The following discussion of our financial condition and results of operations should be read in conjunction with our "Selected Consolidated Financial Data" and the audited Consolidated Financial Statements and the notes thereto included elsewhere in this document.

General Overview and Trends

We are a genetics-focused personalized health company that develops preventive consumer products and genetic tests for sale to the emerging personalized health market. Our vision is to build a leading personalized health and wellness company using the science of applied genetics to empower people to understand the genetic components of their health, to provide physicians guidance on patient care and to provide drug developers the tools necessary to create new, innovative therapeutic products.

We currently have two primary business segments that include:

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º Personalized Health Segment - this segment conducts, researches, develops, market and sells genetic test panels primarily in inflammatory and metabolic areas to provide better insight into health, wellness and disease.

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º Consumer Products Segment - comprising the Alan James Group (AJG) business, is focused on developing, selling and marketing nutritional supplements and products into retail consumer channels.

These two segments contribute toward our overall mission of developing tests and products that can help individuals improve and maintain their health through preventive measures. We plan to pursue this by:

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º developing genetic risk assessment tests for use in multiple indications, countries and various demographics in our Personalized Health Segment;

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º processing genetic risk assessment tests in our Clinical Laboratory Improvement Act of 1988 (CLIA) certified lab or in those of sublicensees in our Personalized Health Segment; and

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º developing and acquiring nutritional products to be distributed in multiple consumer channels in our Consumer Products Segment.

In 2006, sales of our personalized health products began under marketing and other business arrangements with Alticor. For 2008, Alticor represents a significant customer representing virtually all of our Personalized Health Segment revenues and over 25% of consolidated revenues.

Our Consumer Products Segment sells branded nutritional products, including Ginsana®, Ginkoba™, and Venastat® through the nation's largest food, drug and mass retailers. The addition of AJG added substantial revenues to our business and in the year ended December 31, 2008, AJG represented over 74% of our consolidated revenues. Customer concentration in our Consumer Products Segment is high and our largest customer accounted for approximately 52% of revenues in that segment. In 2006, the addition of AJG also added to the selling general and administrative costs necessary to run a consumer products business and it added substantial amortization of intangible assets acquired in the purchase. In the year ended December 31, 2008, amortization of intangible assets was approximately $1.3 million compared to less than $54,000 in the year prior to the acquisition. For the year ended December 31, 2007, amortization of intangible assets was approximately $1.7 million. We expect such amortization expense will continue in 2009 and beyond.

We have traditionally spent approximately $3-4 million annually on research and development. We currently anticipate that range of spending to continue into 2009. Our current development programs focus on obesity, heart disease, osteoporosis, osteoarthritis, skin aging, sports nutrition and weight management genetic risk assessment tests, as well as new proprietary supplements for distribution

through our Consumer Products Segment. We expect that these programs will also lead to the personalized selection of nutritional and therapeutic products and provide consumers and healthcare professionals with better preventive product alternatives. We are in the process of developing our own brand of genetic test products for launch with partners and by ourselves. As a result, corporate selling, general, marketing and administrative expenses associated with the launch for this new brand of genetic test products is likely to increase in 2009. We currently have borrowings available under our credit line of $10.3 million, which permits borrowing any time prior to March 31, 2010. We expect to be able to fund our operations through at least the next twelve months with revenue from product sales and borrowings from our credit facility. Current economic conditions may negatively affect our sales which may impact the funding of projects in development. We will monitor our spending accordingly.

In March 2003, we entered into a research agreement with Alticor to develop genetic tests and software to assess personalized risk and develop and use screening technologies to validate the effectiveness of the nutrigenomic consumables Alticor is developing. In March 2005 and in March 2007, we entered into new agreements with Alticor to continue the research. In June 2004, we entered into another research agreement with Alticor to conduct research into the development of a test to identify individuals with specific genetic variations that affect how people gain and maintain weight. This project was completed during 2006. In June 2006, we entered into another agreement with Alticor to perform association studies on composite genotypes to skin inflammatory response. As of December 31, 2008, the research agreements described above have been completed. See financial statement footnote 4 for a discussion of our strategic alliance with Alticor.

On February 25, 2008, we entered into a new research agreement with Access Business Group International LLC (ABG), a subsidiary of Alticor Inc. The research agreement encompasses four primary areas: osteoporosis, cardiovascular disease, nutrigenomics, and dermagenomics. We will be conducting various clinical studies, which shall be fully funded by Alticor.

Some of these studies aim to correlate SNP gene variations to the risk of osteoporosis or cardiovascular disease in Asian populations. Other studies conducted in North American populations will seek to identify genetic factors that influence athletic performance (nutrigenomics) and skin health, such as wrinkles, elasticity, aging (dermagenomics), for the purpose of developing products to enhance healthy aging. Under the terms of the agreement, ABG paid us $1.2 million during 2008 for the research. In addition, we recognized approximately $800,000 of deferred receipts which were unused from prior research agreements with Alticor.

In our Personalized Health Segment, the competition is defined, but the markets and customer base are not well established. Adoption of such technologies by consumers requires substantial market development and customer education. We have placed a significant focus of this effort in our relationship with our primary customer, Alticor, a significant direct marketing company. Alticor has begun to develop the direct-to-consumer market, however, the overall market is unproven and our challenge in 2009 and beyond will be to work to develop this market. We cannot predict any fluctuations we may experience in our test revenues or whether revenues derived from Alticor related to the heart health and general nutrition genetic tests will be sustained in future periods. In order to help facilitate the sales of tests by our number one customer, we have engaged a senior executive, who is based in Michigan on site at Alticor.

In our Consumer Product Segment, the nutritional products and supplement industry is characterized by rapid and frequent changes in demand for products and new product introductions. The success of new product offerings depends upon a number of factors, including: accurately anticipating customer needs; innovating and developing new products; successfully commercializing new products in a timely manner; pricing our products competitively; manufacturing and delivering our products in sufficient volumes and in a timely manner; and differentiating our product offerings from those of our competitors.

In 2008, the aggregate sales of our brand name nutritional products, including Ginkoba™, Ginsana®, and Venastat® demonstrated a slight increase from the prior year which we believe is due to an increase in advertising spend. We face competition with private label offerings as well as other branded product introductions. Further, our opportunities for new distribution on the existing product lines are limited. We believe our growth is also partly due to consumers focusing their buying patterns on retailers that are more affordable, which is where our products are sold. Increased growth, we believe will be more dependent on our ability to adapt to changing consumer trends with the introduction of new products, making customers more aware of our products or improvements to existing products. The financial downturn of the economy most likely has slowed our growth in our Consumer Product Segment.

Liquidity and Capital Resources

As of December 31, 2008, we had cash and cash equivalents of $5.0 million and borrowings available under our credit facilities of $10.3 million which permits borrowing at any time prior to March 31, 2009. On March 11, 2009, our credit line was extended to permit borrowing at any time prior to March 31, 2010.

Cash used in operations was $5.6 million for the year ended December 31, 2008 as compared to $2.5 million for the year ended December 31, 2007. Cash used in operations is primarily impacted by operating results and changes in working capital, particularly the timing of the collection of receivables, inventory levels and the timing of payments to suppliers. A significant use of cash in the year ended December 31, 2008 was a payment of $1.2 million, relating to the settlement of purchase obligations with the Alan James Group, $.6 million of which had been accrued prior to 2008. We also recognized as revenue $.9 million of previously deferred cash receipts.

Cash used in investing activities was $1.1 million for the year ended December 31, 2008 compared to $.3 million for the year ended December 31, 2007. The most significant use of cash in investing activities was the settlement of claims related to the acquisition of the assets and business of the Alan James Group as described above. As a result of the settlement, we paid additional consideration of $.6 million. Capital additions were $.2 million for the year ended December 31, 2008 compared to $39 thousand for the year ended December 31, 2007. The increase in capital additions consists of furniture, computers and office equipment associated with increased employee headcount in 2008. In addition, we completed substantial improvements to our computer servers. Increases in other assets consist primarily of capitalized patent costs which were $.4 million for the year ended December 31, 2008 as compared to $.2 million for the year ended December 31, 2007. We continue to incur increased expenses in building our patent portfolio.

Cash provided by financing activities was $4.0 million for the year ended December 31, 2008 compared to $.4 million for the year ended December 31, 2007. On June 10, 2008 we received proceeds from the issuance of a note payable in the amount of $4.0 million under an existing credit facility where no such proceeds were received during the year ended December 31, 2007. In addition, during the year ended December 31, 2008, we received $10,000 from the exercise of stock options and stock purchases through the employee stock purchase plan. During the year ended December 31, 2007 we received $.4 million from the exercise of stock options and stock purchases through the employee stock purchase plan and $53,000 from our rights offering completed in January, 2007.

In December 2008, we were notified of our failure to comply with the NYSE Alternext US LLC (the Exchange) continued listing standards under section 1003 of the Company Guide. Specifically, the Exchange noted our failure to comply with section 1003(a)(iii) of the Company Guide because our stockholders' equity was less than $6,000,000 and we had losses from continuing operations and net losses in our five most recent fiscal years. The notice was based on a review by the Exchange of publically available information, including the Company's quarterly report on From 10-Q for the

quarter ended September 30, 2008. As of December 31, 2008 the Company's stockholders equity was $4.5 million. On January 27, 2009 we submitted a plan to the exchange to meet the continued listing requirements. The Exchange has 45 days in which to decide whether the plan is acceptable. The plan consists of several elements, but is primarily focused on increasing the sales of our products and services and raising additional equity capital. If our plan is not accepted, we do not make progress toward compliance consistent with the plan, or we are not in compliance at the end of the plan period, then our common stock may be subject to delisting proceedings by the Exchange.

In January, 2009 we purchased equipment which will allow for a higher volume genetic analysis in our commercial laboratory resulting in a significantly lower per test cost. We expect the equipment will to be validated and installed in the second quarter of 2009. The total cost of the equipment is approximately $.4 million, with an additional $.1 million for software development. We currently do not have any commitments for any additional material capital purchases.

Operating cash is currently generated by sales of consumer products, genetic tests, royalties, and reimbursements for funded research. The amount of cash we generate is not sufficient to fund our operations. In addition to funds generated by our income, we have available a $10.3 million credit line with Alticor, our major investor. Cash received by us from customers and paid to vendors is relatively stable from period to period due to the nature of our consumer products business. Clinical studies and other research and development activities may require cash outflows that depend on the timing of activities.

We believe that our cash on hand and line of credit availability from Alticor will fund our operations and meet our overall strategic plan for at least the next twelve months. We may need to raise additional capital, if market conditions permit, to continue investment in new product development, improving our distribution channels, maintain our listing on the NYSE Alternext US, and other aspects of our overall strategic plan.

We have no debt covenants as part of our borrowing facility with Alticor. We currently have a balance owed on our line of credit of $4.0 million, which is reflected as debt on our balance sheet. We anticipate using additional funds available on our credit facility in the foreseeable future. The current status of the financial markets may affect our ability to raise additional capital.

A summary of our contractual obligations as of December 31, 2008 is included in the table below:

                                                 Payments Due By Period (000's)
                                            Less than                                 More than
Contractual Obligations          Total       1 Year       1-3 Years     3-5 Years      5 Years
Long-Term Debt Obligations       $ 4,000     $       -    $    4,000     $       -     $       -
Operating Lease Obligations        2,477           510           913           936           118

TOTAL                            $ 6,477     $     510    $   4, 913     $     936     $     118

Results of Operations (000's)

                                                      Twelve Months Ended
                                                         December 31,
                                                        2008         2007
           Personalized health:
              Genetics Testing                       $       409    $   779
              Contract research and development            2,061      2,028
              Royalty and Other                              151         20

                   Segment total                     $     2,621    $ 2,827

           Consumer products                               7,394      6,873

           Total Revenue                             $    10,015    $ 9,700

           Cost of revenue                           $     4,738    $ 4,699

           Gross margin                              $     5,277    $ 5,001

           Gross margin percent                             52.7 %     51.6 %

Twelve Months Ended December 31, 2008 and December 31, 2007

Total revenue for the year ended December 31, 2008 was $10.0 million compared to $9.7 million for the year ended December 31, 2007. The increase of $.3 million, or 3.2%, is primarily attributable to an increase in consumer product revenue, an increase in royalty revenue and an increase in contract research revenue, offset by a decrease in genetic test revenue. We continue to experience modest growth in our consumer product business, with net revenues of $7.4 million in 2008, compared to $6.9 million in 2007. During 2008 Royalty Revenue increased approximately $.1 million, primarily attributable to a payment received from a foreign distributor for previous royalties due. Genetic test sales decreased approximately $.4 million, primarily due to a decline in higher customer demand which occurred during the product's initial launch in 2007. On September 1, 2008, we entered into an amended license agreement with Access Business Group granting us a non-exclusive right to sell product on our own. We are in the process of re-launching our products through the Alticor channel, as well as through our own sales channels. Increase in revenue from our consumer products of approximately $.5 million includes income of $.3 million from a lower rate of incentive redemption experience reflected in accrued trade promotions. Our experience participating in these promotional activities over time resulted in a lower rate of incentive redemption experience than had been accrued. In the future we anticipate the lower rate to continue and our accrual will be based on this experience. Genetic testing revenue is a result of tests sold and processed which is driven by consumer demand. Contract research revenue is recognized when Alticor sponsored research expenses are incurred.

We have two significant customers. In our Personalized Health Segment, our significant customer, Alticor, which is our principal shareholder, represented approximately 94% of revenues. In our Consumer Products Segment, our other significant customer represented approximately 52% of revenues. Together, these two significant customers accounted for approximately 61% of our total revenues during 2008.

Cost of revenue for the year ended December 31, 2008 was $4.7 million or 47.3% of revenue compared to $4.7 million or 48.4% for the year ended December 31, 2007. In our Personalized Health Segment, cost of revenue for the year ended December 31, 2008 was $.9 million or 35.9% of its revenue compared to $1.0 million or 34.5% for the year ended December 31, 2007. The decrease in revenue in our Personalized Health Segment is primarily attributable to a decrease in costs of providing genetic testing services partially offset by an increase in the cost of providing contract research services.

The increase in the cost of revenue as a percentage of revenue in our Personalized Health Segment is primarily attributable to the fixed costs associated with our genetic testing laboratory which remain fixed with changes in revenue. In our Consumer Products Segment, cost of revenue for the year ended December 31, 2008 was $3.8 million or 51.4% compared to $3.7 million, or 54.2%, for the year ended December 31, 2007. The increase is primarily attributable to increased consumer product sales.

Gross margin for the year ended December 31, 2008, was $5.3 million, or 52.7%, compared to $5.0 million, or 51.6%, for the year ended December 31, 2007. In our Personalized Health Segment gross margin for the year ended December 31, 2008, was $1.7 million, or 64.1%, compared to $1.9 million, or 65.5%, for the year ended December 31, 2007. The decrease in gross margin of $.2 million is primarily attributable to decreased genetic test sales. The decrease in the gross margin percentage as a percentage of revenue in our Personalized Health Segment is attributable to the fixed costs associated with our genetic testing laboratory which remain constant with changes in revenue. In our Consumer Products Segment gross margin was $3.6 million, or 48.6%, for the year ended December 31, 2008, compared to $3.1 million, or 45.8%, for the year ended December 31, 2007. The increase of $.5 million is primarily attributable to increased sales of our consumer products.

Research and development expenses were $3.6 million for the year ended December 31, 2008 compared to $2.9 million for the year ended December 31, 2007. The increase of $.7 million or 21.6% is primarily attributable to an increase in expenses relating to our sponsored research agreement with Yonsei University, combined with increased costs related to our patent portfolio, partially offset by a reduction in research consulting expenses.

Selling, general and administrative expenses were $7.0 million for the year ended December 31, 2008 compared to $6.4 million for the year ended December 31, 2007. The increase of $.6 million, or 10.5%, is primarily attributable to increased promotional and advertising expenses in both our Personalized Health Segment and Consumer Products Segment, plus additional compensation expenses due to our increased headcount. These expense increases were partially offset by a reduction in settlement expenses relating to the acquisition of The Alan James Group, of which $.6 million was accrued in 2007 and no such expenses were accrued in 2008.

Amortization of intangible assets was $1.3 million for the year ended December 31, 2008 compared to $1.7 million for the year ended December 31, 2007. The decrease of $.4 million, or 19.1%, is primarily attributable to amortization expense associated with a reduction in the basis of intangible assets we acquired from the Alan James Group resulting from our March 2008 settlement agreement with the former owners of that business.

Total other income was $27,000 for the year ended December 31, 2008 as compared to other expenses of $256,000 for the year ended December 31, 2007. The decrease of $283,000 is primarily attributable to amortization of note discount that we recognized in the year ended December 31, 2007 where no such discount was recognized in the year ended December 31, 2008. Net interest income was $27,000 for the year ended December 31, 2008 compared to net interest income of $200,000 for the year ended December 31, 2007. The decrease in net interest income of $173,000 is primarily attributable to a lower cash balance earning interest in 2008. In August, 2006 Alticor purchased from the company $15.6 million of common stock. The sale of common stock to Alticor, offset by the subsequent purchase of the Alan James Group, provided the company with a larger average cash balance in 2007 than in 2008. Operating cash utilization, partially offset by $4.0 million in loan proceeds in 2008 from an advance under our line of credit with Alticor, resulted in lower cash balances in 2008. Financial market conditions have significantly reduced the interest rate we earn on our funds. Our average interest rate in 2007 was 5%, where as of December, 2008, it was approximately 1%.

Comparison of Year Ended December 31, 2007 to Year Ended December 31, 2006

Revenue for the year ended December 31, 2007 was $9.7 million compared to $4.7 million for the year ended December 31, 2006, an increase of $5.0 million or 105%. The increase of $4.8 million was due largely to inclusion of our Consumer Products Segment for the full year 2007 whereas in 2006 that segment was only included since its acquisition on August 17, 2006. Our Personalized Health Segment resulted in an increase of $.1 million in 2007 over 2006.

We have two significant customers. In our Personalized Health Segment, our significant customer, Alticor, which is the Company's majority shareholder, represented approximately 99% of the revenues of that segment and in our Consumer Product Segment, our significant customer represented approximately 47% of the revenues of that segment. Together, these two customers accounted for approximately 60% of revenues.

Gross profit was approximately $5.0 million, or 52% of revenue, for the year ended December 31, 2007. Gross profit from our Personalized Health Segment was approximately $1.9 million, or 65% of its revenue compared to approximately $1.5 million and 55% in the year ended December 31, 2006. Gross profit from our Consumer Product Segment was approximately $3.3 million, or 47% of its revenue compared to approximately $.4 million and 21% in the period from acquisition through December 31, 2006.

Research and development expenses were approximately $2.9 million for the year ended December 31, 2007 compared to approximately $3.3 million for the year ended December 31, 2006, a decrease of $.4 million or 10%. Funded research and development expenses were approximately $1.5 million for the year ended December 31, 2007 compared to approximately $1.7 million for the year ended December 31, 2006, a decrease of approximately $.2 million or 11%. Between March 2003 and March 2007, we entered into various research agreements with Alticor as described above in "General Overview and Trends."

Selling, general and administrative expenses were approximately $6.4 million for year ended December 31, 2007 compared to approximately $4.5 million for the year ended December 31, 2006, an increase of approximately $1.9 million or 41%. Approximately $1.3 million of this increase results from the inclusion of our Consumer Product Segment for the full year 2007 and only since its acquisition in August 2006 in the prior year.

Amortization of intangible assets was approximately $1.7 million for year ended December 31, 2007 compared to approximately $.6 million during the prior year. This increase was primarily attributable to amortization expense associated with acquisition-related intangible assets for the full year in 2007 and only since acquisition in August 2006, in the year ended December 31, 2006.

Other net expense decreased by approximately $.2 million from 2007 to approximately $.3 million in 2006 principally as a result of increased interest income.

Revenue, gross profit, operating and other expenses contributed to a net loss of approximately $6.2 million, or $(0.22) per share, for the year ended December 31, 2007 compared to a loss of approximately $6.9 million, or $(0.27) per share for 2006.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies and estimates upon

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