructure bank debt, advance its patented production process toward commercialization, and general corporate purposes.

In November 2007, the Company issued $600,000 secured convertible notes with warrants to purchase 1,560,000 shares of the Company’s common stock at an exercise price of $0.25 per share. The notes bear interest at 10% per annum, and, at the option of the purchaser, are convertible into shares of the common stock during the first six months following the issue date of the notes at a conversion price of $0.65. The Note matures on May 27, 2008, subject to one 6 months extension. The Company intends to use the proceeds to restructure bank debt, advance its patented production process toward commercialization, and general corporate purposes.

Note 11 – Due to Related Parties

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

	2008		2007
Unsecured short term advance payable to shareholders with interest at 9% per annum, due on demand.	$	49,557	$	47,817
Unsecured short-term advances payable to corporate officers and employees with interest at 9% per annum, due on demand.		148,926		659,058

Total	$	198,483	$	706,875

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Note 12 – Accrued Severance Benefits

Employees and directors with one year or more of service are entitled to receive a lump-sum payment upon termination of their employment based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors are to terminate their employment as of the balance sheet date. The accrued severance benefits payable at March 31, 2008 and 2007, were $292,377 and $610,844, respectively.

Severance benefit expenses incurred for the three months ended March 31, 2008 and 2007 were $95,723 and $26,081, respectively.

Note 13 – Capital Stock

Total shares authorized:

480,000,000 shares of Common Stock, par value $0.001

20,000,000 shares of Preferred Stock, par value $0.001

Shares issued and outstanding:	Shares		Amount

Common stock at, March 31, 2008		41,115,705	$	41,116

March 31, 2007		40,315,705	$	40,316

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

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

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

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

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

On October 25, 2007, the Company issued 800,000 shares of common stock for various consulting services provided.

Stock Compensation Plan

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

	Period ended March 31,
	2008			2007

Dividend yield		0.0	%		0.0	%
Expected volatility		80	%		80	%
Risk-free interest rate		4.3	%		4.3	%
Expected life of the option term (in years)		10			10
Forfeiture rate		7.0	%		7.0	%

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

Expected Volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical volatility since its expected volatility because the current business strategy, which is not expected to change materially, is fundamentally consistent with past strategy. The volatility has averaged at 80%.

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

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

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

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

In May 2006, the Plan granted 3,600,000 stock options for common stock having a $0.01 nominal par value each and exercise price of $0.50 to $1.36. In October 2006, 3,350,000 stock options were exercised, 250,000 options were canceled and no option is outstanding as of March 31, 2008.

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

No option is outstanding as of March 31, 2008 and for disclosure requirements set forth above under SFAS No 123(R), during the period ended March 31, 2008, the Company recognized no additional stock-based compensation for options vested.

Stock Options of the Subsidiary in Korea

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

	Period ended March 31,
	2008			2007

Dividend yield		0	%		0	%
Expected volatility		80	%		80	%
Risk-free interest rate		4.3	%		7.7	%
Expected life of the option term (in years)		2			3

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

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

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

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

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

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

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

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

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

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

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

The following table summarizes the stock option activity during the periods ended March 31:

	2008				2007
	Shares		Weighted- Average Excise Price		Shares		Weighted- Average Excise Price

Outstanding, beginning of period		1,456,246	$	1.88		1,456,246	$	1.88
Granted		-		-		-		-
Exercised		-		-		-		-
Cancelled		-		-		-		-
Outstanding, end of period		1,456,246	$	1.88		1,456,246	$	1.88

Weighted average remaining contractual life of common stock options		2 years				3 years

Note 14 – Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. Corporate income tax rates applicable to the Company in 2008 and 2007 were 16.5% of the first 100 million Korean Won ($84,000) of taxable income and 29.7% on the excess. For the United States operation, the corporate tax rate is approximately 34%. Tax losses from the Korean subsidiary can be carried forward for five years. The U.S. tax losses can be carried forward for fifteen to twenty years. The company has accumulated approximately $24,686,000 of taxable losses which can be used to offset future taxable income. The utilization of the losses expires in years 2008 through 2027.

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.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

The Company has deferred income tax assets at March 31, 2008 and 2007 were as follows:

	2008			2007
Deferred income tax assets:
Research and development expenses amortized over 5 years for tax purposes	$	-		$	150,722
Other timing differences		-			2,876
Net operating loss carryforwards		4,073,190			3,392,570
		4,073,190			3,546,168
Valuation allowance for deferred income tax assets		(4,073,190	)		(3,546,168	)

	$	-		$	-

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

Note 15 – Business Segment Information

Sales and cost of goods sold of the Company’s segments for the periods ended March 31, 2008 and 2007 were as follows:

	2008		2007
Sales:
Manufacturing	$	123,420	$	57,941
Merchandise		-		96,826
	$	123,420	$	154,767

Cost of Sales:
Manufacturing	$	81,327	$	18,638
Merchandise		-		19,102
	$	81,327	$	37,740

Note 16 – Major Customers

Sales to one major customer accounted for all of the Company’s total revenue for the period ended March 31, 2008.

EUGENE SCIENCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(Unaudited)

Note 17 – Related Party Transactions

Significant transactions with companies related or affiliates by common control for the periods ended and as of March 31, 2008 and 2007 are summarized as follows:

	Sales		Net rental/ Interest income		Purchases		Accounts Receivable		Accounts Payable		Rental Deposit

Company related by common control
2008	$	-	$	-	$	-	$	-	$	-	$	-
2007	$	49,085	$	-	$	-	$	-	$	247,417	$	63,755

Companies affiliated by common control
2008	$	-	$	-	$	-	$	-	$	-	$	-
2007	$	201	$	1,582	$	-	$	4,542	$	73,179	$	-

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q 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-Q. 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-Q, 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-Q. 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, 2007.

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, 2007, based on significant operating losses that we incurred and the fact that we do not have adequate working capital to finance our day-to-day operations. Our continued existence depends upon the success of our efforts to raise additional capital necessary to meet our obligations as they become due and to obtain sufficient capital to execute our business plan. We intend to obtain capital primarily through issuances of debt or equity. There can be no degree of assurance that we will be successful in completing additional financing transactions.

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

Results of Operations

Revenue

Comparison of the Three Months Ended March 31, 2008 and 2007

Our total revenue decreased 20%, or $31,347, to $123,420 for the three months ended March 31, 2008 as compared to $154,767 for the three months ended March 31, 2007. The decrease in total revenue for the three months ended March 31, 2008 was primarily attributable to a lack of sales of our cooking oil products to Amway Korea.

Cost of Goods Sold

Comparison of the Three Months Ended March 31, 2008 and 2007

Cost of goods sold increased 54%, or $43,587, to $81,327 for the three months ended March 31, 2008 as compared to $37,740 for the three months ended March 31, 2007. The increase in cost of sales for the three months ended March 31, 2008 was primarily attributable to an increase in the cost of raw materials for the CZ-S products which we produce for Archer Daniels Midland Company.

Operating Expenses

Comparison of the Three Months Ended March 31, 2008 and 2007

Our operating expenses increased 6%, or $23,430, to $432,184 for the three months ended March 31, 2008 as compared to $408,754 for the three months ended March 31, 2007. Our operating expenses increased for the three months ended March 31, 2008 due primarily to an increase in travel expenses incurred by our principal executive officer.

Other Income (Expense)

Comparison of the Three Months Ended March 31, 2008 and 2007

Other expense decreased 580%, or $2,102,730, to $36,115 for the three months ended March 31, 2008 as compared to $2,138,845 for the three months ended March 31, 2007. The decrease in other expense for the three months ended March 31, 2008 was primarily attributable to a decrease in net interest expenses resulting from our debt restructuring arrangements. All of our bank loans were in default as of March 31, 2008. The interest rate on such loans ranges from 15% to 18%.

Liquidity and Capital Resources

At March 31, 2008, we had cash and cash equivalents of $17,223 and negative working capital of approximately $(15,175,957). At March 31, 2007, we had cash and cash equivalents of $29,092 and negative working capital of approximately $(15,828,767). The decrease in our cash and cash equivalents at March 31, 2008 was primarily attributable to an increase in the cost of our business operations. The decrease in our negative working capital at March 31, 2008 was primarily attributable to the payment of accrued wages to retirees.

We currently satisfy our working capital requirements primarily through cash flows generated from operations, bank loans and sales of equity and debt securities. For the three months ended March 31, 2008, we had a net increase in cash and cash equivalents of approximately $360,000 as compared with a net increase in cash and cash equivalents of approximately $562,000 for the three months ended March 31, 2007.

Cash Used In Operating Activities

Cash used in operating activities increased 13%, or $72,774, to $632,293 for the three months ended March 31, 2008 as compared to cash used in operating activities of $559,519 for the three months ended March 31, 2007. The increase in cash used in operating activities for the three months ended March 31, 2008 was primarily attributable to a decrease in our net losses.

Cash Provided By Investing Activities

Cash provided by investing activities increased 141%, or $176,425, to $51,744 for the three months ended March 31, 2008 as compared to cash used in investing activities of $124,681 for the three months ended March 31, 2007. The increase in cash provided by investing activities for the three months ended March 31, 2008 was primarily attributable to a reduction in capital expenditures due to the completion of our manufacturing facility and a redemption of investment securities held by us.

Cash Used In Financing Activities

Cash used in financing activities increased 144%, or $1,007,144, to $309,042 for the three months ended March 31, 2008 as compared to cash provided by financing activities of $698,102 for the three months ended March 31, 2007. The increase in cash used in financing activities for the three months ended March 31, 2008 was primarily attributable to our repayment of outstanding indebtedness with working capital funds raised through the issuance of convertible promissory notes during the fourth quarter of our 2007 fiscal year.

Bank Loans

Since 1999, we have borrowed an aggregate principal amount of $3,889,259 from the Industrial Bank of Korea, or IBK. These loans bear interest at rates of 4.5% to 18% per annum and are due and payable on demand. A portion of these loans was secured by our real property located in Bucheon, Korea. Loans in the aggregate principal amount of $1,301,919 were guaranteed by the Korea Technology Credit Guarantee Fund, or KOTEC, a fund operated by the Korean government. During the first half of the 2006 fiscal year, we used the proceeds from the sale of our real property in Bucheon, Korea to repay all of the outstanding principal and a portion of the accrued and unpaid interest owed under the loans from IBK. At March 31, 2008, the accrued and unpaid interest owed by us to IBK under these loans was approximately $1,290,507.

In December 2004, we obtained a short-term loan from the National Agricultural Cooperative Federation, or the NACF, in the principal amount of $1,946,105. This loan bears interest at a rate of 4.6% per annum and was due on December 22, 2005. This loan is guaranteed by KOTEC. At March 31, 2008, the loan had not been repaid to NACF and the aggregate outstanding principal balance and accrued and unpaid interest on such loan was approximately $1,451,788.

In September 2002, we obtained a short-term loan from ChoHeung Bank in the principal amount of $278,805. This loan has an interest rate of 9.5%, was due on August 1, 2004 and is personally guaranteed by Mr. Noh, our president, chief executive officer, chairman of the board and principal stockholder. At December 31, 2007, the aggregate principal balance and accrued and unpaid interest on such loan was approximately $304,148. In each of July 2001 and December 2002, we entered into loan arrangements with Kookmin Bank. Each loan has a principal amount of $1,000,000, is unsecured and bears interest at the rate of 6.22% or 11.22% per annum, respectively. Both loans were due and payable on November 15, 2004. At March 31, 2008, the aggregate principal balance and accrued and unpaid interest on such loans was approximately $2,494,286.

On July 12, 2007, we entered into a debt restructuring agreement with KOTEC pursuant to which we paid approximately $82,000, or 75,000,000 Korean Won, in principal on debt of approximately $3,300,000 in exchange for which KOTEC agreed to extinguish $1,200,000 in debt. The remaining $2,110,000 will be paid, interest free, and following a three-year grace period, over a ten-year period beginning in 2010.

Additionally, we held advanced discussions and reached preliminary restructuring or workout agreements with creditors holding approximately $12,000,000 in debt which we intend to implement through the first half of 2008 in order to further strengthen our balance sheet.

Notes

On October 9, 2004, we issued KOTEC a note in connection with its payout as guarantor of a convertible debenture issued by us. The note bears interest at a rate of 21% per annum, is guaranteed by Mr. Noh, our president, chief executive officer, chairman of the board and principal stockholder, and is due and payable on demand. To date, KOTEC has made no demands for payment of this note. At March 31, 2008, the outstanding balance of this note was $2,191,949.

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. At March 31, 2008, the outstanding balance of this note was $57,064.

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. At March 31, 2008, the outstanding balance of this note was $24,741.

In July and August 2007, we issued $2,250,000 in secured convertible notes to several accredited investors along with warrants to purchase 3,200,000 shares of our common stock at an exercise price of $0.25 per share. The notes bear interest at 10% per annum, and, at the option of the investors, were convertible into shares of our common stock during the first six months following the issue date of the notes at a conversion price of $0.65. None of the investors converted the notes into shares of our common stock during such six-month period.

On November 27, 2007, we issued a senior secured promissory note in the aggregate principal amount of $600,000 to an accredited investor and warrants to purchase 1,560,000 shares of our common stock at an exercise price of $0.25 per share. The note bears interest at a rate of 10% per annum and, at the option of the investor, is convertible into shares of the Company’s common stock during the first six months following the issue date of the note at a conversion price of $0.65. As of March 31, 2008, the investor has not converted the note into shares of our common stock.

Government Loans

On March 2, 2003, we received a non-interest bearing, unsecured loan from the Korean government in the principal amount of $61,779. Pursuant to its terms, the loan was to be repaid in three annual installments of $20,593, beginning February 26, 2004. The loan matured in its entirety in February 2006. At March 31, 2008, we were $67,702 in arrears under this loan.

We received a $316,181 loan from the Korean government in connection with certain of our research and development projects over the period from 1999 to 2002. These research and development projects were not successful and, as a result, we are obligated to repay the principal amount of the loan to the Korean government. We repaid $21,034 of the amount due under this loan in our 2004 fiscal year. At March 31, 2008, we were $45,134 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. These financial statements have been prepared with the assumption that we will be able to realize our assets and discharge our liabilities in the normal course of business.

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

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

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

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

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

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS. An allowance for doubtful accounts is computed based on our historical experience and our management’s analysis of possible bad debts. Accounts receivable are shown net of allowance for doubtful accounts of $0 and $66,984 as of March 31, 2008 and 2007, respectively.

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

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

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

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

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

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

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standard Board, or the FASB, issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance with Statement of Financial Accounting Standards, or SFAS, No. 109. FIN 48 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are effective for the fiscal years beginning after December 15, 2006. We do not expect that the adoption of FIN 48 will have a significant effect on our financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” or SAB No 108. SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. Under SAB No. 108, we should quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in a misstatement that is material when all relevant quantitative and qualitative factors are considered. The adoption of SAB 108 did not have any impact on our financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," or SFAS No. 159, which permits entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions. The decision is irrevocable and it is applied only to entire instruments and not to portions of instruments. SFAS No. 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157, "Fair Value Measurements.” Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. We are currently evaluating the impact, if any, that the adoption of SFAS No. 159 will have on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not currently have any exposure to market risk with respect to our currency, cash and cash equivalents or investment securities.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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

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

Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the first fiscal quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are a smaller reporting company and were required to comply with the internal control reporting requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002 beginning with our Annual Report on Form 10-KSB for the fiscal year ending December 31, 2007. Although we are in the process of implementing internal control systems and procedures which comply with these requirements, due to our lack of resources and personnel and our limited operations we have not completed the process of preparing the systems and procedures necessary for such compliance and, therefore, our management has not begun testing and cannot issue a report on the effectiveness of our internal control over financial reporting. We have retained an outside consultant to assist us in the process of implementing these internal control systems and procedures, and we expect to be compliant with Section 404 of the Sarbanes-Oxley Act of 2002 and the internal control reporting requirements set forth therein beginning with our Quarterly Report on Form 10-Q for the quarter ending June 30, 2008.

PART II—OTHER INFORMATION

Item 6. Exhibits

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

Exhibit Number		Description
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

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

	EUGENE SCIENCE, INC.

Date: May 20, 2008	By:	/s/ Christopher Craney
		Christopher Craney
		Chief Executive Officer
		(Principal Executive Officer)

Date: May 20, 2008	By:	/s/ Byung Ho Hoang
		Byung Ho Hoang
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit Index

Exhibit Number		Description
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.

EUGENE SCIENCE 10-Q