**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**AMENDMENT
      NO. 1 TO**


**FORM
      10-KSB**





(Mark
      One)





x 
ANNUAL
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      fiscal year ended December 31, 2007





o 
TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      transition period from _________ to ________





Commission
      file number 000-32141





**NUTRA
      PHARMA CORP.**


(Name
      of
      registrant as specified in its charter)




**California**
            **91-2021600**(State
                or Other Jurisdiction of
              Organization)
            (IRS
                Employer Identification Number)





791
      Park
      of Commerce Boulevard, Suite 300


Boca
      Raton, Florida 33487


(Address
      of principal executive offices)





**(954)
      509-0911**


(Issuer's
      telephone number)





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par
      value





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days.
      Yes xNo o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES oNO x





The
      registrant's revenues for the fiscal year ended December 31, 2007 were
      $0.


The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of March
      31,
      2008 is $2,833,294.





As
      of
      March 31, 2008, there were 166,635,682 shares of common stock issued and
      outstanding.





Transitional
      Small Business Disclosure Format (Check one): Yes oNo x










INDEX





Part
                IItem
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            18Item
                3.
            Legal
                Proceedings
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            19Part
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            19Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            22Item
                7.
            Financial
                Statements
            31Item
                8.
            Changes
                in and Disagreements with Accountants and Financial Disclosure
            31Item
                8A.
            Controls
                and Procedures
            31Item
                8B.
            Other
                Information
            31Part
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            31Item
                10.
            Executive
                Compensation
            35Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            36Item
                12.
            Certain
                Relationships and Related Transactions
            36Item
                13.
            Exhibits
            37Item
                14.
            Principal
                Accountant Fees and Services
            38Signatures
            38





This
        Annual Report on Form 10-KSB, most significantly, our "Plan of Operations"
        section, contains forward-looking statements that involve risks and
        uncertainties, as well as assumptions that, if they never materialize or
        prove
        incorrect, could cause the results of Nutra Pharma Corp. (hereafter referred
        to
        as "we", "our" or "us") to differ materially from those expressed or implied
        by
        such forward-looking statements. The words or phrases "would be," "will allow,
        "intends to," "will likely result," "are expected to," "will continue," "is
        anticipated," "estimate," "project," or similar expressions are intended
        to
        identify "forward-looking statements." We are subject to the following risks
        in
        connection with our business: a) we have experienced recurring net losses
        and a
        working capital deficiency and our ability to continue as a going concern
        is
        dependent upon our ability to secure additional financing, which raises
        substantial doubt about our ability to continue as a going concern; (b) our
        history of losses makes it difficult to evaluate our current and future business
        and our future financial results; (c) our continued operations are dependent
        upon obtaining equity or other financing; should we be unable to obtain such
        financing, we will be unable to continue our operations; (d) we are subject
        to
        substantial Federal Food and Drug Administration ("FDA") and other regulations
        and related costs which may adversely affect our operations; (e) a market
        for
        our potential products may never develop; (f) if we fail to adequately protect
        our patents, we may be unable to proceed with development of potential drug
        products; (g) we are dependent upon patents, licenses and other proprietary
        rights from third parties; should we lose such rights our operations will
        be
        negatively affected; (h) to date, we have not generated any significant
        revenues; (i) to date, none of our proposed products have received FDA approval;
        and (j) we may be unable to compete against our competitors in the medical
        device and biopharmaceutical markets since our competitors have superior
        financial and technical resources than we do.


All
      statements other than statements of historical fact, are statements that could
      be deemed forward-looking statements, including any projections of revenue,
      gross margin, expenses, earnings or losses from operations, synergies or other
      financial items; any statements of the plans, strategies and objectives of
      management for future operations; and any statement concerning developments,
      plans, or performance. Unless otherwise required by applicable law, we do not
      undertake and we specifically disclaim any obligation to update any
      forward-looking statements to reflect occurrences, developments, unanticipated
      events or circumstances after the date of such statement.




**PART
      I**





Nutra
      Pharma Corp is referred to herein as “we”, “our” or “us”





**Item
      1. Business**





**General**





**Business
      Development**





We
      were
      incorporated in the state of California on February 1, 2000. We have been
      conducting our operations as a development stage company under the name, Nutra
      Pharma Corp. since October 31, 2001. We have never been the subject of a
      bankruptcy, receivership, material reclassification, merger, consolidation,
      or
      purchase or sale of a significant amount of assets not in the ordinary course
      of
      business, or similar such proceeding or event, apart from our merger with
      ReceptoPharm, Inc. discussed on pages 2 and 27 of this Form 10-KSB,
      which occurred after our December 31, 2007 year end, at which time ReceptoPharm,
      Inc. became our wholly owned subsidiary.





**Our
      Business Model**




We
      are a
      biopharmaceutical company that plans to engage in the acquisition, licensing
      and
      commercialization of pharmaceutical products and technologies for the management
      of neurological disorders, cancer, autoimmune and infectious diseases.
      ReceptoPharm, a biopharmaceutical company, which as of April 10, 2008, we own
      a
      100% interest and is now our wholly owned subsidiary, has conducted
      research and development of two drugs, RPI-MN and RPI-78M for the potential
      treatment of  the following diseases:





·
            Multiple
                Sclerosis (MS);




·
            HIV/AIDS;




·
            Chronic
                pain;




·
            Myasthenia
                Gravis (Autoimmune Disease); and




·
            Adrenomyeloneuropathy
                (AMN).


1


From
      June
      2001 to April 2005, ReceptoPharm was a Biopharmaceutical research and
      development company.  Since April 2005, when ReceptoPharm began
      its AMN Trial in London, England, ReceptoPharm has been a clinical
      stage biopharmaceutical company. **** ReceptoPharm
      has developed two drugs: (a) RPI-78M, to treat the neurological
      diseases, Multiple Sclerosis (MS), Adrenomyeloneuropathy (AMN), Amyotrophic
      Lateral Sclerosis (ALS or *Lou
      Gehrig ’s disease* )
      and
      Myasthenia Gravis, and  (b) RPI-MN, to treat the viral diseases,
      HIV/AIDS and Hepatitis-C.





To
      date,
      none of these treatments have received FDA approval or approvals by any foreign
      country for the treatment of disease.





To
      date,
      we have not generated any significant revenues and we have generated no revenues
      during our 2007 Fiscal Year.




Additionally,
      we sell diagnostic test kits through our wholly owned subsidiary, Designer
      Diagnostics, Inc.





As
      detailed below, we have pursued our business model through ReceptoPharm, Inc.
      and Designer Diagnostics, Inc.





**Description
      of Business**





*Equity
      Interest in ReceptoPharm - Drug Discovery Platform*




In
      February 2004, we agreed to invest $2,000,000 in cash to acquire up to a 49.5%
      equity interest in ReceptoPharm Inc., a privately held development stage
      biopharmaceutical company located in Fort Lauderdale, Florida, which is
      developing technologies to treat the neorological diseases: multiple sclerosis;
      adrenomyeloneuropathy; amyotrophic lateral sclerosis; myasthenia gravis; and
      to
      treat the viral diseases, HIV and hepatitis-C. On February 10, 2006, we
      completed our $2,000,000 investment and at that date, we owned approximately
      38%
      of the issued and outstanding common stock of ReceptoPharm.  We received
      less than a 49.5% interest in ReceptoPharm because our interest was diluted
      as a
      result of ReceptoPharm issuing additional shares of its common stock to various
      consultants and employees in exchange for services rendered. After our 2007
      year-end, on April 10, 2008, we entered into a Share Exchange Agreement with
      ReceptoPharm whereby we acquired the remaining approximately 62% interest in
      ReceptoPharm. ReceptoPharm is now our wholly-owned subsidiary.





*Wholly
      Owned Subsidiary Designer Diagnostics, Inc. - Diagnostic Test
      Kits*




Designer
      Diagnostics, a Nevada corporation we formed in January 2006, is our wholly
      owned
      subsidiary that is engaged in marketing diagnostic test kits that are used
      for
      the rapid identification of infectious human diseases such as Tuberculosis
      (TB)
      and Mycobacterium avium-intracellulare (MAI). Through Designer Diagnostics,
      we
      have developed the diagnostic test kits and to date we have sold approximately
      10,000 units.





**Business
      Strategy**




We
      seek
      to develop proprietary pharmaceutical products for human illnesses that qualify
      for “fast-track” or “Orphan Drug” status under FDA regulations. For some
      conditions the FDA has created the “two animal rule” which permits us to collect
      data from ongoing animal research for human treatment applications. We plan
      to
      pursue the treatment of Rabies using this approach.




We
      believe the results from our research will assist in getting our applications
      processed through the FDA’s “Fast-track” approval process and enable us to plan
      the commercialization of each product independently and/or through joint
      ventures, partnerships and licensing arrangements. **“** Fast-Track”
      denotes life-threatening illnesses while “Orphan” status refers to serious
      ailments affecting less than 200,000 individuals nationwide.
      Adrenomyeloneuropathy (AMN) qualifies under both labels because it has no known
      cure. Statistically, 2500 new cases are reported each year. We have preliminary
      results, which suggest that our product, RPI-78M is  effective
      in alleviating this disease.


2


We
      believe that our proposed unique applications can be used alone or licensed
      for
      use in combination with other therapeutic products and may be of interest to
      other established pharmaceutical companies as a means of extending the patent
      life of their proprietary products.





**Long-term
      goal** - Our
      long-term goal is to the use of drugs developed by us and our affiliates in
      the
      field of neurological diseases, infectious diseases and autoimmune disorders.
      Due to our limited financial and operational resources, this goal will require
      us to establish strategic partners or alliances with pharmaceutical companies,
      academic institutions, biotechnology companies, and clinical diagnostic
      laboratories, which will: (a) complement our research and development efforts;
      (b) reduce the risks associated with undertaking the entire process of drug
      development and marketing; and (c) generate licensing based revenue streams.




We
      plan
      to identify and acquire intellectual property and companies in the biotechnology
      arena.





**Midterm
      goal** - Our
      midterm strategy is to license our AMN, MS and HIV technologies in our attempt
      to bring these technologies to market within the next five years.





**Other
      Components of our Business Strategy - Compassionate Release
      Programs**




Certain
      countries, such as Canada and the United Kingdom permit their citizens to have
      access to investigational medications without being approved for any application
      by their respective “FDA type” agencies, and permit physicians to prescribe
      drugs they believe are of possible benefits to the patients. Through these
      “Compassionate Release Programs” we have supplied RPI-78M, our drug under
      investigation for MS and AMN, to physicians in the United Kingdom. The United
      States FDA does not offer this program.





**Clinical
      Trial Applications**




We
      have
      developed Common Technical Documents (CTD) for both RPI-78M and RPI-MN that
      are
      used to support any clinical trial application. The CTD is a complete history
      of
      the individual drug, including all of the in-vitro and in-vivo work accomplished
      to date, as well as pre-clinical development work on the drug. Having these
      completed documents allows for expedited due diligence from regulatory bodies
      reviewing our applications for trials and approvals. With these documents,
      we
      have successfully applied for approval to conduct a clinical investigation
      in
      the United Kingdom under the regulation of the Medicines Health and Regulatory
      Agency (MHRA), which is the British equivalent of the US-FDA.




**Potential
      Revenue Segments**





Our
      potential revenue segments are composed of our attempt to generate revenues
      from
      license agreements, joint ventures, drug, and test kit sales with pharmaceutical
      companies, biotechnology companies and clinical diagnostic laboratories that
      generate license fees, as follows:




·
            License
                revenues developed through licensing agreements;·
            Joint
                venture revenues developed through joint venture in foreign countries
                that
                will permit local clinical trials and regulatory approval outside
                the
                United States;·
            Drug
                sales should we be successful in obtaining FDA approval; and·
            Test
                kit sales sold through our wholly owned subsidiary, Designer Diagnostics,
                Inc.




To
      date,
      we have not earned any significant revenues regarding any of the above potential
      revenue segments.


3


**Marketing**





We
      currently do not have a marketing program for our drug products; however, if
      and
      when we have FDA approved drug treatments, we plan to develop a marketing
      strategy and market our products through pharmaceutical companies, other
      biotechnology companies, and diagnostic laboratories. Additionally, if and
      when
      a foreign joint venture receives local regulatory approval for our drug(s),
      we
      will participate in the marketing of those drugs in that country. Our Chief
      Executive Officer, Rik Deitsch, will market the treatments to licensing and
      development officers of those companies and will otherwise direct our marketing
      program. Additionally, we will attempt to secure consulting agreements with
      marketing consultants who will actively market our products to such companies
      and/or provide our Chief Executive Officer with marketing guidance. Our
      diagnostic test kits are currently being marketed through our wholly owned
      subsidiary, Designer Diagnostics, Inc., under Neil Roth’s direction, who is
      Designer Diagnostics’ President.





**Employees**





We
      have 3
      full time employees consisting of: (a) Rik Deitsch, our President; (b) Neil
      Roth, President of Designer Diagnostics, Inc.; and (c) Nina Goldstein, our
      Executive Administrative Assistant.




Additionally,
      on an as needed basis, we utilize the services of consultants for financial
      analysis, human resources, and due diligence in licensing or
      acquisitions.





**Our
      Current Technologies**





**ReceptoPharm,
      Inc.**




ReceptoPharm,
      a clinical stage Biotech Company, has a process that safely modifies proteins
      derived from cobra venom for four drug products, two of which are proprietary,
      RPI-78M and RPI-MN. ReceptoPharm also has shared rights of a drug delivery
      method that uses an aerosol formulation, which is administered under the tongue. **** By
      using
      this shared aerosol delivery technology, oral delivery is attainable, an
      important step for a biologic product. **** The
      system is 50% efficient and affects drug delivery in approximately 40% of
      patients in which it was tested. Topical preparations are being examined for
      future applications in treatment of such conditions as pain and Rheumatoid
      arthritis.





We
      believe that ReceptoPharm’s products have a wide range of applications in a
      number of chronic, inherited and/or life-threatening viral, autoimmune and
      neuromuscular degenerative diseases even though none of these products have
      FDA
      or other approval for the treatment of such diseases. What these disorders
      have
      in common is the targeting of nerve cells, especially one specific type of
      cell
      receptor that is sensitive to the neurotransmitter *acetylcholine* that
      plays an important role in the transmission of nerve impulses at synapses and
      myoneural (muscle-nerve) junctions.





ReceptoPharm
      believes its product focus will potentially expand the
      neuropharmaceutical segment of the peptide or protein (Biologics) market.
      ReceptoPharm has four novel anticholinergic therapeutic protein products in
      various stages of development for the treatment of Human Immunodeficiency Virus
      (HIV), Multiple sclerosis (MS) Adrenomyeloneuropathy (AMN), Drug Addiction
      and
      Pain. All these diseases demonstrate a clear involvement with the nicotinic
      acetylcholine receptor (NAchR).




ReceptoPharm
      is focusing its drug development efforts on initiating a Phase II human clinical
      trial for its HIV drug, RPI-MN. Phase II is meant to show preliminary efficacy
      in a human population and is usually a smaller trial in one or two locations.
      Phase III is the last step before potential regulatory approval and usually
      consists of a large, multi-center, multi-national trial and would provide data
      for proper dosage, potential side effects and potential contraindications.
      With
      HIV, the Phase II trial would most likely involve fewer than 50 patients and
      last fewer than 10 weeks. The trial would only need to show a reduction in
      viral
      load. We have set forth below a summary of ReceptoPharm’s proposed drugs and
      their potential applications.


4


**Drug
      Description**





**Drug**
            
            **Potential
                Applications**RPI-78M
            
            Multiple
                sclerosis (MS), Adrenomyeloneuropathy (AMN), Myasthenia gravis (MG)
                and
                Amyotrophic lateral sclerosis (ALS).RPI-MN
            
            HIV,
                Rabies, general anti-viral productRPI-78
            
            PainRPI-70
            
            Pain




**Disease
      Targets**




Through
      ReceptoPharm’s research program, our goal is to obtain required regulatory
      approvals of ReceptoPharm’s HIV and MS products so that they can be marketed. We
      plan to apply for Orphan drug status with the FDA to expedite approvals; however
      there is no assurance we will obtain such status. ReceptoPharm secures
      confidentiality agreements prior to initiating contract research in order to
      protect any patentable opportunities.




**HIV
      Infection** .




HIV
      infection therapy currently uses antiviral drug therapies that are associated
      with the virus’s attachment, fusion with and entry into the host cell. Attempts
      to develop a vaccine that prevents HIV infection have not been successful due
      to
      the mutational idiosyncrasies of the virus. At the present time there are 16
      currently licensed antiretroviral drugs employed to combat HIV-1 infection
      and
      one drug licensed by the FDA that is a binding/entry inhibitory
      drug.





Decision
      Resources, Inc., a research and advisory firms focusing on pharmaceutical and
      health care issues, forecasts that the HIV drug market will grow to more than
      $8
      billion by 2013. According to the latest Epidemic Update, an estimated 39.5
      million people were living with HIV in 2006. There were 4.3 million new
      infections in 2006 with 2.8 million (65%) of these occurring in sub-Saharan
      Africa and important increases in Eastern Europe and Central Asia, where there
      are some indications that infection rates have risen by more than 50% since
      2004. In 2006, 2.9 million people died of AIDS-related illnesses. Growth in
      the
      HIV therapy market will continue to be driven by the rapidly growing HIV and
      AIDS population. In the absence of therapeutic intervention, the vast majority
      of individuals infected with HIV will ultimately develop AIDS, on average in
      about 10 years, which has a mortality rate approaching 100%. Experts say that
      the drugs currently available only extend life on average 1.8 years. The
      foregoing information was obtained from the World Health Organization website
      at www.who.int .





To
      cause
      infection, HIV needs to gain entry into cells through the attachment to
      receptors on the cell membrane. These receptors are called chemokine receptors.
      There are two principal types, CCR5 and CXCR4. Different HIV strains use one
      of
      these types. A single drug that would block all of the chemokine receptors
      ("tropism-independent") could be more useful, for several reasons, than a
      mixture of molecules that would have to be used to do the same.





New
      drugs
      and adjunct therapies with novel mechanisms of action or unique resistance
      profiles are needed in the fight against HIV. Constant innovation, in terms
      of
      efficacy, side effect profile and dosing are occurring. Current research and
      development for HIV is focused on adjunctive therapy, which when combined with
      existing HAART (Highly Active Anti-Retroviral Therapy) regimens reduce side
      effects, enhance the efficacy of existing treatments and delay the progression
      of the HIV virus.




Both
      of
      ReceptoPharm’s drugs inhibited HIV replication in MAGI cells by 50-60% and
      peripheral mononucular cells by 90% in testing conducted by Dr. Juan Lama of
      the
      La Jolla Institute for Molecular Medicine in San Diego, California. Separate
      Phase I studies by Cure Aids Now of Miami, Florida were also conducted by Dr.
      Jamal with orally and parentally administered RPI-78M in HIV patients confirmed
      safety, tolerability and provided preliminary evidence of
      efficacy.


5


RPI-MN
      recently demonstrated the ability to inhibit the replication of highly
      drug-resistant strains of HIV isolates (resistant to protease (PR) or reverse
      transcriptase (RT) inhibitors). Drug resistance has become a critical factor
      in
      long-term management of HIV infection with some viral strains developing
      resistance in as little as 3 weeks. Current treatment for HIV infection is
      a
      complicated regimen of anti-viral drugs, often consisting of what is referred
      to
      as the HAART cocktail, which is a Highly Active Anti-Retroviral Therapy. This
      regimen often requires taking different drugs at precise intervals throughout
      the day and involves an expensive and complex drug regime. We believe that
      RPI-MN may obviate the need for such complex regimes and act as a monotherapy
      by. We believe that our drug could be taken as a stand-alone or as a monotherapy
      for the treatment of HIV infection.




The
      raw
      material for RPI-MN, cobra venom, is widely available even in the geographic
      areas having a high occurrence of HIV.




**Multiple
      Sclerosis**




Multiple
      Sclerosis is thought to be an autoimmune disease that primarily causes central
      nervous system problems. In MS, the insulating fatty material surrounding the
      nerve fibers, also known as myelin, which functions to speed signaling from
      one
      end of the nerve cell to the other, is attacked by cells of the immune system
      causing problems in signal transduction. Multiple sclerosis is the most common
      of demyelinating disorders, having a prevalence of approximately 1 per 1000
      persons in most of the United States and Europe. A conservative estimate
      suggests 400,000 people in the US are affected and another 2 million globally.
      It is a disease that mainly affects Caucasians. People with MS may experience
      diverse signs and symptoms. MS symptoms may include pain, fatigue, cognitive
      impairment, tremors, loss of coordination and muscle control, loss of touch
      sensation, slurred speech and vision impairment. The course of the disease
      is
      unpredictable and for most MS patients, the disease initially manifests a
      "relapsing-remitting" pattern. Periods of apparent stability are punctuated
      by
      acute exacerbations that are sudden unpredictable episodes that might involve
      impaired vision, diminished ability to control a limb, loss of bladder control,
      or a great variety of other possible neurologic deficits. In relapsing-remitting
      MS, some or all of the lost function returns, however, the patient sustains
      an
      unceasing, often insidious, accumulation of neuronal damage. As the burden
      of
      neural damage grows, new lesions are more likely to produce irreversible
      impairment of function. Typically, about eight to fifteen years after onset,
      MS
      patients enter the secondary-progressive phase. Eventually, progressive MS
      sufferers become wheelchair-bound, and may become blind and even incapable
      of
      speech. There is currently no FDA approved drug that reverses the course of
      the
      progressive form of MS.




RPI-78M
      has shown very promising efficacy in animal models (EAE) for MS and ReceptoPharm
      is planning new animal studies to gain more insight into the levels of
      protection that the drugs afford. In one study all members of an untreated
      animal control group developed signs of disease with different levels of
      paralysis/muscle weakness. A similar group treated with RPI-78M showed no
      disease in 90% of the animals in both acute and chronic applications of the
      test. Moreover, there were no toxicities reported though the animals received
      doses the equivalent of 280 times a human dose.




Furthermore,
      we believe that the ability to modulate the host immunostimulatory environment
      could form the basis of an effective strategy for the long-term control of
      autoimmunity in diseases like MS and Myasthenia gravis (MG) and is being studied
      as a therapeutic model for other neuromuscular diseases. Also, we believe our
      data suggest that it is possible that our novel therapeutic proteins could
      have
      a general application in autoimmune diseases based on human studies in
      Rheumatoid Arthritis and anecdotal reports from patients with Multiple
      sclerosis.




In
      August
      of 1984, Biogenix applied for and received an Intrastate Investigational Drug
      (FSDHRS Protocol RA-1 (002)) from the Department of Health and Rehabilitation
      (HRS) in Florida that permitted the 4-week study of RPI-MN in 13 patients with
      Rheumatoid arthritis ranging in age from 49 to 81. Patients were enrolled for
      a
      period of 4 weeks; the results showed 30% to 49% improvement in range of joint
      motion, early morning stiffness and stamina (this data is a small section of
      the
      acquired research referenced above). We believe that the data obtained from
      the
      examination of clinical efficacy in these three diseases can augment information
      from prior clinical studies and lead to the future investigation of treatments
      for other chronic conditions.


6


**AMN
      and Orphan Indications**




Adrenoleukodystrophy,
      or ALD, is a genetically determined neurological disorder that affects 1 in
      every 17,900 boys worldwide. The presentation of symptoms occurs between the
      ages of 4 and 10, and affects the brain with demyelination. Demyelination is
      the
      stripping away of the fatty coating that keeps nerve pulses confined and
      maintains the integrity of nerve signals. This process inhibits the nerves’
ability to conduct properly, thereby causing neurological deficits, including
      visual disturbances, auditory discrimination, impaired coordination, dementia
      and seizures. Demyelination is an inflammatory response and nerve cells
      throughout the brain are destroyed.




Boys
      develop normally until the onset of symptoms occurs. Symptoms typically rival
      those of attention deficit disorder before serious neurological involvement
      becomes apparent. The symptoms progress rapidly and lead to a vegetative state
      within two years, and death anytime thereafter.




AMN
      is
      the most common form of X-ALD, affecting about 40-45% of X-ALD patients and
      usually presents in adolescence or adult life and may be preceded by
      hypoadrenalism. It is characterized by spastic paraplegia and a peripheral
      neuropathy, often being diagnosed as MS. Nerve conduction studies in AMN show
      a
      predominant axonal neuropathy and show a loss of all axons. The restriction
      of
      dietary VLCFAs does not cause clinical improvement. Lorenzo’s oil, a mixture of
      glyceryltrioleate and glyceryltrierucate, has been used for over a decade in
      an
      open, unblinded fashion with mixed results.




Rabies
      virus in acquired from the bite of an infected animal. Following a long
      incubation period the virus penetrates the central nervous system and destroys
      vital nerve cells. Once in the nervous system the disease is fatal and there
      is
      no current treatment. Vaccination shortly after the bite of a suspected rabid
      animal is very effective. Rabies is rare in the United States. However, as
      many
      as 18,000 Americans get rabies shots each year because they have been in contact
      with animals that may be rabid (rabies-infected).




**Value
      Added Research**




**RPI-78
      & RPI-70 Products for Pain**




Products
      to control pain represent a huge market especially those products that reduce
      dependency on opiate-based drugs. Protein or peptide-based drugs are penetrating
      this market with neurotoxins taking the lead. Botox (Allergan) and Ziconitide
      (Elan) have the potential to substitute over the long-term for morphine and
      other opiates in chronic pain indications. Opiates, though potent painkillers,
      suffer from drawbacks. They are addictive, short acting, and drug-resistance
      inducing. We plan to assess the effects of several peptides in animal models
      of
      pain in association with Soochow University in China. Several peptides have
      demonstrated positive effects and the research and development
      continues.




Recently
      completed studies at Soochow University proved the potential of RPI-78 and
      RPI-70. When compared to Dolantin, an opiate-based drug subordinate to morphine,
      the effects were very encouraging. While Dolantin provided immediate pain relief
      it began wearing off just as RPI-70 began to take effect. The effects of RPI-70
      do not seem dramatic in contrast to Dolantin until one considers the quantity
      of
      drug employed in this animal model. The concentration of RPI-70 was
      approximately 100 times less than the opiate product. Also, RPI-70 showed real
      potential for combining with other pain killing medications. RPI-78 was
      calculated to be 150,000 times more potent that aspirin. This product can be
      injected systemically providing evidence of a more practical application than
      Ziconitide, which must be administered intrathecally (into the spinal chord).
      Opiate drugs induce tolerance and dependence, a problem that is not encountered
      with RPI-70 and RPI-78.




**Bio-Therapeutics,
      Inc.**





We
      have a
      non-exclusive license to certain intellectual property of Bio Therapeutics,
      Inc,
      which consists of the following two distinct technology platforms:





·
            Alteration
                of Proteins and Peptides - These include patented methods for altering
                the
                3-Dimensional structure of certain proteins and peptides. The natural
                peptides bind to receptors in the body with toxic effects. This technology
                allows us to alter the structure of these peptides, preserving their
                receptor-binding characteristics, while making them non-toxic and
                therapeutic. Different receptors have various functions in many disease
                states. By the peptides binding to these receptors in a controlled
                fashion
                certain symptoms of diseases may be treated. In connection with MS,
                binding to the acetylcholine receptor on the nerves allows for more
                efficient nerve conduction. With HIV, binding to chemokine receptors
                may
                prevent the virus from entering and infecting new
                cells;


7





·
            Innovative
                aerosolized drug delivery system - Many therapeutic agents cannot
                be
                effectively delivered by aerosol formulation due to their large size
                and/or irregular shapes. Since these therapeutic agents cannot be
                ingested
                orally without being degraded by the digestive system, patients have
                no
                alternative but to inject these drugs directly. We have a non-exclusive
                license to a proprietary aerosol formulation, for which a patent
                is now
                pending, which greatly enhances the permeability of the mucous membranes
                found on the roof of the mouth and the back of the throat. This allows
                for
                the easy and efficient systemic delivery into the bloodstream of
                a much
                wider variety of proteins and peptides. This non-exclusive license
                for
                "Buccal Delivery System" (patent-pending) includes claims that identify
                the active mucosal enhancer, its combination with therapeutic agents
                and
                the mode of delivery through aerosol. This may allow for the effective
                and
                pain-free delivery of peptide and protein therapeutics for the treatment
                of HIV and MS.





We
      have
      been involved in litigation with Bio Therapeutics, which is described herein
      under Item 3, Legal Proceedings.





**Designer
      Diagnostics, Inc.**





*NonTuberculosis
      Mycobacterium (NTM)*





NonTuberculosis
      Mycobacterium (NTM), also known as atypical Tuberculosis (Atypical TB) or
      Mycobacterium other than Tuberculosis (MOTT) are bacteria that can be found
      in
      water, some domestic and wild animals, and soil. NTM is a primary cause of
      respiratory disease in humans and is a leading cause of death in HIV/AIDS
      patients. In countries (such as the U.S. and Canada) that have dramatically
      reduced TB as a major disease, NTM bacteria have become a larger issue. National
      Jewish Medical Research Center in Denver has reported a major increase in the
      U.S., with over 800 patients infected in Denver in 2005 and 1500 regional
      centers around the country are using the National Jewish Research Center for
      NTM
      testing.





A
      study
      done in India on HIV/AIDS patients has shown that over 9% of HIV/AIDS patients
      that have TB also have some form of NTM that requires different antibiotic
      procedures.





The
      NTM
      bacteria usually enter the body through inhalation or by drinking water that
      has
      been contaminated by the NTM bacteria. Additionally, the NTM bacteria can enter
      the body through open wounds. These bacteria cannot be spread directly between
      people. There are over 20 different types of NTM, which include:




·
            Para-Tuberculosis·
            Nocardia





·
            Pseudomonas·
            MAC
                (M.avium Complex)


8





*Tuberculosis
      (TB)*




Tuberculosis
      (TB) is a contagious disease. Like the common cold, it spreads through the
      air.
      Only people who are sick with TB in their lungs are infectious. When infectious
      people cough, sneeze, talk or spit, they propel TB germs, known as bacilli,
      into
      the air. A person needs only to inhale a small number of these to be infected.
      Left untreated, each person with active TB disease will infect on average
      between 10 and 15 people every year. It is estimated that 1.7 million deaths
      resulted from TB in 2004. Strains of TB resistant to all major anti-TB drugs
      have recently emerged. A particularly dangerous form of drug-resistant TB is
      multidrug-resistant TB (MDR-TB), which is defined as the disease caused by
      TB
      bacilli resistant to at least isoniazid and rifampicin, the two most powerful
      anti-TB drugs. Rates of MDR-TB are high in some countries, especially in the
      former Soviet Union, and threaten TB control efforts. More recently, XDR-TB
      (Extensively drug-resistant tuberculosis) has been discovered. XDR-TB is a
      mutated form of MDR-TB that seems to be highly resistant to all of the known
      treatments for the disease.




Designer
      Diagnostics’ kits are being developed to detect the NTM and TB bacteria. 
If this product development is successful, it may lead to the treatment
      of patients before dangerous (often fatal) symptoms appear.




On
      January 24, 2006, we entered into an Agreement with NanoLogix whereby we
      exchanged our holding of NanoLogix common stock for the intellectual property
      pertaining to the manufacture of test kits for the rapid isolation, detection
      and antibiotic sensitivity testing of certain microbacteria. We then placed
      that
      intellectual property into our wholly owned subsidiary, Designer Diagnostics.
      Designer Diagnostics owns 11 issued patents and has licensing rights to 18
      issued patents related to the rapid isolation, growth, identification and
      antibiotic sensitivity of disease causing pathogens such as Tuberculosis ("TB")
      and Mycobacterium avium-intracellulare ("MAI"). The patented technologies are
      related to a technique known as "paraffin baiting". The researchers discovered
      that certain grades of paraffin wax, when used in conjunction with a microscope
      slide, and combined with a nutrient broth, provides for the rapid isolation,
      growth and identification of various disease causing pathogens. Designer
      Diagnostics markets a diagnostic test kit based on this technology. Designer
      Diagnostics plans to market its products to hospitals, clinical laboratories,
      medical research institutions, medical schools, physician's offices, and even
      pharmaceutical companies, as the antibiotic sensitivity testing methodology
      may
      be useful in creating new drugs to treat paraffinophilic microorganisms.





**Compliance
      with Government Regulations and Need for Government
      Approval**





The
      production and marketing of potential drug products as well as research and
      development activities generally are subject to regulation by numerous
      governmental authorities in the United States and other countries. In the United
      States, vaccines, drugs and certain diagnostic products are subject to Food
      an d
      Drug Administration ("FDA") review of safety and efficacy. The Federal Food,
      Drug and Cosmetic Act, the Public Health Service Act and other federal statutes
      and regulations govern or influence the testing, manufacture, safety, labeling,
      storage, record keeping, approval, advertising and promotion of such products.
      Noncompliance with applicable requirements can result in criminal prosecution
      and fines, recall or seizure of products, total or partial suspension of
      production, or refusal of the government to approve Biological License
      Applications ("BLAs"), Product License Applications ("PLAs"), New Drug
      Applications ("NDAs") or refusal to allow a company to enter into supply
      contracts. The FDA also has the authority to revoke product licenses and
      establishment licenses previously granted.





In
      order
      to obtain FDA approval to market a new biological or pharmaceutical product,
      proof of product safety, purity, potency and efficacy, and reliable
      manufacturing capability must be submitted. This requires companies to conduct
      extensive laboratory, pre clinical and clinical tests. This testing, as well
      as
      preparation and processing of necessary applications, is expensive,
      time-consuming and often takes several years to complete. There is no assurance
      that the FDA will act favorably in making such reviews. Our potential partners
      or we may encounter significant difficulties or costs in their efforts to obtain
      FDA approvals, which could delay or preclude from marketing any products that
      may be developed. The FDA may also require post-marketing testing and
      surveillance to monitor the effects of marketed products or place conditions
      on
      any approvals that could restrict the commercial applications of such products.
      Product approvals may be withdrawn if problems occur following initial
      marketing, such as, compliance with regulatory standards is not maintained.
      Delays imposed by governmental marketing approval processes may materially
      reduce the period during which a company will have the exclusive right to
      exploit patented products or technologies. Refusals or delays in the regulatory
      process in one country may make it more difficult and time consuming to obtain
      marketing approvals in other countries.


9




The
      FDA
      approval process for a new biological or pharmaceutical drug involves completion
      of preclinical studies and the submission of the results of these studies to
      the
      FDA in an Initial New Drug application, which must be approved before human
      clinical trials may be conducted. The results of preclinical and clinical
      studies on biological or pharmaceutical drugs are submitted to the FDA in the
      form of a BLA, PLA or NDA for product approval to commence commercial sales.
      In
      responding to a BLA, PLA or NDA, the FDA may require additional testing or
      information, or may deny the application. In addition to obtaining FDA approval
      for each biological or chemical product, an Establishment License Application
      ("ELA") must be filed and the FDA must inspect and license the manufacturing
      facilities for each product. Product sales may commence only when both BLA/
      PLA/
      NDA and ELA are approved. In certain instances in which a treatment for a rare
      disease or condition is concerned, the manufacturer may request the FDA to
      grant
      the drug product Orphan Drug status for a particular use. "Orphan" status refers
      to serious ailments affecting less than 250,000 individuals. In this event,
      the
      developer of the drug may request grants from the government to defray the
      costs
      of certain expenses related to the clinical testing of such drug and be entitled
      to marketing exclusivity and certain tax credits.





In
      order
      to gain broad acceptance in the marketplace of a medical device, our partners
      or
      we will need to receive approval from the FDA and other equivalent regulatory
      bodies outside of the United States. This approval will be based upon clinical
      testing programs at major medical centers. Data obtained from these institutions
      will enable us, or our partners, to apply to the FDA for acceptance of its
      technology as a "device" through a 510(k) application or exemption process.
      Once
      the data have been fully gleaned, it is expected that this process would
      take ninety days.





According
      to the FDA, a "device" is: "an instrument, apparatus, implement, machine,
      contrivance, implant, in vitro reagent, or other similar or related article,
      including a component part, or accessory which is recognized in the official
      National Formulary, or the United States Pharmacopoeia, or any supplement to
      them, intended for use in the diagnosis of disease or other conditions, or
      in
      the cure, mitigation, treatment, or prevention of disease, in man or other
      animals, or intended to affect the structure or any function of the body of
      man
      or other animals, and which does not achieve any of its primary intended
      purposes through chemical action within or on the body of man or other animals
      and which is not dependent upon being metabolized for the achievement of any
      of
      its primary intended purposes."





The
      FDA
      classifies devices as either Class I/II-exempt, Class II, or Class
      III.





Class
      III: Pre-Marketing Approval, or PMA: A Pre-Marketing Approval or PMA is the
      most
      stringent type of device marketing application required by FDA. A PMA is an
      application submitted to FDA to request clearance to market, or to continue
      marketing of a Class III medical device. A PMA is usually required for products
      with which FDA has little previous experience and in such cases where the safety
      and efficacy must be fully demonstrated on the product. The level of
      documentation is more extensive than for a 510(k) application and the review
      timeline is usually longer. Under this level of FDA approval, the manufacturing
      facility will be inspected as well as the clinical sites where the clinical
      trials are being or have been conducted. All the appropriate documents have
      to
      be compiled and available on demand by the FDA. The manufacturing facility
      is
      registered with the FDA and the product or device is registered with the
      FDA.





Class
      II:
      510(k). This is one level down from the PMA and it is applied to devices with
      which the FDA has had previous experience. A 510(k) is a pre-marketing
      submission made to FDA to demonstrate that the device to be marketed is as
      safe
      and effective, that is, substantially equivalent, to a legally marketed device
      that is not subject to pre-market approval. Applicants must compare their 510(k)
      device to one or more similar devices currently on the U.S. market and make
      and
      support their substantial equivalency claims. The legally marketed device to
      which equivalence is drawn is known as the "predicate" device. Applicants must
      submit descriptive data and, when necessary, performance data to establish
      that
      their device is SE to a predicate device. Again, the data in a 510(k) is to
      show
      comparability, that is, substantial equivalency (SE) of a new device to a
      predicate device. Under this level of approval, the manufacturing facility
      is
      registered with the FDA and the product or device is registered with the FDA.
      Inspections under this classification are possible. All the appropriate cGMP
      and
      clinical data backing the claims made must be on file and available on demand
      by
      the FDA.




Class
      I/II Exemption: This is the lowest level of scrutiny. Most Class I devices
      and a
      few Class II devices are exempt from the pre-marketing notification requirements
      subject to the limitations on exemptions. However, these devices are not exempt
      from other general controls. All medical devices must be manufactured under
      a
      quality assurance program, be suitable for the intended use, be adequately
      packaged and properly labeled, and have establishment registration and device
      listing forms on file with the FDA. However, as described above, all the
      appropriate documentation including cGMP and clinical data supporting the claims
      being made has to be on hand and available on demand by the FDA. The data must
      be available to support all the product claims.


10


Sales
      of
      biological and pharmaceutical products and medical devices outside the United
      States are subject to foreign regulatory requirements that vary widely from
      country to country. Whether or not FDA approval has been obtained, approval
      of a
      product or a device by a comparable regulatory authority of a foreign country
      must generally be obtained prior to the commencement of marketing in that
      country.




Designer
      Diagnostics is also subject to regulation by the Occupational Safety and Health
      Administration ("OSHA") and the Environmental Protection Agency ("EPA") and
      to
      regulation under the Toxic Substances Control Act, the Resource Conservation
      and
      Recovery Act and other regulatory statutes, and may in the future be subject
      to
      other federal, state or local regulations. Designer Diagnostics believes that
      they are in compliance with regulations regarding the disposal of its
      biological, radioactive and chemical waste. Designer Diagnostics voluntarily
      complies with NIH guidelines regarding research involving recombinant DNA
      molecules. Such guidelines, among other things, restrict or prohibit certain
      recombinant DNA experiments and establish levels of biological and physical
      containment that must be met for various types of research.





**Product
      Liability**





Although
      ReceptoPharm and Designer Diagnostics have product liability insurance detailed
      below, we individually have no product liability insurance. Consequently,
      product liability claims may result in significant legal costs related to our
      defense of such actions and/or damage amounts exceeding our product liability
      insurance coverage. The design, development, and manufacture of drug products
      or
      diagnostic tests involves an inherent risk of product liability claims and
      corresponding damage to our brand name reputation, including claims of product
      failure or harm caused by the drug product. ReceptoPharm has product liability
      insurance for purpose of manufacturing the drugs currently under clinical
      trials; however, there is no assurance that such insurance would protect us
      against any product liability claims. Designer Diagnostics has product liability
      insurance for its portfolio of test kits; however, there is no assurance that
      such insurance would protect us against any product liability claims. We have
      no
      product liability insurance and product liability claims may result in
      significant legal costs related to our defense of such actions and/or damage
      amounts exceeding the product liability insurance coverage of ReceptoPharm
      or
      Designer Diagnostics.





**Research
      and Development**





During
      2006, we spent $410,921 on research and development activities, most of which
      was funded by our President. All of these costs were incurred by ReceptoPharm
      during 2006, at which time our financial statements were consolidated with
      ReceptoPharm’s financial results. Because our financial statements for our 2007
      Fiscal Year are not consolidated with ReceptoPharm’s financial results, we have
      no research and development costs during 2007.





**Effect
      of Compliance with Federal, State, and Local Provisions for the Protection
      of
      the Environment**





We
      have
      no present or anticipated direct future costs associated with environmental
      compliance, since we are not and will not be directly involved in manufacturing
      drug products as result of our research and development; however, we may be
      affected in the percentage licensing fees we receive, since a company may
      consider the environmental expense as an offset to a determination of the
      percentage amount we receive. ReceptoPharm produces a drug that has limited
      waste issues and related costs, but handles environmentally related matters
      through the FDA's Good Manufacturing Practices, the FDA mandated guidelines
      pertaining to the production of drugs in the United States.




**Sources
      and Availability of Raw Materials**





ReceptoPharm
      uses the raw material, cobra venom, which is the main ingredient for the drugs
      being studied by ReceptoPharm. Apart from that, we do not currently use raw
      materials in our business.


11


**Dependence
      on one or a Few Major Customers**





Our
      potential customers consist of men and women using the drugs that are developed
      through relationships with pharmaceutical and other companies; as such, we
      do
      not plan on being dependent upon one single customer or just a few customers.
      Nonetheless, one of our revenue segment models seeks to develop licensing fees
      with pharmaceutical companies; should we be successful in securing such a
      licensing agreement, the termination of such an agreement with one or a few
      such
      companies may negatively affect our ability to generate revenues.





**Patents,
      Trademarks, Licenses and Intellectual Property**





We
      seek
      patent and other intellectual property rights to protect and preserve our
      proprietary technology and our right to capitalize on the results of our
      research and development activities. We also rely on trade secrets, know-how,
      continuing technological innovations and licensing opportunities to develop
      new
      products.





*Bio
      Therapeutics Patents*





We
      hold
      the license to certain intellectual property patented by Bio Therapeutics as
      follows:





·
            U.S.
                Patent No. 5,989,857, which was granted in November 1999 with 10
                claims.





·
            U.S.
                Patent No. 6,670,148, which was granted in December 2003, with 9
                claims.
                The patent further describes the method for preparing a bioactive
                peptide
                (protein) found in cobra venom, in a stable, inactivated form, by
                treating
                the peptide with ozone.





·
            Buccal
                Delivery System, on which a patent is pending. This application describes
                a throat spray that permits efficient delivery of the modified peptide
                drugs to the body through oral
                mucosa.





·
            Technology
                contained in one pending U.S. patent application for the further
                development of bioactive peptides in cobra venom for use in the treatment
                of HIV and MS.





·
            Technology
                contained in two pending U.S. patent applications for Immunokine
                Composition and Method, which describes a method for developing modified
                peptides from alpha-cobratoxin.





·
            Technology
                contained in two patents pending for the topical delivery of our
                proprietary wound healing treatment, which was developed in conjunction
                with Bio Therapeutics. One of these products is in the form of  an
                ointment style skin protectant and the other a foaming
                aerosol.




*ReceptoPharm
      Patents*





ReceptoPharm
      has 7 patents pending with the United States Patent and Trademark Office. These
      patents include:





·
            Modified
                venom and venom components as anti-retroviral agents. The present
                invention relates to a class of proteins, and a method for treatment
                of
                neurological and viral diseases in humans and
                animals.




·
            Modified
                anticholinergic neurotoxins as modulators of the autoimmune reaction.
                The
                invention has application to the treatment of certain human autoimmune
                diseases, including especially multiple sclerosis, myasthenia gravis,
                and
                rheumatoid arthritis.





·
            Method
                of use of crotoxin as an anti-retroviral agent. Provides a composition
                of
                matter and a method of using the composition for treating and preventing
                of retroviral infections of mammalian
                cells.





·
            Method
                of production and use of crotoxin as an analgesic. A pharmaceutical
                composition including one of crotoxin, mojavetoxin or a related toxin
                and
                a carrier for use in the treatment of chronic
                pain,


12





·
            Modified
                alpha-neurotoxins as painkillers. A composition of matter, a process
                of
                production thereof, and a method for the treatment of chronic
                pain.





·
            Modified
                neurotoxins as therapeutic agents for the treatment of diseases and
                methods of making. a method for treatment of neurological and viral
                diseases and especially to the treatment of heretofore intractable
                diseases.




*Patents
      Assigned to Us by Nanologix, Inc. and Used by Designer
      Diagnostics*





On
      January 24, 2006 we entered into an Agreement with NanoLogix whereby we
      exchanged our entire holding of NanoLogix common stock for intellectual property
      pertaining to the manufacture of test kits for the rapid isolation, detection
      and antibiotic sensitivity testing of certain mycobacteria. The agreement
      provides that: (a) NanoLogix has reassigned to us 11 key patents protecting
      the
      diagnostics test kit technology in exchange for our entire holding of NanoLogix
      stock represented by 4,556,174 shares of that stock; (b) NanoLogix has licensed
      to us the remaining 18 patents that protect the diagnostics test kit technology
      in exchange for a 6% royalty on the gross sales of the products based on the
      licensed technology or a minimum of $20,000 annually; (c) we issued to NanoLogix
      1 million options of our restricted common stock at $.20 per share; and (d)
      we
      will allow NanoLogix to continue their use of these patents for development
      of
      their hydrogen technology and other technologies unrelated to medical diagnostic
      test kits.





We
      own 11
      issued U.S. patents and have licensing rights to 18 issued U.S. patents covering
      technologies related to growing, detecting, identifying, defining antibiotic
      sensitivity and designing apparatus for the detection of 32 different
      paraffin-eating microorganisms that were assigned to us by Nanologix, Inc..
      These patents are used by our wholly owned subsidiary, Designer Diagnostics.





Owned
      Patents





U.S. Patent Nos.
            
            Description#5,989,902
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic hydrophobic microorganism and an associated apparatus#5,981,210
            
            Method
                for determining a presence or absence of a nonparaffinophilic hydrophobic
                microorganism in a body specimen by using a DNA extraction procedure
                and a
                novel DNA extraction procedure#5,935,806
            
            Method
                and apparatus for speciating and identifying MAI (Mycobacterium Avium
                Intracellulare) and testing the same for antibiotic sensitivity#5,882,920
            
            Apparatus
                for determining the presence or absence of a paraffinophilic microorganism#5,854,014
            
            Apparatus
                for testing paraffinophilic microorganisms for antimicrobial sensitivity#5,846,760
            
            Method
                for determining a presence or absence of a nonparaffinophilic hydrophobic
                microorganism in a body specimen and an associated kit#5,776,722
            
            Method
                of testing a body specimen taken from a patient for the presence
                or
                absence of a microorganism a further associated method and associated
                apparatus#5,569,592
            
            Apparatus
                for testing MAI (Mycobacterium Avium Intracellulare) for antimicrobial
                agent sensitivity


13




#5,472,877
            
            Apparatus
                for determining the presence or absence of MAI (Mycobacterium Avium
                Intracellulare)#5,316,918
            
            Method
                and apparatus for testing MAI (Mycobacterium Avium Intracellulare)
                for
                antimicrobial agent sensitivity#5,153,119
            
            Method
                for speciating and identifying MAI (Mycobacterium Avium
                Intracellulare)




Licensed
      Patents




U.S. Patent Nos.
            
            Description#5,962,306
            
            Method
                of determining the presence or absence of a nonparaffinophilic
                microorganism in a specimen and an associated apparatus#5,891,662
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic hydrophobic microorganism#5,882,919
            
            Apparatus
                for determining the presence or absence of a nonparaffinophilic
                microorganism in a specimen#5,854,013
            
            Method
                of determining presence or absence of a nonparaffinophilic microorganism
                in a specimen#5,804,406
            
            Determining
                sensitivity of paraffinophilic microorganisms to
                antimicrobials#5,801,009
            
            Method
                for determining the antimicrobial sensitivity of a paraffinophilic
                microorganism using various milieus and an associated
                apparatus#5,750,363
            
            Method
                for determining the antibiotic agent sensitivity of a nonparaffinophilic
                microorganism and an associated apparatus#5,726,030
            
            Method
                for automatically testing the antibiotic sensitivity of a
                nonparaffinophilic microorganism#5,721,112
            
            Method
                of determining the presence or absence of a nonparaffinophilic
                microorganism in a specimen and an associated apparatus#5,707,824
            
            Method
                of determining the presence or absence of a paraffinophilic
                microorganism#5,698,414
            
            Method
                and apparatus for testing paraffinophilic microorganisms for antimicrobial
                agent sensitivity#5,677,169
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microorganism and an associated
                apparatus#5,668,010
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microorganism using various milieus and an associated
                apparatus#5,663,056
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microorganism and an associated
                apparatus


14




#5,654,194
            
            Method
                of identifying a nonparaffinophilic microrganism using various milieus
                and
                an associated apparatus#5,641,645
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microrganism using various milieus and an associated
                apparatus#5,639,675
            
            Method
                of identifying a nonparaffinophilic microorganism using various mileus
                and
                an associated apparatus#5,637,501
            
            Apparatus
                for automatically testing the antibiotic sensitivity of a paraffinophilic
                microorganism




Our
      business is dependent upon our ability to protect our proprietary technologies
      and processes. Despite our efforts to protect our proprietary rights,
      unauthorized parties may attempt to obtain and use proprietary information.
      We
      will rely on patent and trade secret law and nondisclosure and other contractual
      arrangements to protect such proprietary information. We will file patent
      applications for our proprietary methods and devices for patient treatments.
      Our
      efforts to protect our proprietary technologies and processes are subject to
      significant risks, including that others may independently develop equivalent
      proprietary information and techniques, gain access to our proprietary
      information, our proprietary information being improperly disclosed, or that
      we
      may ineffectively protect our rights to unpatented trade secrets or other
      proprietary information.





**Markets**





**Target
      Market - ReceptoPharm**




CDC
      figures indicate that HIV, the virus that causes AIDS, globally infects 39.5
      million people. The continent of Africa has the greatest concentration of
      infected individuals while the subcontinent of India has experienced dramatic
      growth in the number of new infections. It is estimated that within the next
      few
      years over 10 million Indians will be infected. The affected US population
      numbers 900,000 over 50% of who are on current AIDS-related therapy. Europe
      has
      slightly lower numbers of infected individuals with approximately 30% on
      retroviral therapy. Current drugs have proven effective at delaying the onset
      of
      AIDS though the HIV virus has demonstrated the ability to develop resistance
      to
      these new drugs and their ability to prevent the infection of the central
      nervous system seems limited. Once in the nervous system, the virus is capable
      of causing sufficient damage to result in dementia. There is no drug to prevent
      this occurrence. Historically, as a result of pressure groups, AIDS-related
      drugs are rapidly adopted, leading to rapid increases in drug
      sales.




According
      to current estimates approximately 2.5 million people worldwide have MS, with
      350,000 cases in the United States, 50,000 cases in Canada, 130,000 cases in
      Germany, 85,000 cases in the United Kingdom, 75,000 cases in France, 50,000
      cases in Italy, and 11,000 cases in Switzerland (www.myelin.org). Drug
      prescription use is higher in the USA due to fewer restrictions on prescriptions
      and the market is larger. Several European nations impose strict rules governing
      the distribution of drugs to patients with MS due to issues on the cost/benefit
      aspects of the drugs associated with this disease.




Adrenoleukodystrophy,
      or ALD, is a genetically determined neurological disorder that affects 1 in
      every 17,900 boys worldwide or 1 in 50,000 of the population. ALD in boys is
      usually lethal whereas AMN, while rarely life threatening, can be quite
      debilitating. There are no drugs for these conditions though Lorenzo’s Oil has
      been studied extensively. In the USA 5,000 new cases are diagnosed each year,
      half being AMN.




Although
      rabies in humans is rare in the United States, as many as 18,000 Americans
      get
      rabies shots each year because they have come in contact with animals that
      may
      be rabid (rabies-infected). In 2006, according to the U.S. Centers for Disease
      Control and Prevention (CDC), only one person died of rabies in this country.
      In
      other parts of the world, however, many people die of rabies each year. The
      World Health Organization (WHO) estimates that 40,000 people worldwide die
      every
      year from rabies. WHO also estimates 10 million people worldwide are treated
      after being exposed to animals that may have had rabies.


15


**Market
      Values**




**Human
      Healthcare**




The
      World
      Health Organization estimates that 39.5 million people worldwide are HIV
      positive with the majority of these occurring in third world countries. In
      the
      United States alone, an estimated 900,000 people are infected and the majority
      undergoes treatment for HIV-related conditions at an individual cost of $14,000
      (HAART) to $34,000 (AIDS patients). The worldwide market for HIV drugs exceeds
      $5 billion annually.




Multiple
      sclerosis affects an estimated 2.5 million people globally. There are 5 approved
      drugs for the treatment of this disease. The average annual cost of these drugs
      is $12,000 per person. In 2004, sales by one manufacturer, Biogen, were reported
      to be $1.4 billion for its drug, Avonex. Total drugs sales for MS exceed $4
      billion annually.




AMN/ALD
      affects an estimated 30,000 people in the US with some estimates exceeding
      this
      number. A realistic market value would be somewhere between $100-200 million
      per
      year.




The
      World
      Health Organization estimates that 10 million people per year are treated for
      rabies with the majority of these occurring in third world countries. In the
      United States alone, an estimated 18,000 people undergo treatment for rabies
      at
      an individual cost of $1,000 to $2,300, dependent upon location, for an
      aggregate US market value of $18 to $41 million annually.




**Market
      Competition - ReceptoPharm**




Competition
      is intense among companies that develop and market products based on advanced
      cellular and molecular biology. ReceptoPharm has a number of competitors,
      including Amgen, Aventis, Cephalon, Genetech, Genzyme, Immunex Corp. (a
      subsidiary of Amgen), Novartis, Regeneron and Schering-Plough Corp. For products
      that we manufacture and market we faces significant competition from these
      and
      other biotechnology and pharmaceutical firms in the United States, Europe and
      elsewhere. Certain specialized biotechnology firms have also entered into
      cooperative arrangements with major companies for development and
      commercialization of products, creating an additional source of
      competition.




Any
      products or technologies that successfully address viral or neurological
      indications could negatively impact the market potential for RPI-78M or RPI-MN.
      These include products that could receive approval for indications similar
      to
      those for which RPI-78M or RPI-MN seeks approval, development of biologic or
      pharmaceutical treatments that are more effective than existing treatments
      and
      the development of other modalities with reduced toxicity and side effects.




Interferon-based
      drugs and their indications represent target markets for ReceptoPharm. Sales
      of
      interferon-based drugs annually exceed $6 billion and have attracted the
      participation of several major drug companies. Schering-Plough Corp. and Roche
      are major suppliers of interferons. Currently, there are five interferon-based
      drugs licensed in Canada and the U.S.; three for the treatment of the milder
      Relapsing-Remitting form of Multiple sclerosis and two for Hepatitis C. These
      interferons are also used in the treatment of other conditions where treatment
      options are limited. The interferons for MS are Betaseron (Berlex/Schering),
      Avonex (Biogen) and Rebif (Serono). Current global estimates for the number
      of
      patients taking these drugs are 120,000 on Avonex, 80,000 on Betaseron and
      80,000 on Rebif. However, one must note that since the launching of these drugs,
      the number of patients undergoing treatment has stabilized at current levels,
      indicating that there is a high turnover rate of patients in the administration
      of these individual drugs due to cost and side effects. Biogen developed Avonex
      in the early 1990’s and has been shipping the drug since late 1996. In the U.K.,
      the National Institute for Clinical Efficiency (NICE) has called for the
      withdrawal of Betaseron and another unrelated drug, Copaxone (Teva), from the
      market based on poor cost/effectiveness.


16




Schering
      Plough manufactures alpha-interferon (Intron-A) and Roche produces Roferon
      as
      the only treatments for Hepatitis C. Schering also developed the drug Ribavirin
      as a general antiviral agent which, when combined, with Intron-A, is a treatment
      for Hepatitis C. This combination is called Ribitron. Treatment with Intron-A
      costs $19,000 per year though initial treatment periods are usually for 6
      months. It is the high cost and significant side effects that prevents the
      widespread uptake of this drug by the 4 million Hepatitis C sufferers in the
      US.
      Other companies producing interferon-based products are Amgen (INFERGEN) and
      Viragen.





**Main
      Competitors - ReceptoPharm**




Employing
      venoms as therapeutics is not new and is growing rapidly. A large number of
      well-known pharmaceutical companies are developing novel therapies derived
      from
      snake venoms and other reptiles. Most of those using snake venoms employ the
      anticoagulant enzymes usually from viperids (adders and rattlesnakes) though
      elapids (cobra family) are also being investigated. Knoll Pharmaceuticals
      (acquired recently by Abbot) is employing an anticoagulant from rattlesnakes.
      Ancrod is derived from the venom of a family of snakes known as pit vipers.
      These include deadly rattlesnakes, such as the Diamondback, that live in the
      US
      and Mexico. Researchers observed that the blood of people bitten by rattlesnakes
      failed to clot. Based on that observation, the venom was extracted and turned
      into an anti-coagulant. Ancrod is not yet approved by the FDA for stroke
      treatment. The only FDA-approved acute stroke treatment is Tissue Plasminogen
      Activator (TPA). Other heart drugs are also based on snake venom, notably
      Merck’s Aggrastat and COR Therapeutics’ Integrilin. The approval of extendin-4
      from the Gila Monster lizard (Amylin Pharmaceuticals) for type 2 diabetes
      represents another successful application of a venom-based product. It was
      licensed to Eli Lilly for $325 million.




Keluoqu,
      a pain-killing drug on the market in China since 1978, contains cobrotoxin
      (from
      cobra venom) as its primary ingredient. It is used to control severe pain in
      advanced cancer patients and for post-operative pain. Several companies are
      working with scorpion toxins mainly in the anticancer field. Botox (botulinum
      toxin), a bacterial neurotoxin, is the most toxic biological product. It is
      being developed for a number of applications by Allergan and Elan but has
      been increasingly popular for cosmetic applications.




We
      view
      our main competitors as those who also engage in the development of
      protein-based neurotoxins as therapeutics. Abbot’s new drug under development,
      epibatidine, while derived from a poisonous frog, is not a protein. Elan
      Pharmaceuticals acquired Neurex Corporation specifically for the biologic drug
      development of Ziconitide, which is a highly effective, peptide-based drug
      derived from poisonous cone snails. Neurex has enabled Elan to enter the
      significant markets of acute care and pain management. This drug’s impressive
      characteristic is selectivity in blocking sensations of pain without side
      effects. Most painkillers today function as narcotics, making sufferers feel
      good enough that they forget about the pain but the pain is still there. In
      contrast, Ziconitide simply stops the pain. There is no addiction, no drug
      interactions, and no build up of resistance. Ziconitide is expected to replace
      morphine within the next few years. Cognetix (Utah), a company similar to
      Neurex, has also focused on Conus venoms as potential therapeutic agents for
      pain management.




**Ability
      to Compete - ReceptoPharm**





The
      biotechnology research and development field is extremely competitive and is
      characterized by rapid change. Our competitors have substantially greater
      financial, scientific, and human resources, and as a result greater research
      and
      product development capabilities. Our competitors have competitive advantages
      with greater potential to develop revenue streams. Our competitors are located
      in the United States as well as around the world. We will attempt to complete
      by
      establishing strategic partners or alliances with pharmaceutical companies,
      academic institutions, biotechnology companies, and clinical diagnostic
      laboratories, which will enter into joint ventures, emphasizing that the drugs
      RPI-MN and RPI-78M possess the following properties:




1)
            They
                lack measurable toxicity but are still capable of attaching to and
                affecting the target site on the nerve cells. This means that patients
                cannot overdose.




2)
            They
                display no adverse side effects following years of investigations
                in
                humans and animals.




17




3)
            The
                products are stable and resistant to heat, which gives the drug a
                long
                shelf life. The drugs’ stability has been determined to be over 4 years at
                room temperature.




4)
            RPI-78M
                can be administered orally. It has been routinely delivered by injection
                in a manner similar to insulin, but recent research and development
                has
                given rise to administration by mouth. Oral delivery presents patients
                with additional “quality of life” benefits by eliminating or decreasing
                the requirement for routine
                injections.




Additionally,
      the only competing products to Designer Diagnsotics’ test kits are the
      conventional solid media, such as Lowenstein Jensen and Middlebrook Media.





**Competitive**  **Weaknesses
      - ReceptoPharm**





The
      primary weakness associated with a company at ReceptoPharm’s stage of
      development is not having the necessary funds to complete the requirements
      of a
      drug development business. Furthermore, the management/founders do not have
      an
      established track record in the pharmaceutical business, although the
      installation of Dr. Dorothy Bray, formerly of GlaxoSmithKline, as ReceptoPharm’s
      Clinical Development Advisor has somewhat addressed this deficiency.




**Market
      Competition – Designer Diagnostics**




We
      view
      the main competition to Designer Diagnostics’ Test Kit technology to be divided
      into two areas: Tuberculosis and Non-Tubercular Mycobacterium. In the TB
      (Tuberculosis) Test Kit arena. Designer Diagnostics’ main competition is Becton,
      Dickinson and Company and their TB test kit is widely used throughout the world.




We
      intend
      to emphasize the advantages of our Designer Diagnostic kit on the basis of
      lower
      cost and that it does not require refrigeration or specialized equipment for
      utilization.  When looking at NTM (Non-Tubercular Mycobacterium) Test Kits,
      there is no competition with a kit that will work on all 15 identified types
      of
      NTMs.  Becton, Dickinson and Company is a purveyor and major competition
      for kits that can be used for NTMs, but they require different tests for most
      types. The Designer Diagnostics NTM Test Kit can be used to identify all types
      and subtypes of NTMs in a single test. Additionally, there is currently no
      competition for the use of an NTM test for environmental applications. Designer
      Diagnostics has begun marketing the first ever diagnostic test for identifying
      NTMs in soil, water and other environmental media.




REPORTS
      TO SECURITY HOLDERS





We
      are
      subject to the informational requirements of the Securities Exchange Act of
      1934. Accordingly, we file annual, quarterly and other reports and information
      with the Securities and Exchange Commission. You may read and copy these reports
      in Washington, D.C. Our filings are also available to the public from commercial
      document retrieval services and the Internet world wide website maintained
      by
      the Securities and Exchange Commission at www.sec.gov.





**Item
      2. Description of Property**





Our
      March
      2004 verbal lease agreement between Stan Cherelstein, on Waiora, Inc.’s behalf
      as its President and Rik Deitsch, as our President and on our behalf, provides
      for our use of Waiora’s lease space at any location that Waiora occupies. From
      March 2004 to May 2006, we occupied approximately 800 square feet of Waiora’s
      lease office space at 1829 Corporate Drive, Boynton Beach, Florida 33426. As
      of
      May 2006, we occupied approximately 800 square feet of Waiora’s lease office
      space at 791 Park of Commerce Boulevard, Suite 300, Boca Raton, Florida 33487.
      We make no cash payment for the use of this space; instead, we are permitted
      to
      use such space in return for our President serving as Waiora’s Chairman of its
      Scientific Advisory Board. The verbal lease agreement further provides that:
      (a)
      there is no expiration date to this agreement, but Waiora, Inc may terminate
      the
      lease at any time, and it is subject to Waiora's own lease term, which expires
      May 2008; (b) 800 square feet of office space is allotted specifically to us;
      (b) Waiora provides us with access to a conference room, office equipment,
      and a
      T-1 Internet connection; and (c) Stan Cherelstein serves as one of our Directors
      and is Chairman of our Audit and Compensation Committees. Our offices are in
      good condition and are sufficient to conduct our operations.




18





We
      have
      no investments in real estate, real estate mortgages or any other real estate
      related investments and we have no intention of making any such investments
      or
      establishing related invested policies.





**Item
      3. Legal Proceedings**




On
      April 4, 2005, a Motion to Enforce Settlement Agreement was filed against
      us in the Circuit Court of Broward County Florida by Bio Therapeutics, Inc.
      f/k/a Phylomed Corp. in Nutra
      Pharma Corp. v. Bio Therapeutics, Inc. ( 17th
      Judicial Circuit, Case No. 03-008928 (03). This proceeding results from our
      alleged breach of a settlement agreement that was entered into between Bio
      Therapeutics and us in resolution of a previous lawsuit between us and Bio
      Therapeutics that was resolved by entering into a Settlement
      Agreement.  In conjunction with the settlement agreement, we also
      entered into a related License Agreement and Amendment to the License Agreement
      (“License Agreement”) with Bio Therapeutics regarding certain pieces of
      intellectual property owned by Bio Therapeutics. In the April 4, 2005
      motion, Bio Therapeutics alleges we breached certain provisions of the License
      Agreement and requests that the Court grant its motion to enforce the Settlement
      Agreement by declaring the License Agreement terminated, enjoining us from
      further use of license products that was granted to us by the License Agreement,
      and awarding attorneys’ fees and costs to Bio Therapeutics.




During
      the last quarter of 2007, we moved for summary judgment regarding Bio
      Therapeutics’ Motion to Enforce Settlement Agreement and the Court, at oral
      argument, granted our summary judgment motion. We are waiting for the Court
      to
      enter an order granting our motion for summary judgment and denying Bio
      Therapeutics’ Motion to Enforce Settlement.




There
      are
      no other legal proceedings that occurred during our Fiscal Year 2007 that are
      reportable.




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





There
      were no matters submitted during the fourth quarter of 2007 for a vote of our
      security holders through the solicitation of proxies or otherwise.





**PART
      II**





**Item
      5. Market Price of and Dividends on our Common Equity and Related Stockholder
      Matters.**




*Market
      Information*





Our
      common stock is quoted on the over-the-counter bulletin board under the trading
      symbol "NPHC." The following table sets forth the high and low bid prices for
      each quarter within the last two fiscal years.




2006
            
            2007High
                Bid
            
            Low
                Bid
            
            High
                Bid
            
            Low
                BidFirst
                Quarter
            
            
            .33
            
            
            .17
            
            $
            .13
            
            $
            .09Second
                Quarter
            
            
            .26
            
            
            .14
            
            $
            .10
            
            $
            .07Third
                Quarter
            
            
            .16
            
            
            .08
            
            $
            .07
            
            $
            .05Fourth
                Quarter
            
            
            .14
            
            
            .08
            
            $
            .05
            
            $
            .03





The
      above
      quotations reflect inter-dealer prices, without retail mark-up, markdown or
      commission and may not represent actual transactions.




19




*Penny
      Stock Considerations*





Our
      shares of common stock are "penny stocks" as that term is generally defined
      in
      the Securities Exchange Act of 1934 as equity securities with a price of less
      than $5.00. Our shares are subject to rules that impose sales practice and
      disclosure requirements on broker-dealers who engage in certain transactions
      involving a penny stock.





Under
      the
      penny stock regulations, a broker-dealer selling a penny stock to anyone other
      than an established customer or "accredited investor" must make a special
      suitability determination regarding the purchaser and must receive the
      purchaser's written consent to the transaction prior to the sale, unless the
      broker-dealer is otherwise exempt. Generally, an individual with a net worth
      in
      excess of $1,000,000 or annual income exceeding $200,000 individually or
      $300,000 together with his or her spouse is considered an accredited
      investor.




In
      addition, under the penny stock regulations the broker-dealer is required
      to:





·
            Deliver,
                prior to any transaction involving a penny stock, a disclosure schedule
                prepared by the Securities and Exchange Commission relating to the
                penny
                stock market, unless the broker-dealer or the transaction is otherwise
                exempt;





·
            Disclose
                commission payable to the broker-dealer and its registered representatives
                and current bid and offer quotations for the
                securities;





·
            Send
                monthly statements disclosing recent price information pertaining
                to the
                penny stock held in a customer's account, the account's value and
                information regarding the limited market in penny stocks;
                and





·
            Make
                a special written determination that the penny stock is a suitable
                investment for the purchaser and receive the purchaser's written
                agreement
                to the transaction, prior to conducting any penny stock transaction
                in the
                customer's account.




Because
      of these regulations, broker-dealers may encounter difficulties in their attempt
      to sell shares of our common stock, which may affect the ability of shareholders
      to sell their shares in the secondary market and have the effect of reducing
      the
      level of trading activity in the secondary market. These additional sales
      practice and disclosure requirements could impede the sale of our securities.
      In
      addition, the liquidity for our securities may be adversely affected, with
      a
      corresponding decrease in the price of our securities. Our shares are subject
      to
      such penny stock rules and our shareholders will, in all likelihood, find it
      difficult to sell their securities.





**Holders**





As
      of
      March 31, 2008, based upon records obtained from our transfer agent, there
      were
      246 holders of record of our common stock. Our transfer agent records does
      not
      account for other holders of our common stock that are held in street name
      or by
      broker dealers as custodian for individual holders of our stock. We have one
      class of common stock outstanding.





**Dividends**





We
      have
      not declared any cash dividends on our common stock since our inception and
      do
      not anticipate paying such dividends in the foreseeable future. We plan to
      retain any future earnings for use in our business. Any decisions as to future
      payment of dividends will depend on our earnings and financial position and
      such
      other factors as our Board of Directors deems relevant. There are no
      restrictions contained in our bylaws or otherwise pertaining to our issuing
      dividends.




20


**Equity
        Compensation Plan Information**
 
 Securities
        authorized per issuance under Equity Compensation Plans as of December 31,
        2007.


**Equity
                  Compensation Plan Information****Plan
                  category**
              
              **Number
                  of securities**
                **to
                  be issued upon**
                **exercise
                  of outstanding**
                **options,
                  warrants and**
                **rights**
                
                **(a)**
              
              **Weighted-average**
                **exercise
                  price of**
                **outstanding
                  options,**
                **warrants
                  and rights**
                
                **(b)**
              
              **Number
                  of securities**
                **remaining
                  available**
                **for
                  future issuance**
                **under
                  equity**
                **compensation
                  plans**
                **(excluding
                  securities**
                **reflected
                  in column (a))**
                
                **(c)**Equity
                  compensation plans approved by security holders
              
              
              0
              
              
              N/A
              
              
              N/AEquity
                  compensation plans not approved by security holders
              
              
              13,000,000
              
              $
              0.59
              
              
              17,005,000**Total**
              
              
              13,000,000
              
              $
              0.59
              
              
              17,005,000




The
      figures contained in the above chart are composed of the following 5 equity
      compensation plans that were not approved by our stockholders:




*2003
      Plan*




On
      December 3, 2003, our Board of Directors approved the Employee/Consultant Stock
      Compensation Plan (the "2003 Plan").  The purpose of the 2003 Plan is to
      further our growth by allowing us to compensate employees and consultants who
      have provided bona fide services to us through the award of our common
      stock.  The maximum number of shares of common stock that may be issued
      under the 2003 Plan is 2,500,000. As of December 31, 2007, we had issued a
      total
      of 2,495,000 shares under the 2003 Plan.




*2007
      Plan*




On
      June
      6, 2007, our Board of Directors approved the 2007 Employee/Consultant Stock
      Compensation Plan (the "2007 Plan").  The purpose of the 2007 Plan is to
      further our growth by allowing us to compensate employees and consultants who
      have provided bona fide services to us through the award of our common
      stock.  The maximum number of shares of common stock that may be issued
      under the 2007 Plan is 25,000,000.  As of December 31, 2007, we had issued
      a total of 8,000,000 shares under the 2007 Plan, with 17,000,000 shares
      remaining under the 2007 Plan.  These shares were issued in exchange for
      services rendered to us during 2007.




Our
      Board
      of Directors is responsible for the administration of the 2003 and 2007 Plans
      and has full authority to grant awards under the Plans.  Awards may take
      the form of stock grants, options or warrants to purchase common stock. 
The Board of Directors has the authority to determine: (a) the employees and
      consultants that will receive awards under the Plan, (b) the number of shares,
      options or warrants to be granted to each employee or consultant, (c) the
      exercise price, term and vesting periods, if any, in connection with an option
      grant, and (d) the purchase price and vesting period, if any, in connection
      with
      the granting of a warrant to purchase shares of common stock of the
      Company.




*Five
      Year Option to Nanologix Inc.*




On
      January 25, 2006, we and Nanologix entered into a definitive agreement pursuant
      to which Nanologix agreed to assign its ownership of 11 patents to us which
      protect Nanologix' infectious disease diagnostic test kit technology.  In
      connection with this agreement, we also issued Nanologix a five-year option
      to
      purchase 1,000,000 of the Company's common stock at an exercise price of $.20.
      This option vested immediately on January 25, 2006, the date of
      grant.




21




*Five
      Year Option to Doherty & Company, LLC*




On
      June 1, 2005, we retained Doherty & Company, LLC (“Doherty &
Company”), to provide the services of Michael Doherty as executive Chairman of
      the Company. Concurrently, the Company also retained Doherty & Company to
      act as our agent in connection with prospective private capital-raising
      activities. On April 1, 2006, the Company and Mr. Doherty entered into a
      termination agreement whereby Mr. Doherty agreed to resign his position as
      our
      Chairman of Board. Upon the effectiveness of the termination agreement on April
      1, 2006, we issued a five-year option to Mr. Doherty to purchase 2,000,000
      shares of common stock at an exercise price of $.27 per share. The option vested
      immediately on the date of grant.




*Warrants
      issued to Xinhua Financial Network*




In
      October 2005, the Company entered into a one-year consulting agreement with
      Xinhua Financial Network (“Xinhua”), providing that Xinhua will introduce us to
      potential strategic and operational partners in The People's Republic of China
      and elsewhere in Asia.  In connection with this agreement, we issued a
      5-year warrant to Xinhua to purchase 10,000,000 shares of our common stock
      at an
      exercise price of $.70.  The warrant is callable by us a price of $1.00 in
      the event that our market price exceeds $1.00.




**Recent
      Sales of Unregistered Securities**





In
      December 2007, we sold an aggregate of 4,800,000 shares of restricted common
      stock shares at $0.025 per share and received total gross proceeds of $120,000.
      These shares were not issued to the purchasers until March 13, 2008.





We
      relied
      upon Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (“the
      Securities Act”) for the offer and sale of the above shares as well as those
      previously reported in our periodic filings. We believed Section 4(2) was
      available because: (a) there was no general solicitation in the offer or sale;
      (b) all purchasers were accredited investors; (c) we placed restrictive legends
      on the certificates representing these securities issued to the accredited
      investors stating that the securities were not registered under the Securities
      Act and are subject to restrictions on their transferability and resale; and
      (d)
      the offer and sale did not involve a public offering.





We
      did
      not repurchase any of our securities during our 2007 Fiscal Year nor have we
      done so since our inception.




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





**PLAN
      OF OPERATIONS**




Pending
      adequate financing, we plan on spending total estimated expenses of $500,000
      for
      the next 12 months, which will include: (a) $380,000 pertaining directly to
      our
      operations; and (b) $120,000 pertaining the operations of our subsidiary,
      Designer Diagnostics. Our Plan of Operations does not involve: (a) any expected
      purchase or sale of a plant or significant equipment; and/or (b) any expected
      significant changes in the number of our employees.




22


EXPENSES
      PERTAINING TO OUR OPERATIONS




Type
                Expenditure
            
            Total
              Expenditure
            
            Monthly
              ExpenditureSalaries*
            
            $
            175,000
            
            $
            14,583Travel
                related expenses for our Chief Executive Officer
            
            
            40,000
            
            
            3,333pertaining
                to research and due diligenceProfessional
                Fees - Legal and Accounting
            
            
            165,000
            
            
            13,750Total
            
            $
            380,000
            
            $
            31,666




*
      Salaries include the following: (a) Chief Executive Officer - $130,000; and
      (b)
      Administrative Assistant - $45,000




FUNDING
      OF DESIGNER DIAGNOSTICS, INC.




Type
                Expenditure
            
            Total
              Expenditure
            
            Monthly
              ExpenditureOperating
                Expenses(Rent,
                supplies, utilities)
            
            $
            50,000
            
            $
            4,167Salaries
                (President)
            
            
            70,000
            
            
            5,833Total:
            
            $
            120,000
            
            $
            10,000




OUR
      PLAN
      OF OPERATIONS TO DATE:




To
      date,
      we have accomplished the following in our Plan of Operations:




In
      approximately October 2005, we completed pre-clinical studies with various
      companies that ReceptoPharm has agreements with pertaining to ReceptoPharm’s
      Multiple Scherosis (MS) and HIV drugs, which consist of (a) and (b)
      below:




(a)
      MS
      Drug under Development (RPI-78M) - ReceptoPharm conducted microarray and
      histoculture studies and related analysis of the cells of Multiple Sclerosis
      patients to ascertain how RPI-78M affected the cells of these patients.
      Microarray analysis is the study of the gene expression of cells. Histoculture
      is the study of the entire cellular environment. We measured the effect of
      RPI-78M on gene expression using cDNA microarray technology to identify any
      potentially unique changes in gene expression that may be caused by RPI-78M.
      After statistical evaluation of the data, the researchers found more than sixty
      genes with significant changes in expression as compared to the control. In
      analyzing the affected genes, at least thirty of them may have a specific role
      in the progression of the disease and symptoms of MS; and




23




(b)
      HIV
      Drug under Development (RPI-MN) - Viral isolates are common mutations of HIV.
      ReceptoPharm, through an agreement with the University of California, San Diego,
      conducted research to study the effect of ReceptoPharm’s drug under development
      on different viral isolates to determine the drug’s efficacy in mutated forms of
      the HIV virus. The ability of the HIV virus to establish resistance to
      therapeutic drugs through genetic mutation is a major concern in the treatment
      of HIV/AIDS. HIV does not always make perfect copies of itself. With billions
      of
      viruses being made every day, lots of small, random differences can occur.
      The
      differences are called mutations and these mutations can prevent drugs from
      working effectively. When a drug no longer works against HIV, this is called
      drug resistance and the virus with the mutation is considered to be ‘resistant’
to the drug. With the increasing number of drug-resistant patients, it is of
      great importance in the development of new HIV/AIDS therapeutics that they
      will
      be effective against HIV of known resistance characteristics. The inhibition
      of
      multi-resistant HIV-1 strains by RPI-MN preparations was investigated at the
      La
      Jolla Institute of Molecular Medicine. The results from these trials indicate
      that the drug is effective against drug-resistant strains of HIV.




·
            On
                January 24, 2006, we obtained NanoLogix’s intellectual property pertaining
                to the manufacture of test kits for the rapid isolation, detection
                and
                antibiotic sensitivity testing of certain microbacteria, which includes
                reassignment to us of 11 key patents protecting the diagnostics test
                kit
                technology and NanoLogix licensing to us, and the remaining 18 patents
                that protect the diagnostics test kit
                technology.




·
            In
                February 2006, we completed the initial funding of ReceptoPharm in
                the
                amount of $2,000,000.




·
            In
                January 2006, we established Designer Diagnostics to sell NonTuberculois
                Mycobacterium test kits.





·
            Designer
                Diagnostics held a Continuing Medical Education Seminar at the Mahatma
                Gandhi Institute in India on March 24, 2006 during the World Stop
                TB Day.
                At that meeting, Designer Diagnostics officially began marketing
                their
                test kits for the rapid isolation, detection and antibiotic-sensitivity
                testing of microbacteria. In March 2006, we made our first sales
                of
                Designer Diagnostics’ test kits.




·
            In
                May of 2006, ReceptoPharm received approval from the Medicines Health
                and
                Regulatory Agency (MHRA) for its application of human clinical trials
                for
                the treatment of Adrenomyeloneuropathy (AMN). The MHRA is the medical
                regulatory agency within the British Department of
                Health.




24




·
            From
                March and April of 2006, ReceptoPharm published two clinical trials
                on the
                use of their technology for the treatment of
                pain.




·
            In
                June of 2006, ReceptoPharm published the results of their EAE rat
                model
                of  MS, which showed that their drug, RPI-78M, had promising results
                in an accepted animal model of the
                disease.




·
            In
                October of 2006, ReceptoPharm received Ethics Committee approval
                in the
                United Kingdom to begin its Phase IIb human clinical trial for the
                treatment of AMN. This approval allows for the late Phase II/early
                Phase
                III (Iib/IIIa) trial to begin.




·
            From
                November 29, 2006 to December 2, 2006, ReceptoPharm presented their
                analgesic research on RPI-78M at the International Conference on
                Neurotoxins (ICoN) in Hollywood, Florida.




·
            In
                January of 2007, we completed a series of microarray studies with
                various
                companies that ReceptoPharm has agreements with pertaining to
                ReceptoPharm’s anti-viral drug. The microarray studies indicated that the
                exposure of healthy immune T-cells to our antiviral drugs activates
                the
                primary immune mechanisms. The expression of one such immune trigger,
                interferon gamma, is increased by as much as 20 times, acting as
                an
                effective antiviral agent, but without the significant negative clinical
                side effects of other interferon-based therapies. This may explain
                the
                broad antiviral activity observed with these types of agents. Based
                upon
                this data, these products could conceivably be used to substitute
                for the
                flu shot in winter or protect against other contagious viral diseases
                when
                vaccines are not readily available.




·
            In
                January of 2007, Designer Diagnostics received positive results from
                its
                in-vitro analysis of its Tuberculosis (TB) test kit. Normal culturing
                methods can take as long as 10 weeks to produce results, where Designer
                Diagnostics test kits have shown similar results within 10
                days.




·
            In
                January of 2007, ReceptoPharm began its Phase IIb human clinical
                trial for
                the treatment of AMN.




·
            In
                February of 2007, ReceptoPharm expanded their antiviral clinical
                research
                into Mexico and Peru where RPI-MN was used in early clinical studies.
                ReceptoPharm seeks to conduct two Phase II antiviral trials each
                with a
                primary duration of 3-4 months.




25




·
            In
                March of 2007, Designer Diagnostics engaged the U.S. Commercial Service
                to
                help build international sales of its diagnostic test
                kits.




·
            On
                March 7, 2007, ReceptoPharm’s signed a letter of intent to create a Joint
                Venture with Nan gene Biotechnology, a Chinese biotech company. The
                proposed joint venture will develop the antiviral drug, RPI-MN, for
                the Chinese market.




·
            In
                March of 2007, ReceptoPharm published an article in the Critical
                Reviews
                in Immunology special conference issue. The article, entitled
                “Alpha-Cobratoxin”, discussed Alpha-Cobratoxin as a possible therapy for
                Multiple Sclerosis, reviews the literature leading to the development
                for
                this application, and discusses the background and reasoning behind
                ReceptoPharm’s research on its treatment for Multiple Sclerosis
                (MS).




·
            On
                March 27, 2007, we completed our first licensing payment on behalf
                of
                Designer Diagnostics to NanoLogix for the patents protecting Designer
                Diagnostics’ test kits.




·
            On
                April 11, 2007, ReceptoPharm filed a patent for method of treating
                autoimmune diseases, including MS and Rheumatoid
                Arthritis.




·
            During
                April 2007, ReceptoPharm completed its initial discussions with Zhong
                Xin
                Dong Tai Co., Ltd (“Nanogene Biotechnology”) to develop RPI-MN for the
                China market. RPI-MN is ReceptoPharm’s drug candidate being researched for
                the treatment of HIV/AIDS and other viral disorders. According to
                a signed
                Memorandum of Understand between ReceptoPharm and Nanogene Biotechnology.
                ReceptoPharm will need to confirm safety and efficacy of RPI_MN by
                completing pre-clinical studies at Soochow University located in
                China.
                Nanogene Biotechnology will provide the drug raw material and ReceptoPharm
                will modify the products and provide the proper study protocols.
                Upon
                successful completion of the pre-clinical studies, ReceptoPharm and
                Nanogene Biotechnology will proceed with clinical trials aimed at
                gaining
                full regulatory approval in China.




·
            On
                May 2, 2007, Designer Diagnostics announced that it would conduct
                clinical
                trials for their Tuberculosis and NonTuberculois Mycobacterium diagnostic
                test kits at the National Jewish Medical and Research Center in Denver,
                Colorado. The purpose of the clinical trials are to validate the
                efficacy
                of the test kits for use with Tuberculosis and Non-Tubernulosis
                Mycobacterium patients as well as for environmental testing. The
                clinical
                trials for Designer Diagnostics are the final step required by the
                FDA
                prior to applying for FDA regulatory approval of the test kits. The
                studies are ongoing with plans to complete testing throughout 2008.




26




·
            During
                May 2007, Designer Diagnostics completed the an upgrade of its
                Tuberculosis diagnostic test kits enabling such the test kits to
                show more
                rapid and reliable results.




·
            During
                July 2007, ReceptoPharm successfully completed enrollment in its
                phase llb
                human clinical trial for the treatment of AMN.




·
            In
                August of 2007, ReceptoPharm successful results on the use of their
                technology for the treatment of pain. The latest data demonstrated
                that
                RPI-78 was as effective as morphine at blocking pain signals in that
                part
                of the brain that signals the presence of pain. It was also confirmed
                that
                the drug did not use an opioid mechanism. Moreover, the duration
                of
                RPI-78’s effect was superior to
                morphine’s.





·
            In
                November 2007, the Designer Diagnostics test kit technology was showcased
                at the 38th Union World Conference on Lung Health in South Africa.
                The
                test kits were used to isolate NTM from clinical samples of 300 AIDS
                patients and for the first time ever on the Indian subcontinent,
                M.
                Wolinskyi was successfully isolated in clinical samples. In addition,
                these test kits were also used for the first time to isolate NTM
                from soil
                and water samples collected from the environment of patients with
                NTM
                disease.·
            In
                November 2007, Designer Diagnostics was featured in an article published
                in the International Journal of TB and Lung Diseases. The article,
                which
                was authored by leading NonTuberculous Mycobacterium (NTM) research
                scientist, Dr. Rahul Narang, covered Designer Diagnostics’ paraffin
                culture technology to isolate NTM.·
            In
                December 2007, ReceptoPharm successfully completed its six-month
                patient
                crossover in the Phase IIb/IIIa clinical trial for the treatment
                of
                Adrenomyeloneuropathy (AMN).·
            On
                December 27, 2007 the Company expanded its licensing agreement with
                NanoLogix, Inc., to include intellectual property for the use of
                testing
                the environment for NonTuberculous Mycobacterium (NTM).·
            In
                February 2008, Designer Diagnostics started marketing the first-ever
                environmental test kit for the detection of Nontuberculous Mycobacteria
                (NTM) in water and soil.·
            On
                April 10, 2008, we completed the acquisition of ReceptoPharm through
                our
                purchase of their remaining 61.9% interest. ReceptoPharm is now our
                wholly
                owned subsidiary and will act as our Drug Discovery division.




OUR
      TWELVE-MONTH PLAN OF OPERATIONS PENDING ADEQUATE FINANCING




We
      intend
      to accomplish the following regarding our Plan of Operations over the next
      twelve months.




27




*Designer
      Diagnostics, Inc.*




Designer
      Diagnostics’ NTM Test Kits are now being marketed and will continue to be
      marketed to a global audience, including:




·
            Hospitals;




·
            Pharmaceutical
                companies;




·
            Biotechnology
                companies;




·
            Medical
                device distributors;




·
            Governmental
                organizations;·
            Environmental
                testing facilities; and·
            Government
                water and soil testing facilities at the local, state and federal
                levels.




Over
      the
      next twelve months, Designer Diagnostics will attempt to distribute the test
      kits to the above companies and organizations. Our first sales occurred during
      our second quarter of 2006. When and if sales of the test kits exceed our
      operating budget, we will use the test kit proceeds to fund drug research and
      clinical studies in the area of MS and HIV.




Third-party
      researchers are currently validating Designer Diagnostics’ TB Test Kit and we
      anticipate research completion some time in 2008. Additionally, the test kits
      are now utilized for environmental analysis for the presence of NTM in the
      water
      and/or soil. This allows investigators to easily find the source of
      contamination and may greatly reduce NTM infections and outbreaks.




Designer
      Diagnostics’ President will attempt to develop a distribution network and
      actively market the test kits to supply administrators of companies and/or
      governmental organizations in the following markets: hospitals; pharmaceutical;
      biotechnology; medical device distributors. Designer Diagnostics will also
      attempt to acquire other medical diagnostic products to develop that same
      distribution market. Designer Diagnostic’s President will also seek license
      agreements to develop revenue streams consisting of drug discovery, drug
      development, and new medical device technologies.




*ReceptoPharm*




Clinical
      Studies




In
      January of 2007, ReceptoPharm began their clinical study in AMN.




28




AMN
      is a
      genetic disorder that affects the central nervous system. The disease causes
      neurological disability that is slowly progressive over several decades.
      Throughout our twelve month Plan of Operations and for 3 months thereafter,
      ReceptoPharm plans to conduct clinical studies of its AMN drug. The study is
      underway and completed its patient recruitment process and is being conducted
      by
      the Charles Dent Metabolic Unit located in London, England to conduct a clinical
      study that provides for:




·
            Recruitment
                of 20 patients with AMN;




·
            Administering
                ReceptoPharm’s AMN drug under development;
                and




·
            Monitoring
                patients throughout a 15-month
                protocol.




The
      clinical study is classified as a Phase IIb/IIIa study and is the final step
      required for regulatory approval of the drug.




In
      the
      areas of HIV and MS, ReceptoPharm plans to complete preclinical studies of
      its
      MS drug under development over the next 12 months. These include toxicology
      studies as well as pharmacokinetic studies required for regulatory approval.
      ReceptoPharm also plans to conduct clinical studies of its HIV and MS drugs
      under development. These "Phase II" studies will either prove or disprove the
      preliminary efficacy of ReceptoPharm's' HIV/MS drugs under development.
      ReceptoPharm is in the process of attempting to secure agreements with third
      parties to conduct such clinical studies.




Liabilities
      and Shareholders’ Equity




Liquidity
      and Capital Resources




Our
      independent registered public accounting firm has issued a going concern opinion
      on our audited financial statements for the fiscal year ended December 31,
      2007
      since we have experienced recurring net losses and at December 31, 2007
      have a working capital deficiency. Further, as stated in Note 1 to our
      consolidated financial statements for the year ended December 31, 2007, we
      have
      experienced significant losses from operations totaling $2,431,178 and $164,951
      for the years ended December 31, 2006 and 2007, respectively and had an
      accumulated deficit of $20,109,094 for the period from our inception to December
      31, 2007. We had a working capital and stockholders’ deficit at December 31,
      2007 of $1,962,675 and $1,952,725, respectively. Our operations have been
      largely reliant upon receiving loans from our Chief Executive Officer. At
      December 31, 2007 and March 31, 2008, we were indebted to our Chief Executive
      Officer in the amount of $1,944,414 and $812,749, respectively, the funds of
      which have enabled us to continue our operations. Our ability to continue as
      a
      going concern is contingent upon our ability to secure additional financing,
      increase ownership equity, and attain profitable operations. In addition, our
      ability to continue as a going concern must be considered in light of the
      problems, expenses and complications frequently encountered in established
      markets and the competitive environment in which we operate.





We
      have
      estimated expenses of $500,000 pertaining to our twelve month Plan of Operations
      or $41,666 of monthly expenditures. Based on our current cash position, we
      only
      have enough funds to accomplish our operational plan for a period of three
      months. Our ability to meet these expenses is dependent upon our ability to
      raise additional capital or our management loaning us sufficient funds to meet
      our expenses.





29




We
      will
      attempt to satisfy our estimated cash requirements for our twelve month Plan
      of
      Operations through the sale of Designer Diagnostics’ test kits; however, if
      sales do not achieve adequate levels to provide for our operations, we will
      be
      have to raise additional capital through divestiture of assets, a private
      placement of our equity securities or, if necessary, possibly through
      shareholder loans or traditional bank financing or a debt offering; however,
      because we are a development stage company with a limited operating history
      and
      a poor financial condition, we may be unsuccessful in obtaining shareholder
      loans, conducting a private placement of equity or debt securities, or in
      obtaining bank financing. In addition, if we only have nominal funds by which
      to
      conduct our operations, we may have to curtail our research and development
      activities, which will negatively impact development of our possible
      products.




We
      have
      no alternative Plan of Operations. In the event that we do not obtain adequate
      financing to complete our Plan of Operations or if we do not adequately
      implement an alternative plan of operations that enables us to conduct
      operations without having received adequate financing, we may have to liquidate
      our business and undertake any or all of the following actions:




·
            Sell
                or dispose of our assets, if any;




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




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




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




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




·
            Make
                the appropriate filings with the National Association of Security
                Dealers
                to effect a delisting of our common stock, if, in fact, our common
                stock
                is trading on the Over-the-Counter Bulletin Board at that
                time.




Based
      upon our current assets, however, we will not have the ability to distribute
      any
      cash to our shareholders. If we have any liabilities that we are unable to
      satisfy and we qualify for protection under the U.S. Bankruptcy Code, we may
      voluntarily file for reorganization under Chapter 11 or liquidation under
      Chapter 7. Our creditors may also file a Chapter 7 or Chapter 11 bankruptcy
      action against us. If our creditors or we file for Chapter 7 or Chapter 11
      bankruptcy, our creditors will take priority over our shareholders. If we fail
      to file for bankruptcy under Chapter 7 or Chapter 11 and we have creditors,
      such
      creditors may institute proceedings against us seeking forfeiture of our assets,
      if any.




30




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


**Item
      7.**  **Financial
      Statements**





The
      Financial Statements appear in a separate section of this report following
      Part
      III





**Item
      8. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure**





None


**Item
          8A. Controls and Procedures**
  (a)
                Evaluation
                    of Disclosure Controls and
                    Procedures
  Under
          the
          supervision and with the participation of our management, including our
          Principal Executive Officer and Principal Financial Officer, we conducted
          an
          evaluation of our disclosure controls and procedures, as such term is defined
          under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934,
          as
          amended (Exchange Act), as of December 31, 2007.  Based on this
          evaluation, our Principal Executive officer and Principal Financial Officer
          concluded that our disclosure controls and procedures are effective in
          alerting
          them on a timely basis to material information relating to our Company
          required
          to be included in our reports filed or submitted under the Exchange
          Act.
  MANAGEMENT’S
          REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Management
          of the Company is responsible for establishing and maintaining effective
          internal control over financial reporting as defined in Rule 13a-15(f)
          under the
          Exchange Act.  The Company’s internal control over financial reporting
          is designed to provide reasonable assurance to the Company’s management and
          Board of Directors regarding the preparation and fair presentation of published
          financial statements in accordance with United State’s Generally Accepted
          Accounting Principles (“United States GAAP”), including those policies and
          procedures that: (a) pertain to the maintenance of records that, in
          reasonable detail, accurately and fairly reflect the transactions and
          dispositions of the assets of the Company, (ii) provide reasonable
          assurance that transactions are recorded as necessary to permit preparation
          of
          financial statements in accordance with United States GAAP and that receipts
          and
          expenditures are being made only in accordance with authorizations of management
          and directors of the company, and (iii) provide reasonable assurance
          regarding prevention or timely detection of unauthorized acquisition, use,
          or
          disposition of the Company’s assets that could have a material effect on the
          financial statements.
  Management
          conducted an evaluation of the effectiveness of internal control over financial
          reporting based on the framework in Internal Control—Integrated Framework issued
          by the Committee of Sponsoring Organizations of the Treadway
          Commission.  Management’s assessment included an evaluation of the
          design of our internal control over financial reporting and testing of
          the
          operational effectiveness of our internal control over financial
          reporting.  Based on this assessment, management concluded the Company
          maintained effective internal control over financial reporting as of December
          31, 2007.
  Because
          of its inherent limitations, internal control over financial reporting
          may not
          prevent or detect misstatements.  Therefore, even those systems
          determined to be effective can provide only reasonable assurance with respect
          to
          financial statement preparation and presentation.
  This
          annual report does not include an attestation report of the Company’s registered
          public accounting firm regarding internal control over financial
          reporting.  Management’s report was not subject to attestation by our
          registered public accounting firm pursuant to temporary rules of the Securities
          and Exchange Commission that permit the Company to provide only management’s
          report in this Annual Report.
  (b)
                Changes
                    in Internal Controls
  There
          were no significant changes (including corrective actions with regard to
          significant deficiencies or material weaknesses) in our internal controls
          over
          financial reporting that occurred during the quarter ended December 31,
          2007
          that has materially affected, or is reasonably likely to materially affect,
          our
          internal control over financial reporting.





**Item
      8B. Other Information**





None.





**PART
      III**





**Item
      9. Directors and Executive Officers of the Registrant**





Directors
      and Executive Officers





Our
      Board
      of Directors elects our executive officers annually. Directors are elected
      to
      hold office until the next annual meeting. A majority vote of the directors who
      are in office is required to fill vacancies of our Board of Directors not caused
      by removal. Each director, including a Director elected to fill a vacancy,
      will
      hold office until the expiration of the term for which the Director was elected
      and until a successor has been elected. Our directors and executive officers
      are
      as follows:





Listed
      below are our executive officers and directors as of December 31,
      2007(3)




31




Name
            
            Age
            
            Position
                with the
              Company
            
            Director
                SinceRik
                J. Deitsch
            
            40
            
            Chairman,
                President,Chief
                Executive Officer,and
                Chief Financial Officer
            
            2002Stanley
                J Cherelstein
            
            49
            
            Director
                (1)
            
            2004Stewart
                Lonky, M.D.
            
            61
            
            Director
                (2)
            
            2004




(1)
            Stanley
                Cherelstein is the Chairman of our Audit Committee and Compensation
                Committee. Additionally, he is our Audit Committee Financial
                Expert.





(2)
            Dr.
                Lonky is a member of our Audit Committee and Compensation
                Committee.





(3)
            On
                May 8, 2007, Dr. Tanvir Khandaker resigned as our Director. He resigned
                from his position as our Director to devote his time to other business
                interests and his resignation was not due to any disagreement with
                our
                operations, policies or procedures.
                .




**Rik
      J. Deitsch** has been
      our President, Chief Executive Officer, Chief Financial Officer, and a Director
      since November 7, 2002 and our Chairman of the Board from December 15, 2003
      until June 1, 2005 and from April 1, 2006 to present. From February 1998 through
      November 2002, Mr. Deitsch served as the President of NDA Consulting Inc.,
      a
      biotechnology research group that provided consulting services to the
      pharmaceutical industry. NDA Consulting specializes in the research of peptides
      derived from Cone Snail venom and Cobra venom. In October 1999, Mr. Deitsch
      founded Wellness Industries, a private corporation that provides formulations,
      research and education in the dietary supplement industry. Research conducted
      by
      Rik J Deitsch provided some of the beginning fundamentals for the development
      of
      drugs being studied for the treatment of cancer and intractable pain. Mr.
      Deitsch has several papers and posters on rational drug design using computer
      simulations. Mr. Deitsch received a B.S. in Chemistry and an M.S. in
      Biochemistry from Florida Atlantic University in June 1997 and December 1999,
      respectively. Throughout 1999 and 2000, he conducted research for the Duke
      University Medical School Comprehensive Cancer Center. Mr. Deitsch is an adjunct
      professor and teaches several courses for Florida Atlantic University's College
      of Business and Continuing Education Department. Mr. Deitsch also teaches
      physician CME courses internationally, lecturing on lifestyle choices in the
      prevention and treatment of chronic disease states. He is also the co-author
      of
      Are You Age-Wise, a book that reviews current research in healthy aging as
      it
      relates to lifestyle choices and supplementation. Mr. Deitsch has been the
      Chairman of Waiora's Scientific Advisory Board since April 2004. Waiora develops
      and markets natural, science-based dietary supplements and personal care
      products that provide healthy aging solutions.





**Stanley
      J. Cherelstein** has been
      our Director since September 28, 2004. Since December 2003, Mr. Cherelstein
      has
      been the Chief Executive Officer and President of Waiora, Inc., which develops
      and distributes Healthy Aging products. From August 2002 to July 2003, Mr.
      Cherelstein was the President and Chief Operating Officer of Unicity, Inc.,
      a
      $300 million nutritional supplement company with offices in thirteen countries
      in North America, Asia and Europe. From July 2001 to August 2002, Mr.
      Cherelstein was the Chief Operating Officer of Unicity where he was responsible
      for global operations including supply chain, distribution, information
      technology, customer service, human resources and finance. From July 1999 to
      July 2001, Mr. Cherelstein served as the Senior Vice President of Finance and
      Operations at Rexall Showcase International (RSI), a division of Rexall Sundown.
      RSI was a $180 million nutritional supplement company that operated in the
      USA,
      Japan, Korea, Taiwan and Hong Kong. From July 1997 to July 1999, Mr. Cherelstein
      served as Vice President of Finance at RSI. Mr. Cherelstein began his career
      in
      public accounting at the firm of Cooper's and Lybrand where he worked for a
      total of five years from 1983 to 1988, including three years in auditing and
      two
      years in management consulting. In April 1983, Mr. Cherelstein received a B.S.
      Degree in Business and Accounting from the University of
      Pittsburgh.




32




**Dr.
      Stewart Lonky** has been
      our director since November 5, 2004. Dr. Lonky is a co-founder of the Trylon
      Corporation, a medical test kit firm located in Torrance, California and has
      served as its Chief Medical Officer since 1990. Trylon Corporation has developed
      diagnostic products for the early diagnosis of cervical and oral cancer, and
      in
      connection with that Dr. Lonky's responsibilities have included product
      development, the direction of clinical research and interacting with regulatory
      agencies, including the U.S. Food and Drug Administration (FDA). In these roles
      he has been instrumental in successfully bringing a number of products to the
      medical marketplace. He has continued to be engaged in both clinical and
      biochemical research, and has published research articles in the peer-reviewed
      literature in the areas of cervical cancer and cellular pathophysiology. Dr.
      Lonky has been a practicing physician in the Los Angeles Area since 1982. He
      is
      Board Certified in Internal Medicine, Pulmonary Medicine, and Critical Care
      Medicine. Prior to entering practice, Dr. Lonky served as a full-time faculty
      member at the University of California, San Diego in the Department of Medicine,
      Pulmonary Division, where he was engaged in research in the biochemistry of
      lung
      injury. He was a National Institutes of Health (NIH) Postdoctoral Fellow from
      1974-77. He has published over twenty articles and abstracts in the
      peer-reviewed literature during that time, and authored two book
      chapters.





**Family
      Relationships**





None





**Legal
      Proceedings**





Our
      directors, executive officers and control persons have not been involved in
      any
      of the following events during the past five years:




1.
      any
      bankruptcy petition filed by or against any business of which such person was
      a
      general partner or executive officer either at the time of the bankruptcy or
      within two years prior to that time;




2.
      any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor offenses);




3.
      being
      subject to any order, judgment, or decree, not subsequently reversed, suspended
      or vacated, of any court of competent jurisdiction, permanently or temporarily
      enjoining, barring, suspending or otherwise limiting his involvement in any
      type
      of business, securities or banking activities; or




4.
      being
      found by a court of competent jurisdiction (in a civil action),the Commission
      or
      the Commodity Futures Trading Commission to have violated a federal or state
      securities or commodities law, and the judgment has not been reversed,
      suspended, or vacated.





**Section
      16(a) Compliance of Officers and Directors**




Based
      upon our review of Forms 3, 4, and 5 furnished to us during the last fiscal
      year, all of our officers, directors and persons holding more than ten percent
      of our equity securities have filed the reports required of them to be filed
      pursuant to Section 16(a) of the Exchange Act.





**Corporate
      Governance:**





**a.
      Director Independence**


Our
      common stock is quoted on the OTC Bulletin Board; that trading medium does
      not
      have director independence requirements. Under Item 407(a) of Regulation S-K
      (check), we have adopted the definition of independence used by the American
      Stock Exchange, which may be found in the American Stock Exchange Company guide
      at (s) 121(A)(2) (2007). This definition states that our Board of Directors
      must
      affirmatively determine whether any of our directors have a relationship that
      would interfere with the exercise of independent judgment in carrying out their
      responsibilities of a director. Based on this definitional standard, our Board
      of Directors has determined that Directors Cherelstein and Lonky are our
      independent directors.




33




**b.
      Committees**





*(i)
      Audit Committee*




On November
      5, 2004, our Board of Directors established an Audit Committee.  We do
      not have an audit committee charter.  Mr. Cherelstein and
      Dr. Lonky serve on the Audit Committee.  Mr. Cherelstein is the
      Chairman of the Audit Committee and also the audit committee financial
      expert.  During our 2007 Fiscal Year, our Audit Committee met four
      times, the last committee meeting of which occurred on April 11, 2008, in
      connection with our 2007 Fiscal Year audit, at which time the audit
      committee reviewed the audited financial statements and related notes. The
      Audit Committee meets on a quarterly basis to review the quarterly financials.
      The Audit Committee addresses any questions it has to our Board members
      and officers, and our principal independent accountants.




*(ii)
      Compensation Committee*


On
      November 5, 2004, our Board of Directors established a Compensation Committee.
      We do not have a Compensation Committee Charter. Mr. Cherlestein and Dr. Lonky
      serve on our Compensation Committee and Mr. Cherestein is the Compensation
      Committee’s Chairman. During
      our 2007 Fiscal year, our Compensation Committee met one (1) time. Our
      Compensation Committee reviews all salaries, expenses, stock plans, and other
      compensation paid to our officers, directors, consultants, and others. Our
      Compensation Committee has not adopted any specific processes or procedures
      for
      considering executive and director compensation.





*(iii)
      Nominating Committee*





We
      do not
      have a Nominating Committee or similar committee performing similar functions
      nor a written Nominating Committee Charter. Our Board of Directors as a whole
      decides such matters, including those that would be performed by a standing
      nominating committee. We have not yet adopted a nominating committee because
      we
      have not sufficiently developed revenue generating operations. We do not
      currently have any specific or minimum criteria for the election of nominees
      to
      our Board of Directors nor do we have any process or procedure for evaluating
      such nominees.





**c.
      Shareholder Communications**





Our
      Board
      of Directors does not have any defined policy or procedure requirements for
      our
      stockholders to send communications to our Board of Directors, including
      submission of recommendations for nominating directors. We have not yet
      adopted a process for our security holders to communicate with our Board of
      Directors because we have not sufficiently developed our operations and
      corporate governance structure. We do have a toll-free number available on
      our
      website for our shareholders to contact us.





**d.
      Board of Director Meetings.**





We
      had no
      Board of Directors meetings during our 2007 Fiscal Year. Our corporate actions
      that were subject to Board approval were accomplished by Board resolutions.
      We
      request that all of our Directors attend our Board of Director meetings;
      however, we have no formal policy regarding their attendance.





**e.
      Annual Shareholder Meetings**





We
      held
      no annual shareholder meeting during 2007.





We
      request that all of our Directors attend our Annual Shareholder Meetings;
      however, we have no formal policy regarding their attendance.





34




**f.
      Code of Ethics**





We
      have a
      code of ethics that applies to all of our employees including its principal
      executive officer, principal financial officer and principal accounting officer.
      A copy of this code is available without charge on our website at
      www.nutrapharma.com. We intend to disclose any changes in or waivers from our
      code of ethics by posting such information on our website or by filing a Form
      8-K.




**Item
      10. Executive Compensation**




The
      following table summarizes compensation information for the last two fiscal
      years for (i) our Chief Executive Officer and (ii) the four most highly
      compensated executive officers other than the Chief Executive Officer who were
      serving as our executive officers at the end of the fiscal year (collectively,
      the "Named Executive Officers").




The
      following executive compensation disclosure reflects all compensation awarded
      to, earned by or paid to the executive officers below, for the fiscal years
      ended December 31, 2007 and 2006.




SUMMARY
      COMPENSATION TABLE




Name
                and principal position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                 Awards ($)
            
            Option
                 Awards ($)
            
            Non- Equity
              Incentive
              Plan
              Compen- sation ($)
            
            Nonqualified
              Deferred
              Compen- sation
              Earnings ($)
            
            All
                Other
              Compen- sation
                ($)
            
            Total
              ($)Rik Deitsch
              Chief
                Executive Officer,
              Chief
                Financial Officer,
              President
                and Chairman of the Board
            
            
            2007
              2006
            
            
            130,000
              130,000
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            130,000
              130,000





**Director
      Compensation**




There
      are
      no standard arrangements to which directors are compensated for services
      provided to us.





**Stock
      Option Grants in Last Fiscal Year**





We
      did
      not grant incentive and non-qualified stock options in 2007 to any executive
      officer.




35




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




The
      following tables sets forth, as of March 31, 2008, certain information with
      respect to the beneficial ownership of our common stock by each stockholder
      known by us to be the beneficial owner of more than 5% of our common stock
      and
      by each of our current directors and executive officers. Each person has sole
      voting and investment power with respect to the shares of common stock, except
      as otherwise indicated. Information relating to beneficial ownership of common
      stock by our principal stockholders and management is based upon information
      furnished by each person using "beneficial ownership" concepts under the rules
      of the Securities and Exchange Commission. Under these rules, a person is deemed
      to be a beneficial owner of a security if that person has or shares voting
      power, which includes the power to vote or direct the voting of the security,
      or
      investment power, which includes the power to vote or direct the voting of
      the
      security. The person is also deemed to be a beneficial owner of any security
      of
      which that person has a right to acquire beneficial ownership within 60
      days.




Under
      the
      Securities and Exchange Commission rules, more than one person may be deemed
      to
      be a beneficial owner of the same securities, and a person may be deemed to
      be a
      beneficial owner of securities as to which he or she may not have any pecuniary
      beneficial interest. We are unaware of any contract or arrangement that could
      result in a change in control of our company.




The
      following table assumes based on our stock records, that there are 166,635,682
      shares issued and outstanding as of March 31, 2008.




Security
      Ownership of Beneficial Owners


Name
                  and Address of Beneficial Owner
              
              Shares
                  ofCommon
                Stock
                Beneficially
                  Owned
              
              Percent
                  of
                Common
                Stock
                OutstandingOpus
                  International*
                19
                  Hillsyde Court
                Cockeysville,
                    Maryland 21030
              
              
              11,692,556
              
              
              7.0
              %Total
              
              
              11,692,556
              
              
              7.0
              %




*On
      April
      13, 2005, Opus International filed an amendment to Schedule 13D reporting that
      its 11,692,556 shares were purportedly pledged as collateral for a $2.5 million
      loan from Clarisco Stiftung. Opus International is a limited liability company
      organized under Maryland law. Opus International appears to have been controlled
      at various times by our former Chairman of the Board, Zirk Engelbrecht, and
      his
      then wife, Marcy Engelbrecht. We have attempted to ascertain from Opus
      International other information we consider regarding Opus International's
      reporting obligations; however, Opus International has failed to respond to
      our
      request for information. We have, however, been advised that the purported
      collateral, i.e. the stock certificate, provided by Opus International to
      Clarisco Stiftung, may not be perfected or be in negotiable form. We have been
      unable to obtain any additional information regarding the status of this matter.




Security
      Ownership of Management


Name
                  and Address of
                Director
                  or Executive Officer
              
              Shares
                  of
                Common
                  Stock
                Beneficially
                  Owned
              
              Percent
                  of
                Common
                  Stock
                OutstandingRik
                  J. DeitschChief
                  Executive Officer/President791
                  Park of Commerce Blvd Suite 300Boca
                  Raton, Florida 33487
              
              
              54,500,000
              
              
              32.7
              %Stanley
                  J CherelsteinDirector791
                  Park of Commerce Blvd. Suite 300Boca
                  Raton, Florida 33487
              
              
              3,000,000
              
              
              1.8
              %Dr.
                  Stewart LonkyDirector1158
                  Chautaqua BoulevardPacific
                  Palisades, California 90272
              
              
              3,000,000
              
              
              1.8
              %All
                  executive officers and directors as a group (3) persons
              
              
              60,500,000
              
              
              36.3
              %




**Item
      12. Certain Relationships and Related Transactions**




*Loan
      Transaction Between Our Chief Executive Officer/President and
      Us*




At
      December 31, 2006, we owed our President, Rik Deitsch $1,153,375 in connection
      with demand loans made to us by Mr. Deitsch.  This amount included $40,000
      of accrued interest.  During the year ended December 31, 2007, we borrowed
      an additional $791,000 from Mr. Deitsch.  The balance owed to Mr. Deitsch
      at December 31, 2007 was $1,944,414, which includes accrued interest of
      $105,039.  This demand loan is unsecured and bears interest at a rate of
      4.0%. From January 1 through February 8, 2008, Mr. Deitsch loaned us an
      additional $55,000 for working capital purposes.  As a result of these
      additional loans and accrued interest from January 1 through February 29, 2008,
      we owed Mr. Deitsch $2,012,749 as of February 29, 2008. On March 14, 2008,
      our
      Board of Directors approved an offer made by Mr. Deitsch, to discharge
      $1,200,000 of Mr. Deitsch’s outstanding loan to us in exchange for 48,000,000
      shares of restricted common stock.  The price per share in this loan
      conversion was $0.025.  After this conversion, the remaining balance of Mr.
      Deitsch’s loan to us was $812,749.




*Lease
      information*




Our
      March
      2004 verbal lease agreement between Stan Cherelstein, on Waiora, Inc.’s behalf
      as its President and Rik Deitsch, as our President and on our behalf, provides
      for our use of Waiora’s lease space at any location that Waiora occupies. From
      March 2004 to May 2006, we occupied approximately 800 square feet of Waiora’s
      lease office space at 1829 Corporate Drive, Boynton Beach, Florida 33426. As
      of
      May 2006, we occupied approximately 800 square feet of Waiora’s lease office
      space at 791 Park of Commerce Boulevard, Suite 300, Boca Raton, Florida 33487.
      We make no cash payment for the use of this space; instead, we are permitted
      to
      use such space in return for our President serving as Waiora’s Chairman of its
      Scientific Advisory Board. The verbal lease agreement further provides that:
      (a)
      there is no expiration date to this agreement, but Waiora, Inc may terminate
      the
      lease at any time, and it is subject to Waiora's own lease term, which expires
      May 2008; (b) 800 square feet of office space is allotted specifically to us;
      (b) Waiora provides us with access to a conference room, office equipment,
      and a
      T-1 Internet connection; and (c) Stan Cherelstein serves as one of our Directors
      and is Chairman of our Audit and Compensation Committees. Our offices are in
      good condition and are sufficient to conduct our operations.




36




**Item
      13. Exhibits**





(a)  
      The following Financial Statements are filed as part of this report under Item
      7.




Report
                of Independent Registered Public Accounting Firm
            F-1Consolidated
                Balance Sheet
            F-2Consolidated
                Statements of Operations
            F-3Consolidated
                  Statement of Changes in Stockholders' Equity (Capital
                  Deficit)
            F-4Consolidated
                Statements of Cash Flows
            F-5Notes
                to Consolidated Financial Statements
            F-6




(b)  
      The following exhibits are filed herewith or are incorporated by reference
      to
      exhibits previously filed with the SEC:





**Exhibit
      Number/Description**





3.1
            
            Certificate
                of Incorporation dated February 1, 2000 (incorporated by reference
                to the
                Company’s Registration Statement on Form SB-2/A, Registration No.
                33-44398, filed on April 6, 2001)3.2
            
            Certificate
                of Amendment to Articles of Incorporation dated July 5, 2000 (incorporated
                by reference to the Company’s Registration Statement on Form SB-2/A,
                Registration No. 33-44398, filed on April 6, 2001)3.3
            
            Certificate
                of Amendment to Articles of Incorporation dated October 31, 2001
                (incorporated by reference to the Company’s Registration Statement on Form
                SB-2/A, Registration No. 33-44398, filed on April 6,
                2001)10.18
            
            Patent
                Assignment Agreement dated January 24, 2006 between Nanologix, Inc.
                and
                Nutra Pharma Corp. (incorporated by reference to Form 10-KSB for
                period
                ending December 31, 2006)10.19
            
            International
                License Agreement between NanoLogix, Inc. and Nutra Pharma Corp.
                (incorporated by reference to Form 10-KSB for period ending December
                31,
                2006)14.1
            
            Code
                of Ethics (incorporated by reference to Report on Form 10-KSB/A filed
                on
                May 7, 2004).21.1
            
            Subsidiaries
                of Nutra Pharma Corp.31.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




37




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




AUDIT
      FEES




On
      February 24, 2005, we engaged the firm of Stark Winter Schenkein & Co., as
      our new principal independent accountant to audit our financial statements.
      During our 2006 and 2007 Fiscal Years, we paid Stark Winter Schenkein & Co.
      audit fees as follows:


2006
              
              2007$
              35,300
              
              $
              37,900




TAX
      FEES




No
      such
      fees were paid to Stark Winter Schenkein & Co. in 2006 or 2007.




ALL
      OTHER
      FEES




No
      such
      fees were paid to Stark Winter Schenkein & Co. in 2006 or 2007.




**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.
 
 **NUTRA
                  PHARMA CORP.**/s/ Rik
                  J. DeitschRik
                  J. Deitsch, Chairman, President, Chief
                Executive
                  Officer and Chief Financial Officer
  Dated:
        September 5, 2008
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on behalf of the Registrant and in
        the
        capacities indicated.
 
 Signature
              
              Title
              
              Date/s/ Rik
                  J. Deitsch
              
              Chairman
                  of the Board, President,
                Chief
                  Executive Officer and Chief Financial Officer
              
              September
                  5, 2008Rik
                  J. Deitsch/s/
                  Stanley Cherelstein
              
              Director
              
              September
                  5, 2008Stanley
                  Cherelstein/s/
                  Stewart Lonky
              
              Director
              
              September
                  5, 2008Stewart
                  Lonky


38




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Stockholders
      and Board of Directors


Nutra
      Pharma Corp.





We
      have
      audited the accompanying consolidated balance sheet of Nutra Pharma Corp. (a
      Development Stage Company) as of December 31, 2007, and the related consolidated
      statements of operations, stockholders’ (deficit)and cash flows for the years
      ended December 31, 2006 and 2007, and the period from inception (February 1,
      2000) through December 31, 2007. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audits. The Company’s
      financial statements for the period from inception (February 1, 2000) to
      December 31, 2003, were audited by other auditors whose report dated April
      3,
      2004, expresses an unqualified opinion and included a going concern paragraph
      on
      those financial statements. The financial statements for the period from
      inception (February 1, 2000) to December 31, 2003, reflect a net loss of
      $4,373,948 that is included in the related total for the period from inception
      (February 1, 2000) to December 31, 2007. The other auditors report has been
      previously furnished to us, and our opinion, insofar as it relates to the
      amounts included for such prior period, is based solely on the report of such
      other auditors.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates by management, as well as evaluating
      the overall financial statement presentation. We believe that our audits provide
      a reasonable basis for our opinion.





In
      our
      opinion, based on our audits and the report of other auditors, the financial
      statements referred to above present fairly, in all material respects, the
      financial position of Nutra Pharma Corp. (a Development Stage Company) as of
      December 31, 2007, and results of its operations and its cash flows for the
      years ended December 31, 2006 and 2007, and for period from inception (February
      1, 2000) through December 31, 2006, in conformity with accounting principles
      generally accepted in the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has incurred significant losses from operations and
      has
      a working capital deficit and no revenue generating operations. These factors
      raise substantial doubt about the Company’s ability to continue as a going
      concern. Management’s plans in regard to this matter are also discussed in Note
      1. The financial statements do not include any adjustments that might result
      from the outcome of this uncertainty.







Stark
      Winter Schenkein & Co., LLP





/s/
      Stark
      Winter Schenkein & Co., LLP





Denver,
      Colorado


April
      9,
      2008




F-1


NUTRA
      PHARMA CORP.


(A
      Development Stage Company)


Consolidated
      Balance Sheet


December
      31, 2007


ASSETSCurrent
                  assets:Cash
              
              $
              122,810Inventory
              
              
              11,425Total
                  current assets
              
              
              134,235Other
                  assets
              
              
              9,950TOTAL
                  ASSETS
              
              $
              144,185LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)Current
                  liabilities:Accounts
                  payable
              
              $
              22,496Accrued
                  expenses
              
              
              30,000Due
                  to officers
              
              
              1,944,414Other
                  loans payable
              
              
              100,000Total
                  current liabilities
              
              
              2,096,910Stockholders'
                  (deficit):Common
                  stock, $0.001 par value, 2.0 billion shares authorized; 81,895,682
                  shares
                  issued and outstanding
              
              
              81,896Additional
                  paid-in capital
              
              
              18,074,473(Deficit)
                  accumulated during the development stage
              
              
              (20,109,094
              )Total
                  stockholders' (deficit)
              
              
              (1,952,725
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' (DEFICIT)
              
              $
              144,185





See
      the
      accompanying notes to the financial statements.




F-2


NUTRA
      PHARMA CORP.


(A
      Development Stage Company)


Consolidated
      Statements of Operations





For
                thePeriod
                FromFebruary
                1,2000(Inception)ThroughYears
                Ended December 31,
            
            December
                31,2006
            
            2007
            
            2007Sales
            
            $
            20,200
            
            $
            -
            
            $
            20,200Cost
                of sales
            
            
            3,472
            
            
            -
            
            
            3,472Gross
                profit
            
            
            16,728
            
            
            -
            
            
            16,728Costs
                and expenses:General
                and administrative
            
            
            1,385,971
            
            
            566,921
            
            
            6,943,393Research
                and development
            
            
            410,920
            
            
            -
            
            
            1,740,237General
                and administrative - stock based compensation
            
            
            605,421
            
            
            603,050
            
            
            6,929,657Write-off
                of advances to potential acquiree
            
            
            -
            
            
            -
            
            
            629,000Finance
                costs
            
            
            -
            
            
            -
            
            
            786,000Interest
                expense
            
            
            45,594
            
            
            76,075
            
            
            396,059Amortization
                of license agreement
            
            
            -
            
            
            -
            
            
            155,210Amortization
                of intangibles
            
            
            -
            
            
            -
            
            
            656,732Losses
                on settlements
            
            
            -
            
            
            -
            
            
            1,261,284Write-down
                of investment in subsidiary
            
            
            -
            
            
            -
            
            
            620,805Equity
                in loss of unconsolidated subsidiary
            
            
            -
            
            
            -
            
            
            853,540Write-off
                of investment in Portage BioMed
            
            
            -
            
            
            -
            
            
            60,000Write-off
                of investment in Xenacare
            
            
            -
            
            
            -
            
            
            175,000Net
                gain from deconsolidation of Receptopharm
            
            
            -
            
            
            (1,081,095
            )
            
            (1,081,095
            )Total
                costs and expenses
            
            
            2,447,906
            
            
            164,951
            
            
            20,125,822Net
                loss
            
            $
            (2,431,178
            )
            $
            (164,951
            )
            $
            (20,109,094
            )Per
                share information - basic and diluted:Loss
                per common share
            
            $
            (0.03
            )
            $
            (0.00
            )Weighted
                average common shares outstanding
            
            
            71,607,011
            
            
            77,113,846





See
      the
      accompanying notes to the financial statements.


F-3


NUTRA
      PHARMA CORP.


(A
      Development Stage Company)


Consolidated
      Statements of Changes in Stockholders' Equity


Period
      From Inception (February 1, 2000) to December 31, 2007





DeficitAccumulatedAdditional
            
            During
                theCommon
            
            Stock
            
            Paid-in
            
            DevelopmentShares
            
            Par
                Value
            
            Capital
            
            Stage
            
            TotalCommon
                stock issued to founders
            
            
            39,000,000
            
            $
            39,000
            
            $
            (37,050
            )
            $
            -
            
            $
            1,950Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,950
            )
            
            (1,950
            )Balance
                - December 31, 2000
            
            
            39,000,000
            
            
            39,000
            
            
            (37,050
            )
            
            (1,950
            )
            
            -Proceeds
                from sale of common stock - $.025 per share
            
            
            1,000,000
            
            
            1,000
            
            
            24,000
            
            
            -
            
            
            25,000Common
                stock issued in connection with acquisition - $.025 per
                share
            
            
            4,500,000
            
            
            4,500
            
            
            108,000
            
            
            -
            
            
            112,500Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (67,504
            )
            
            (67,504
            )Balance
                - December 31, 2001
            
            
            44,500,000
            
            
            44,500
            
            
            94,950
            
            
            (69,454
            )
            
            69,996Issuance
                of common stock in exchange for services - $.30 to $1.50 per
                share
            
            
            656,000
            
            
            656
            
            
            670,874
            
            
            -
            
            
            671,530Return
                of common stock by principal stockholder
            
            
            (10,394,000
            )
            
            (10,394
            )
            
            10,394
            
            
            -Rescission
                of common stock issued in acquisition - $.025 per share
            
            
            -
            
            
            -
            
            
            (112,500
            )
            
            -
            
            
            (112,500
            )Cancellation
                  of common stock issued in connection with rescission of
                  acquisition
            
            
            (2,037,500
            )
            
            (2,038
            )
            
            2,038
            
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,491,038
            )
            
            (1,491,038
            )Balance
                - December 31, 2002
            
            
            32,724,500
            
            
            32,724
            
            
            665,756
            
            
            (1,560,492
            )
            
            (862,012
            )Issuance
                of common stock in exchange for services - $.38 to $.76 per
                share
            
            
            2,196,828
            
            
            2,197
            
            
            1,358,070
            
            
            -
            
            
            1,360,267Cancellation
                  of common stock issued in connection with rescission of
                  acquisition
            
            
            (2,055,000
            )
            
            (2,055
            )
            
            2,055
            
            
            -
            
            
            -Value
                of common stock issued by stockholder to third partyin
                connection with settlement - $.51 per share
            
            
            -
            
            
            -
            
            
            229,500
            
            
            -
            
            
            229,500Conversion
                of stockholder loan into common stock - $.08 per share
            
            
            10,300,000
            
            
            10,300
            
            
            1,637,712
            
            
            -
            
            
            1,648,012Value
                of common stock issued by stockholder to employeefor
                services rendered - $.15 per share
            
            
            -
            
            
            -
            
            
            75,000
            
            
            -
            
            
            75,000Issuance
                of common stock in connection with acquisition - $.85 per
                share
            
            
            4,502,549
            
            
            4,503
            
            
            3,822,664
            
            
            
            
            
            3,827,167Common
                  stock deemed irretrievable in connection with rescission of acquisition
                  -
                  $.11 per share
            
            
            -
            
            
            -
            
            
            23,375
            
            
            -
            
            
            23,375Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,813,456
            )
            
            (2,813,456
            )Balance
                - December 31, 2003
            
            
            47,668,877
            
            
            47,669
            
            
            7,814,132
            
            
            (4,373,948
            )
            
            3,487,853Cancellation
                  of common stock issued in connection with rescission of
                  acquisition
            
            
            (199,000
            )
            
            (199
            )
            
            199
            
            
            -
            
            
            -Cancellation
                  of common stock issued in connection with settlement with third
                  parties
            
            
            (120,000
            )
            
            (120
            )
            
            120
            
            
            -
            
            
            -Issuance
                of common stock in connection with acquisition - $.85 per
                share
            
            
            775,538
            
            
            776
            
            
            658,431
            
            
            -
            
            
            659,207Issuance
                of common stock in exchange for services - $.24 to $.66 per
                share
            
            
            4,054,200
            
            
            4,054
            
            
            2,061,942
            
            
            -
            
            
            2,065,996Issuance
                of common stock for cash - $.17 to $.25 per share
            
            
            1,285,000
            
            
            1,285
            
            
            223,565
            
            
            -
            
            
            224,850Conversion
                of convertible loans into common stock - $.16 per share
            
            
            595,067
            
            
            595
            
            
            97,405
            
            
            -
            
            
            98,000Common
                shares subscribed for services - 2,000,000 shares at $.40
            
            
            -
            
            
            -
            
            
            800,000
            
            
            -
            
            
            800,000Common
                shares subscribed for cash - 4,105,000 shares at $.17
            
            
            -
            
            
            -
            
            
            697,850
            
            
            -
            
            
            697,850Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,986,853
            )
            
            (7,986,853
            )Balance
                - December 31, 2004
            
            
            54,059,682
            
            
            54,060
            
            
            12,353,644
            
            
            (12,360,801
            )
            
            46,903Issuance
                of shares subscribed for at December 31, 2004
            
            
            6,105,000
            
            
            6,105
            
            
            (6,105
            )
            
            -
            
            
            -Issuance
                of common stock for cash - $.17 to $.20 per share
            
            
            5,667,500
            
            
            5,668
            
            
            1,104,132
            
            
            -
            
            
            1,109,800Issuance
                of common stock in exchange for services - $.26 to $.37 per
                share
            
            
            2,007,000
            
            
            2,006
            
            
            716,499
            
            
            -
            
            
            718,505Issuance
                of common stock for loan repayment and interest - $.33 per
                share
            
            
            1,458,000
            
            
            1,458
            
            
            479,682
            
            
            -
            
            
            481,140Issuance
                of common stock by Receptopharm in exchange for services
            
            
            -
            
            
            -
            
            
            636,685
            
            
            -
            
            
            636,685Value
                of stock warrants issued to a consultant
            
            
            -
            
            
            -
            
            
            1,500,000
            
            
            -
            
            
            1,500,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,152,164
            )
            
            (5,152,164
            )Balance
                - December 31, 2005
            
            
            69,297,182
            
            
            69,297
            
            
            16,784,537
            
            
            (17,512,965
            )
            
            (659,131
            )Issuance
                of common stock for cash - $.20 per share
            
            
            3,110,000
            
            
            3,110
            
            
            618,890
            
            
            -
            
            
            622,000Issuance
                of common stock in exchange for services - $.11 to $.21 per
                share
            
            
            873,500
            
            
            873
            
            
            123,298
            
            
            -
            
            
            124,171Issuance
                of common stock by Receptopharm in exchange for services
            
            
            -
            
            
            -
            
            
            11,250
            
            
            -
            
            
            11,250Value
                of stock options issued to an officer
            
            
            -
            
            
            -
            
            
            260,000
            
            
            -
            
            
            260,000Value
                of stock warrants issued to a former subsidiary
            
            
            -
            
            
            -
            
            
            210,000
            
            
            -
            
            
            210,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,431,178
            )
            
            (2,431,178
            )Balance
                - December 31, 2006
            
            
            73,280,682
            
            $
            73,281
            
            $
            18,007,976
            
            $
            (19,944,143
            )
            $
            (1,862,886
            )Effect
                of deconsolidation of Receptopharm
            
            
            -
            
            
            -
            
            
            (647,938
            )
            
            -
            
            
            (647,938
            )Issuance
                of common stock in exchange for services - $0.07 per share
            
            
            8,615,000
            
            
            8,615
            
            
            594,435
            
            
            -
            
            
            603,050Common
                shares subscribed for cash -$0.025 per share
            
            
            -
            
            
            -
            
            
            120,000
            
            
            -
            
            
            120,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (164,951
            )
            
            (164,951
            )Balance
                - December 31, 2007
            
            
            81,895,682
            
            $
            81,896
            
            $
            18,074,473
            
            $
            (20,109,094
            )
            $
            (1,952,725
            )





See
      the
      accompanying notes to the financial statements.


F-4


NUTRA
      PHARMA CORP.


(A
      Development Stage Company)


Consolidated
      Statements of Cash Flows





For thePeriod FromFebruary 1,2000(Inception)Years EndedThroughYears Ended December 31,
            
            December 31,2006
            
            2007
            
            2007Cash
                flows from operating activities:Net
                loss
            
            $
            (2,431,178
            )
            $
            (164,951
            )
            $
            (20,109,094
            )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Amortization
                of intangibles
            
            
            -
            
            
            -
            
            
            656,732Amortization
                of license agreement
            
            
            -
            
            
            -
            
            
            155,210Depreciation
            
            
            22,649
            
            
            -
            
            
            64,700Write-off
                of advances to potential acquiree
            
            
            -
            
            
            -
            
            
            629,000Deconsolidation
                of Receptopharm
            
            
            -
            
            
            (1,252,244
            )
            
            (1,252,244
            )Stock-based
                compensation
            
            
            605,420
            
            
            603,050
            
            
            9,038,403Finance
                costs in connection with conversion ofstockholder
                loan into common stock
            
            
            -
            
            
            -
            
            
            786,000Expenses
                paid by stockholder
            
            
            -
            
            
            -
            
            
            474,140Losses
                on settlements
            
            
            -
            
            
            -
            
            
            1,261,284Write-down
                of investment in Infectech, Inc.
            
            
            -
            
            
            -
            
            
            620,805Equity
                in loss of unconsolidated subsidiary
            
            
            -
            
            
            -
            
            
            853,540Write-down
                of investment in Portage BioMed
            
            
            -
            
            
            -
            
            
            60,000Write-down
                of investment in Xenacare
            
            
            -
            
            
            -
            
            
            175,000Non-cash
                interest expense
            
            
            45,594
            
            
            -
            
            
            315,278Changes
                in operating assets and liabilities:Increase
                in inventory
            
            
            (11,425
            )
            
            -
            
            
            (11,425
            )Decrease
                (increase) in other assets
            
            
            (22,286
            )
            
            30,644
            
            
            (6,316
            )Increase
                (decrease) in accounts payable
            
            
            (5,037
            )
            
            (21,866
            )
            
            140,706Increase
                (decrease) in accrued expenses
            
            
            59,182
            
            
            -
            
            
            460,169Net
                cash (used in) operating activities
            
            
            (1,737,081
            )
            
            (805,367
            )
            
            (5,688,112
            )Cash
                flows from investing activities:Cash
                reduction due to deconsolidation of Infectech
            
            
            -
            
            
            -
            
            
            (2,997
            )Cash
                reduction due to deconsolidation of Receptopharm
            
            
            -
            
            
            (1,754
            )
            
            (1,754
            )Cash
                acquired in acquisition of Infectech
            
            
            -
            
            
            -
            
            
            3,004Acquisition
                of property and equipment
            
            
            (9,889
            )
            
            -
            
            
            (96,029
            )Investments
                carried at cost
            
            
            -
            
            
            -
            
            
            (235,000
            )Net
                cash (used in) investing activities
            
            
            (9,889
            )
            
            (1,754
            )
            
            (332,776
            )Cash
                flows from financing activities:Common
                stock issued for cash
            
            
            622,000
            
            
            120,000
            
            
            2,799,500Proceeds
                from convertible loans
            
            
            -
            
            
            -
            
            
            304,750Proceeds
                from notes payable
            
            
            100,000
            
            
            -
            
            
            100,000Loans
                from stockholders, net of repayments
            
            
            974,835
            
            
            791,039
            
            
            2,939,448Net
                cash provided by financing activities
            
            
            1,696,835
            
            
            911,039
            
            
            6,143,698Net
                increase (decrease) in cash
            
            
            (50,135
            )
            
            103,918
            
            
            122,810Cash
                - beginning of period
            
            
            69,027
            
            
            18,892
            
            
            -Cash
                - end of period
            
            $
            18,892
            
            $
            122,810
            
            $
            122,810Supplemental
                Cash Flow Information:Cash
                paid for interest
            
            $
            -
            
            $
            -
            
            $
            -Cash
                paid for income taxes
            
            $
            -
            
            $
            -
            
            $
            -Non-cash
                investing and financing activities:Assumption
                of obligation under license agreement
            
            $
            -
            
            $
            -
            
            $
            1,750,000Value
                  of shares issued as consideration in acquisition of Nutra Pharma,
                  Inc.
            
            $
            -
            
            $
            -
            
            $
            112,500Payments
                of license fee obligation by stockholder
            
            $
            -
            
            $
            -
            
            $
            208,550Conversion
                of stockholder loan to common stock
            
            $
            -
            
            $
            -
            
            $
            862,012Loan
                  advances to Bio Therapeutics, Inc. by stockholder
            
            $
            -
            
            $
            -
            
            $
            629,000Value
                  of common stock issued as consideration in acquisition of Infectech,
                  Inc.
            
            $
            -
            
            $
            -
            
            $
            4,486,375Liabilities
                assumed in acquisition of Infectech, Inc.
            
            
            
            
            
            
            
            $
            115,586Cancellation
                of common stock
            
            $
            -
            
            $
            -
            
            $
            14,806Value
                    of common stock issued by stockholder to third party in connection
                    with
                    settlement
            
            $
            -
            
            $
            -
            
            $
            229,500Value
                  of common stock issued by stockholder to employee for services
                  rendered
            
            $
            -
            
            $
            -
            
            $
            75,000Net
                  deferred taxes recorded in connection with
                  acquisition
            
            $
            -
            
            $
            -
            
            $
            967,586Notes
                payable settled with common stock
            
            $
            -
            
            $
            -
            
            $
            98,000Settlement
                  of stockholder loan in exchange for common stock of
                  subsidiary
            
            $
            -
            
            $
            -
            
            $
            1,384,931Settment
                of debt with common stock
            
            $
            -
            
            $
            -
            
            $
            206,750Expenses
                paid by stockhoder
            
            $
            -
            
            $
            -
            
            $
            119,140





See
      the
      accompanying notes to the financial statements.


F-5





**NUTRA
      PHARMA CORP.**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007**





1.
      BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





*Organization*





Nutra
      Pharma Corp., a development stage company ("Nutra Pharma" or "the Parent")
      is a
      holding company that owns intellectual property and operations in the
      biotechnology industry. Nutra Pharma incorporated under the laws of the state
      of
      California on February 1, 2000, under the original name of
      Exotic-Bird.com.





*Basis
      of Presentation*





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 significant losses from operations aggregating
      $2,431,178 and $164,951 for the years ended December 31, 2006 and 2007, and
      has
      an accumulated deficit of $20,109,094 for the period from inception to December
      31, 2007. In addition, the Company had working capital and stockholders’
deficits at December 31, 2007 of $1,962,675 and $1,952,725 respectively and
      has
      no significant revenue generating operations.





The
      Company's ability to continue as a going concern is contingent upon its ability
      to secure additional financing, increase ownership equity and attain profitable
      operations. In addition, the Company's ability to continue as a going concern
      must be considered in light of the problems, expenses and complications
      frequently encountered in established markets and the competitive environment
      in
      which the Company operates.





The
      Company is pursuing financing for its operations and seeking additional
      investments. In addition, the Company is seeking to establish a revenue
      base.


Failure
      to secure such financing or to raise additional equity capital and to establish
      a revenue base may result in the Company depleting its available funds and
      not
      being able pay its obligations.





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.





*Principles
      of Consolidation*





The
      consolidated financial statements presented herein include the accounts of
      Nutra
      Pharma and its subsidiary Designer Diagnostics Inc. (collectively the
      "Company"). In addition, the Company consolidated Nanologix, Inc. (formerly
      known as "Infectech, Inc.") during the period from October 31, 2003 through
      September 28, 2004 (see Note 3). The Company also consolidated Receptopharm
      Inc.
      during the period from February 1, 2004 through March 31, 2007 (see Note
      4).





All
      intercompany transactions and balances have been eliminated in
      consolidation.





*Use
      of Estimates*





The
      accompanying financial statements are prepared in accordance with accounting
      principles generally accepted in the United States of America which require
      management to make estimates and assumptions. These estimates and assumptions
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenue and expense. Actual results may differ from
      these estimates.


F-6


*Revenue
      Recognition*





In
      general, the Company records revenue when persuasive evidence of an arrangement
      exists, services have been rendered or product delivery has occurred, the sales
      price to the customer is fixed or determinable, and collectability is reasonably
      assured. The following policies reflect specific criteria for the various
      revenues streams of the Company:





Revenue
      is recognized at the time the product is delivered. Provision for sales returns
      will be estimated based on the Company's historical return experience. Revenue
      will be presented net of returns.





*Cash
      and Cash Equivalents*





The
      Company considers all highly liquid investments with an original maturity of
      three months or less to be cash equivalents.





*Fair
      Value of Financial Instruments*





Fair
      value estimates discussed herein are based upon certain market assumptions
      and
      pertinent information available to management as of December 31, 2007. The
      respective carrying value of certain on-balance-sheet financial instruments,
      approximate their fair values. These financial instruments include cash,
      accounts payable, accrued expenses, loans payable and due to officers. Fair
      values were assumed to approximate carrying values for these financial
      instruments because they are short term in nature and their carrying amounts
      approximate fair values or they are receivable or payable on
      demand.





*Property
      and Equipment*





Property
      and equipment is recorded at cost. Expenditures for major improvements and
      additions are added to property and equipment, while replacements, maintenance
      and repairs which do not extend the useful lives are expensed.





*Long
      Lived Assets*





The
      carrying value of long-lived assets is reviewed on a regular basis for the
      existence of facts and circumstances that suggest impairment. Should there
      be an
      impairment, the Company measures the amount of the impairment based on the
      amount that the carrying value of the impaired asset exceeds the discounted
      cash
      flows expected to result from the use and eventual disposal of the from the
      impaired assets.


F-7


*Research
      and Development*





Research
      and development is charged to operations as incurred.





*Income
      Taxes*





The
      Company follows SFAS 109 "Accounting for Income Taxes" for recording the
      provision for income taxes. Deferred tax assets and liabilities are computed
      based upon the difference between the financial statement and income tax basis
      of assets and liabilities using the enacted marginal tax rate applicable when
      the related asset or liability is expected to be realized or settled. Deferred
      income tax expenses or benefits are based on the changes in the asset or
      liability each period. If available evidence suggests that it is more likely
      than not that some portion or all of the deferred tax assets will not be
      realized, a valuation allowance is required to reduce the deferred tax assets
      to
      the amount that is more likely than not to be realized. Future changes in such
      valuation allowance are included in the provision for deferred income taxes
      in
      the period of change.





*Loss
      per Share*





The
      Company calculates net income (loss) per share as required by Statement of
      Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
      (loss) per share are calculated by dividing net income (loss) by the weighted
      average number of common shares outstanding for the period. Diluted earnings
      loss) per share is calculated by dividing net income (loss) by the weighted
      average number of common shares and dilutive common stock equivalents
      outstanding. During periods in which the Company incurs losses common stock
      equivalents, if any, are not considered, as their effect would be anti
      dilutive.





*Stock-Based
      Compensation*





In
      December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
      This Statement requires that the cost resulting from all share-based
      transactions be recorded in the financial statements. The Statement establishes
      fair value as the measurement objective in accounting for share-based payment
      arrangements and requires all entities to apply a fair-value-based measurement
      in accounting for share-based payment transactions with employees. The Statement
      also establishes fair value as the measurement objective for transactions in
      which an entity acquires goods or services from non-employees in share-based
      payment transactions. The Statement replaces SFAS 123 "Accounting for
      Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
      Stock Issued to Employees". The provisions of this Statement were effective
      for
      the Company beginning January 1, 2006.


F-8


*Recent
      Accounting Pronouncements*





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which
      became effective for us on January 1, 2007. The Interpretation prescribes a
      recognition threshold and a measurement attribute for the financial statement
      recognition and measurement of tax positions taken or expected to be taken
      in a
      tax return. For those benefits to be recognized, a tax position must be
      more-likely-than-not to be sustained upon examination by taxing authorities.
      The
      amount recognized is measured as the largest amount of benefit that is greater
      than 50 percent likely of being realized upon ultimate settlement. The adoption
      of FIN 48 did not have a material impact on our financial statements for the
      year ended December 31, 2007.





In
      September 2006, the FASB issued Statement No. 157, "Fair Value Measurements".
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles and expands disclosure about
      fair value measurement. The implementation of this guidance is not expected
      to
      have any impact on the Company's financial statements.





In
      September 2006, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 158, "Employers' Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      No. 87, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires companies
      to
      recognize a net liability or asset and an offsetting adjustment to accumulated
      other comprehensive income to report the funded status of defined benefit
      pension and other postretirement benefit plans. SFAS No. 158 requires
      prospective application, recognition and disclosure requirements effective
      for
      the Company's fiscal year ending December 31, 2007. Additionally, SFAS No.
      158
      requires companies to measure plan assets and obligations at their year-end
      balance sheet date. This requirement is effective for the Company's fiscal
      year
      ending December 31, 2009. The Company is currently evaluating the impact of
      the
      adoption of SFAS No. 158 and does not expect that it will have a material impact
      on its financial statements.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, The Fair Value Option for Financial Assets and Financial Liabilities,
      including an amendment of FASB Statement No. 115 (“FAS 159”). FAS 159 permits
      companies to choose to measure many financial instruments and certain other
      items at fair value that are not currently required to be measured at fair
      value
      and establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities. The provisions of FAS 159 will become
      effective as of the beginning of our 2009 fiscal year. The adoption of these
      new
      Statements is not expected to have a material effect on the Company’s financial
      position, results of operations, or cash flows.





In
      December 2007, the FASB issued SFAS No. 141 (R) Business Combinations. SFAS
      141R
      establishes principles and requirements for how the acquirer of a business
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree. SFAS 141R also provides guidance for recognizing and measuring the
      goodwill acquired in the business combination and determines what information to
      disclose to enable users of the financial statements to evaluate the nature
      and
      financial effects of the business combination. The guidance will become
      effective as of the beginning of the Company’s fiscal year beginning after
      December 15, 2008. Management believes the adoption of this pronouncement will
      not have a material impact on the Company's consolidated financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in
      Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160
      establishes accounting and reporting standards for the noncontrolling interest
      in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
      become effective as of the beginning of the Company’s fiscal year beginning
      after December 15, 2008. Management believes
      the adoption of this pronouncement will not have a material impact on the
      Company's consolidated financial statements.


F-9





2.
      ACQUISITIONS, JOINT VENTURE AND RESCISSIONS





*Acquisition
      of Nutra Pharma, Inc.*




On
        November 23, 2001, the Company acquired 100% of the issued and outstanding
        common stock of Nutra Pharma, Inc. ("NPI"), a privately held company, from
        its
        sole stockholder, pursuant to an agreement and plan for exchange of common
        stock. NPI was formed on May 3, 2001 under the laws of the State of Nevada
        andat
        the time of this acquisition, its only asset was an exclusive worldwide license
        agreement (the "License Agreement") to distribute a medicinal compound.The
        principal products that were intended to be developed from this
        medicinalcompound were products designed to treat and heal open wounds and
        other
        skin disorders such as acne and psoriasis. NPI was a development stage company,
        as it had not realized any revenue from the date of its inception on May
        3,
        2001through the date that it was acquired by the Company.




The
      Company issued 4,500,000 shares of its restricted common stock to NPI's sole
      stockholder, in exchange for the outstanding common stock of NPI. At the time
      of
      the acquisition, NPI owed $1,750,000 to Terra BioPharma, S.A. ("TBPH"), a
      Panamanian company, as the licensor under the License Agreement. The term of
      the
      License Agreement was for a period of five (5) years commencing in May 2001.
      Payments to TBPH under the License Agreement were to be made in installments
      through May 2003.




This
        acquisition was accounted for as the purchase of a license. The Company valued
        the shares issued in this transaction at $0.025 per share, the price at which
        the Company sold shares of its common stock in a self-underwritten public
        offering in May 2001, for a total value of $112,500. The Company recorded
        the
        cost of the license at $1,862,500, which was equal to the $1,750,000 owed
        to
        TBPH plus the $112,500 value of the 4,500,000 shares
        issued.


*Joint
      Venture with Terra BioPharma*





On
      January 30, 2002, the Company entered into a Joint Venture Agreement (the "JV
      Agreement") with TBPH, whereby it acquired a 50% ownership interest in a newly
      formed Panamanian company called Terra Nutra, S.A. ("Terra Nutra"). This JV
      Agreement superseded the License Agreement between TBPH and NPI. The purpose
      of
      the joint venture was to patent the raw material composition, manufacturing
      process and various uses of the medicinal compound that was the subject of
      the
      License Agreement between TBPH and NPI. Pursuant to the JV Agreement, the
      parties agreed that the patent for the raw material composition and the patent
      for the manufacturing process would be owned by TBPH. Terra Nutra would own
      all
      future patents for all subsequent uses and products.


F-10


As
      part
      of the JV Agreement, the Company agreed to pay $1,740,000 to TBPH to secure
      the
      exclusive, worldwide distribution rights to all products derived from the
      medicinal compound. This sum was to be paid in monthly installments of varying
      amounts over a sixteen (16) month period beginning in July 2002. The Company
      also agreed to pay all costs associated with purchasing and developing the
      land
      that was to be used for growing the raw material that was required to produce
      the medicinal compound, the costs associated with the construction of a
      manufacturing plant used to process the raw material and the costs associated
      with clinical trials and patent applications. The JV Agreement acknowledged
      that
      amounts paid toward these costs would be deducted from the amounts owing under
      the License Agreement. The Company also agreed to pay a 3% royalty to TBPH
      on
      gross sales from any product ultimately derived from the medicinal
      compound.





*Rescission
      of Acquisition of Nutra Pharma Inc., and Joint Venture with
      Terra*


*BioPharma*





On
      May
      14, 2002, the Company notified TBPH of its intent to rescind the JV Agreement.
      The Company also notified NPI's sole stockholder of its intent to rescind the
      NPI Agreement to recover the 4,500,000 shares that were issued to NPI's sole
      stockholder in connection with the November 23, 2001 NPI Agreement. The Company
      also notified certain other stockholders holding a portion of the 4,500,000
      shares of common stock (the "Individual Stockholders") that had received shares
      through a transfer from NPI's sole stockholder. The notifications specified
      that
      the Company had rescinded the NPI Agreement and had instructed its transfer
      agent to place a stop transfer on all stock certificates that represented the
      4,500,000 shares issued in connection with the NPI Agreement.





On
      October 23, 2002, the Company received a total of 2,037,500 shares of its common
      stock from a group that included NPI's sole stockholder and other Individual
      Stockholders. These shares were cancelled and returned to the Company's
      Treasury.





On
      December 23, 2002, the Company, and NPI's sole stockholder agreed to rescind
      the
      NPI Agreement dated November 23, 2001. Pursuant to a Rescission, Settlement
      and
      Release Agreement, NPI's sole stockholder agreed to facilitate the return of
      2,092,500 of the 4,500,000 shares of common stock that were issued by the
      Company in connection with the NPI Agreement. Of the 2,092,500 shares, 2,037,500
      were previously returned on October 23, 2002. As part of this Rescission
      Agreement, upon the receipt by the Company of the additional 55,000 shares,
      NPI's sole stockholder would receive 450,000 shares of common stock directly
      from an existing stockholder who was also an Officer and Director of the
      Company.





On
      January 17, 2003, the Company received a total of 55,000 shares of its common
      stock from three Individual Stockholders. These shares were cancelled and
      returned to the Company's Treasury.





On
      February 10, 2003, the Company received 1,000,000 shares of its common stock
      from an Individual Stockholder. These shares were cancelled and returned to
      Treasury.





On
      June
      19, 2003, the Company received 1,000,000 shares of its common stock from an
      Individual Stockholder. These shares were cancelled and returned to
      Treasury.





On
      January 21, 2004, the Company received 150,000 shares of its common stock from
      an Individual Stockholder. These shares were cancelled and returned to
      Treasury.





On
      February 23, 2004, the Company received 30,000 shares of its common stock from
      an Individual Stockholder. These shares were cancelled and returned to
      Treasury.





At
      March
      31, 2004, the Company had an agreement in place to recover an additional 15,000
      shares from an Individual Stockholder. Upon the return of those shares in August
      2004, a total of 4,287,500 of the 4,500,000 shares originally issued to NPI's
      sole stockholder have been returned. The remaining 212,500 shares were deemed
      by
      the Company to be irretrievable, and accordingly, the Company recorded a charge
      to operations of $23,375 in 2003 for these shares.


F-11


On
      May
      19, 2004, the Company received 4,000 shares of its common stock from an
      Individual Stockholder. These shares were cancelled and returned to Treasury.
      The Company had previously included these 4,000 shares as part of the 212,500
      shares that it deemed to irretrievable.





In
      connection with these transactions, the Company recorded a loss on settlement
      of
      $53,340 in 2002, representing the write-off of the carrying value of the
      unamortized license agreement of $1,707,290, the cancellation of the remaining
      obligation to TBPH of $1,541,450 and the reduction to additional paid-in capital
      for the value of the common shares issued to NPI's sole stockholder of $112,500.
      Common shares received subsequent thereto have been cancelled and reflected
      as a
      reduction in the par value of common stock and a corresponding increase in
      additional paid-in capital. In addition, the 450,000 common shares transferred
      to NPI's sole stockholder by a stockholder of the Company was valued at market
      value of $229,500 on the date of transfer and has been recorded as a charge
      to
      operations in 2003 with a corresponding increase to additional paid-in
      capital.





*Failed
      Acquisition of Bio Therapeutics, Inc.:*





On
      May
      30, 2002, the Company entered into a definitive agreement (the "Share Exchange
      Agreement") to acquire 100% of the issued and outstanding common stock of Bio
      Therapeutics, Inc. ("Bio Therapeutics"), a privately held Florida corporation.
      Pursuant to this Share Exchange Agreement, the Company was obligated to issue
      11,137,139 shares of common stock in exchange for an equal number of shares
      of
      Bio Therapeutics, which represented 100% of the issued and outstanding common
      stock of Bio Therapeutics. The Share Exchange Agreement also contained a
      provision that in the event the Company's common stock was trading below $2.40
      on the closing date, the Company would be obligated to issue additional shares
      of its common stock to the stockholders of Bio Therapeutics in order to ascribe
      a final value of $2.40 for each share of Bio Therapeutics stock. In addition,
      as
      part of this Share Exchange Agreement, the Company agreed to loan Bio
      Therapeutics up to $500,000 for working capital purposes. The closing of this
      transaction was contingent upon the Company raising a minimum of $1,500,000
      through a private placement of its common stock. The Share Exchange Agreement
      also provided that the shares of the Company and the shares Bio Therapeutics
      that are being exchanged would be held by an escrow agent, who would hold all
      of
      the subject shares, and release them to the respective parties, only upon
      receiving written proof that the Company had successfully raised a minimum
      of
      $1,500,000.





On
      August
      12, 2002, the Company entered into a Closing Agreement for the Exchange of
      Common Stock (the "Closing Agreement"), which amended the Share Exchange
      Agreement between the parties. The Closing Agreement stipulated that: (i) the
      Company had satisfied its obligation to loan up to $500,000 to Bio Therapeutics,
      and (ii) the closing shall take place in two phases. In connection with the
      First Closing, the Company was obligated to issue 11,130,889 shares of its
      common stock in exchange for an equal amount of Bio Therapeutics common stock,
      which represented 100% of the issued and outstanding common stock of Bio
      Therapeutics. All share certificates to be issued by each party would be issued
      to a Trustee who would hold the shares until the Final Closing. The Final
      Closing was contingent upon the Company raising a minimum of $1,500,000 through
      a private placement of its common stock.





On
      September 27, 2002, the parties further amended the Closing Agreement as
      follows: (i) the number of shares to be issued by the Company in exchange for
      100% of the issued and outstanding shares of Bio Therapeutics is now 1,790,889,
      and (ii) in the event that the Company's common stock was trading below $1.20
      on
      the closing date, the Company would be obligated to issue additional shares
      of
      its common stock to the shareholders of Bio Therapeutics in order to ascribe
      a
      final value of $1.20 for each share of Bio Therapeutics stock.





As
      of
      December 31, 2002, the Company had written off its loan receivable balance
      of
      $629,000, due to uncertainty about the extent and timing of
      collection.


F-12


On
      April
      23, 2003, Bio Therapeutics withdrew from and terminated the Share Exchange
      Agreement due to the fact that the Company had been unsuccessful in raising
      the
      minimum amount of $1,500,000 through a private placement of its common stock.
      Upon the termination of the Share Exchange Agreement, the Trustee returned
      certificates representing a total of 9,156,961 shares of the Company's common
      stock to the Company for cancellation. The Trustee returned an equal amount
      of
      Bio Therapeutics stock to Bio Therapeutics's legal counsel. The number of shares
      returned by the Trustee to the Company and Bio Therapeutics in connection with
      the termination of the Share Exchange Agreement represented 100% of the shares
      issued by each party.




On
      May
      21, 2003, the Company commenced legal proceedings against Bio Therapeutics
      in
      order to collect amounts owing under the loan that the Company made to Bio
      Therapeutics in connection with the Share Exchange Agreement.





On
      November 14, 2003, the Company entered into a final Settlement Agreement (the
      "Settlement") with Bio Therapeutics. The Settlement provided for the dismissal
      of the lawsuit that the Company initiated against Bio Therapeutics. The
      Settlement also provided the Company with a non-exclusive license to certain
      intellectual property of Bio Therapeutics, including patents and patents pending
      for the development of therapies for Multiple Sclerosis and HIV. Also as part
      of
      the Settlement, the Company agreed to extinguish the entire amount of the loan
      receivable from Bio Therapeutics. With respect to the license received in
      connection with the Settlement, the Company deemed it to have a nominal value
      as
      its fair market value was not readily ascertainable. See Note 12.





3.
      NANOLOGIX, INC. (FORMERLY INFECTECH, INC.)





On
      September 19, 2003, the Company entered into an agreement (“Acquisition
      Agreement”) to acquire up to 100% of the issued and outstanding common stock of
      Nanologix, Inc., a Delaware corporation (“Nanologix”). Nanologix is a
      development stage company based in Sharon, Pennsylvania, which is engaged in
      the
      development of diagnostic test kits used for the rapid identification of
      infectious human and animal diseases. Nanologix owns patented technologies,
      which allow for the rapid detection of disease-causing pathogens. Nanologix
      also
      owns a patented technology designed for use in the bioremediation of
      contaminated soil and water.





The
      Acquisition Agreement provided for the acquisition by the Company of up to
      100%
      of the issued and outstanding common stock of Nanologix, through an exchange
      of
      one (1) share of the Company’s common stock for every two (2) shares
      of Nanologix common stock. The Company recorded the acquisition of Nanologix
      as
      the purchase of assets, principally patents and other intangibles. The value
      of
      the Company’s common stock issued in connection with this transaction was $0.85
      per share, which was the market value of the Company’s common stock on
      September 22, 2003, the date the terms of the acquisition were agreed to
      and announced.





Through
      December 31, 2003, the Company issued an aggregate of 4,502,549 shares of
      its common stock in exchange for 9,005,098 shares of Nanologix common stock.
      This initial exchange resulted in the Company owning approximately 58% of the
      issued and outstanding common stock of Nanologix. In January 2004, the
      Company issued an additional 426,275 shares of its common stock, in exchange
      for
      852,550 shares of Nanologix common stock. In September 2004, the Company
      issued an additional 293,288 shares of its common stock in exchange for 586,576
      shares of Nanologix common stock. These exchanges increased the Company’s
      ownership interest in Nanologix from 58% to 67%.





On
      September 28, 2004, the Company transferred 6,000,000 shares of Nanologix,
      Inc. common stock to a shareholder of Nutra Pharma, to discharge a $1,384,931
      demand loan from such shareholder. After giving effect to this transfer, the
      Company owned a total of 4,444,224 shares or approximately 29% of the issued
      and
      outstanding common stock of Nanologix (which was 15,537,050
      shares).


F-13


Subsequent
      to September 28, 2004, the Company owned a minority interest in Nanologix
      and accordingly, applied the equity method of accounting to its investment
      in
      Nanologix. The Company’s share of Nanologix’s earnings or losses is included in
      its statement of operations as a single amount. During the year ended
      December 31, 2004, Nanologix incurred a loss of $6,658,838. The Company’s
      portion of the loss using the equity method of accounting of $1,664,710 exceeded
      the carrying value of the Company’s investment which was $853,540 at
      December 31, 2004, and as such, the $853,540 was charged to operations at
      December 31, 2004. This charge reduced the carrying value of the Company’s
      investment in Nanologix to $0.





At
      December 31, 2005, the Company owned a total of 4,556,174 shares of the
      issued and outstanding common stock of Nanologix. These shares were returned
      to
      Nanologix on January 25, 2006, (see below).





The
      aggregate market value of the Company’s 4,556,174 shares of Nanologix common
      stock, based on the trading price of Nanologix common stock as quoted on the
      pink sheets of $.08 per share at December 31, 2005, was $364,494.





On
      January 25, 2006, the Company and Nanologix entered into a definitive agreement
      pursuant to which Nanologix agreed to assign its ownership of 11 patents to
      the
      Company which protect Nanologix' infectious disease diagnostic test kit
      technology. Nanologix also granted the Company a license to utilize 18
      additional patents related to the diagnostic test kits. As consideration, the
      Company agreed to return 100% or 4,556,174 shares of common stock of Nanologix
      that it owned to Nanologix. In addition, the Company agreed to pay Nanologix
      a
      royalty of 6% of gross sales of any products that are developed which utilize
      any of the 29 licensed patents. The Company also issued Nanologix a five-year
      option to purchase 1,000,000 of the Company's common stock at an exercise price
      of $.20.





4.
      ACQUISITION OF RECEPTOPHARM, INC.





On
      December 12, 2003, the Company entered into an acquisition agreement (the
“Agreement”), whereby it agreed to acquire up to a 49.5% interest in
      ReceptoPharm, Inc. (“ReceptoPharm”), a privately held biopharmaceutical company
      based in Ft. Lauderdale, Florida. ReceptoPharm is a development stage company
      engaged in the research and development of proprietary therapeutic proteins
      for
      the treatment of several chronic viral, autoimmune and neuro-degenerative
      diseases.





Pursuant
      to the Agreement, the Company acquired its interest in ReceptoPharm’s common
      equity for $2,000,000 in cash, which equates to a purchase price of $.45 per
      share. ReceptoPharm intends to use such funds to further research and
      development, which could significantly impact future results of
      operations.





At
      December 31, 2005, the Company had funded a total of $1,860,000 to ReceptoPharm
      under the Agreement, which equated to a 37% ownership interest in ReceptoPharm.
      In February 2006, the Company funded an additional $140,000 to ReceptoPharm,
      thereby completing the $2,000,000 investment. As of December 31, 2006, the
      Company owned 4,444,445 shares or 38% of the issued and outstanding common
      equity of ReceptoPharm. In addition to its ownership interest, as of December
      31, 2006, the Company had loaned ReceptoPharm $825,000 for working capital
      purposes.





For
      accounting purposes, the Company through March 31, 2007, had been treating
      its
      capital investment in ReceptoPharm as a vehicle for research and development.
      Because the Company is solely providing financial support to further the
      research and development of ReceptoPharm, such amounts are being charged to
      expense as incurred by ReceptoPharm. ReceptoPharm presently has no ability
      to
      fund these activities and is dependent on the Company to fund its operations.
      In
      these circumstances, ReceptoPharm is considered a variable interest entity
      and
      has been consolidated. The creditors of ReceptoPharm do not have recourse to
      the
      general credit of the Company.


F-14


Effective
      in April 2007 the Company ceased advancing funds to Receptopharm and had no
      further commitment to fund them. As such, the Company deconsolidated
      Receptopharm from its financial statements at June 30, 2007. This
      deconsolidation resulted in a gain of $1,081,095. This gain resulted from the
      Company reversing the net losses of Receptopharm included in its consolidated
      financial statements and including the net losses as if the equity method had
      been applied. In addition, the Company wrote off the balance of its investment
      in ($2,000,000) and advances to ($975,000) Receptopharm as discussed above
      as
      they were deemed to be impaired at June 30, 2007.





The
      Gain
      was computed as follows:




Net
                losses included in the consolidated financial statements
            
            $
            4,056,095Investment
                advances and equity method losses
            
            
            (2,975,000
            )Gain
                on deconsolidation
            
            $
            1,081,095





5.
      SETTLEMENT OF DEMAND LOAN - STOCKHOLDER





From
      inception to May 2004, the Company funded its ongoing operational costs through
      unsecured, non-interest bearing, demand loans from certain of its shareholders,
      which included loans from the Company's former Chairman of the Board, Zirk
      Engelbrecht. At June 30, 2004, the balance on the loan due to Mr. Engelbrecht
      was $1,384,931. On August 1, 2004, Mr. Engelbrecht assigned the loan to Opus
      International, LLC, a company that Mr. Engelbrecht claims is controlled by
      his
      wife, Marcy Engelbrecht. On or about August 9, 2004, a Managing Member of Opus
      International, LLC made a formal demand for repayment of the loan in the amount
      of $1,384,931.





On
      September 28, 2004, the Company entered into a settlement agreement with Opus
      International, which provided for the following terms:





o
      The
      transfer of 6,000,000 shares of Nanologix common stock owned by the Company
      to
      Opus International, in full and fair settlement of the outstanding debt owed
      to
      Opus International.





o
      Upon
      the transfer of the Nanologix shares to Opus International, any and all
      outstanding debt that the Company owed to Opus International was deemed
      discharged and the Company was released from any and all liability regarding
      the
      debt.





o
      The
      Company accepted the resignation of Mitchell Felder and David C. McClelland
      as
      directors.





In
      connection with the settlement, the Company recorded a loss of $955,069,
      representing the difference between the Company's carrying value per share
      of
      the Nanologix common stock and the value of the Nanologix common stock ascribed
      in the settlement which was $0.23 per share.





6.
      CONVERTIBLE LOANS





In
      November 2004, in accordance with the terms of completed Subscription
      Agreements, the Company received total proceeds of $206,750 from four
      (4) investors. These agreements provide that upon the expiration of a
      6 month term from the date of execution, each of the four investors has the
      option of: (a) being repaid the amount of their investment together with
      15% interest per annum; (b) converting their investment into shares of the
      Company’s common stock at a conversion price of $0.17


F-15


per
      share
      up to an aggregate of 1,216,176 shares, if all four investors convert; or (c)
      converting their investment into a number of shares of common stock of the
      Company equal to the sum of the principal and accrued interest on the note,
      divided by the conversion price equal to a price which is 35% below (i) the
      average of the last reported sales prices for the shares of Common Stock on
      the
      NASDAQ National Market, the American Stock Exchange, the NASDAQ Small Cap Market
      or the Over-the-Counter Bulletin Board for the 5 trading days immediately prior
      to such date or (ii) if there have been no sales on any such market on any
      applicable day, the average of the highest bid and lowest ask prices on such
      market at the end of any applicable day, or (iii) if the market value cannot
      be
      calculated as of such date on any of the foregoing bases, the Market Price
      will
      be at the fair market value as reasonably determined in good faith by our Board
      of Directors.





Each
      investor had piggyback registration rights that would have required the Company
      to register any shares held by them if the Company voluntarily filed a
      registration statement, or immediately if an investor decided to convert their
      investment into shares of common stock.





In
      May 2005, the loan holders amended their original agreements. The new
      agreements released the Company from its requirements to register the loan
      holders’ shares. Each loan holder received approximately ten percent in
      additional shares as part of the new agreement. In full settlement of the debt,
      the Company issued an aggregate of 1,458,000 shares of common stock to settle
      the debt. The fair value of these shares at the date of the settlement was
      $481,140. The Company recorded interest expense of $261,782 for the value of
      the
      shares in excess of the debt settled. (See Note 8.)





7.
      DUE TO
      OFFICERS





At
      December 31, 2006, the Company owed its President, Rik Deitsch $1,153,375 in
      connection with demand loans made to the Company by Mr. Deitsch. This amount
      included $40,000 of accrued interest. During the year ended December 31, 2007,
      the Company borrowed an additional $791,039 from Mr. Deitsch. The balance owed
      to Mr. Deitsch at December 31, 2007 was $1,944,414 which includes accrued
      interest of $105,039. This demand loan is unsecured and bears interest at a
      rate
      of 4.0%.





8.
      STOCKHOLDERS' DEFICIT





On
      October 31, 2001, Nutra Pharma amended its articles of incorporation to increase
      the number of authorized shares of common stock from 100,000,000 to 2
      billion.





On
      November 7, 2001, Nutra Pharma affected a 20-for-1 forward stock split which
      increased the total issued and outstanding shares of common stock from 2,000,000
      shares to 40,000,000 shares. All share and per share amounts have been
      retroactively adjusted for all periods presented to reflect the stock
      split.





In
      May
      2001, the Company raised $25,000 through the sale of 1,000,000 shares of its
      common stock at a price of $0.025 per share in a self-underwritten initial
      public offering.





In
      November 23, 2001, the Company issued 4,500,000 shares in connection with the
      acquisition of Nutra Pharma, Inc. (see Note 2 - Acquisitions, Joint Venture
      and
      Rescissions). The Company valued the 4,500,000 shares issued in this transaction
      at a price of $0.025 per share, for a total value of $112,500. The value of
      $0.025 per share was based on the price at which the Company sold shares of
      its
      common stock in an initial public offering in May 2001, the most recent cash
      transaction of its common stock.


F-16





On
      April
      23, 2002, the Company issued 1,000,000 shares of restricted common stock to
      a
      lender as collateral for a loan. The loan was never funded and the Company
      placed a stop transfer order on the stock certificate. The lender is currently
      in Chapter 11 Bankruptcy. These shares have not been reflected as issued and
      outstanding.





On
      May
      23, 2002, a stockholder of the Company returned a total of 10,394,000 shares
      of
      common stock to the Company for cancellation. The Company did not pay any
      consideration to the stockholder. Accordingly, the Company adjusted
      stockholders' equity for the treasury shares with no cost.





In
      2002,
      the Company issued a total of 656,000 shares of restricted common stock to
      various individuals and companies in exchange for services rendered. These
      issuances were made at various times throughout the year. The Company recorded
      stock-based compensation expense of $671,530 to reflect the fair market value
      of
      the common stock issued. Fair market value was based on the closing price of
      the
      Company's common stock on the date of each grant.





On
      December 23, 2002, the Company rescinded the NPI Agreement dated November 23,
      2001, pursuant to a Rescission, Settlement and Release Agreement. NPI's sole
      stockholder agreed to facilitate the return of 2,092,500 of the 4,500,000 shares
      of common stock to the Company for cancellation. Subsequently, through December
      31, 2004, an additional 2,199,000 shares were returned to the Company by
      Individual Stockholders that received shares of common stock of the Company
      directly from NPI's sole stockholder. The
      remaining 208,500 shares are deemed by the Company to be irretrievable, and
      accordingly, the Company recorded a charge to operations of $23,375 for these
      shares in 2003. As
      part
      of this Rescission Agreement, NPI's sole stockholder received 450,000 shares
      of
      common stock directly from an existing stockholder who was also an Officer
      and
      Director of the Company. The Company recorded a charge to operations of $229,500
      in 2003 to reflect the value of the settlement for the benefit of the
      Company.





In
      June
      2003, a stockholder of the Company transferred 500,000 shares of his common
      stock to the Company's President/Chief Executive Officer. Such shares were
      valued at $75,000, the fair market value on the date of the transfer, and the
      accompanying financial statements have been revised to reflect a charge to
      operations as compensation with a corresponding increase in additional
      paid-in-capital.





On
      June 9, 2003, the Company converted a stockholder loan payable in the
      amount of $862,012, by issuing 10,300,000 shares of its restricted common stock.
       The conversion price of $0.08 represented a discount of approximately 50%
      from the fair market value of the common stock as measured by the closing price
      on the day prior to the conversion.  Accordingly, the Company recorded
      financing costs of $786,000 in connection with this transaction.





In
      2003,
      the Company issued a total of 2,196,828 shares of restricted common stock,
      including 15,000 shares issued pursuant to the Company's Equity Compensation
      Plan to various individuals and companies in exchange for services rendered.
      Of
      this total, 1,500,000 shares were issued to officers and directors of the
      Company. These issuances were made at various times throughout the year. The
      Company recorded stock-based compensation expense of $1,360,267 to reflect
      the
      fair market value of the common stock issued. Fair market value was based on
      the
      closing price of the Company's common stock on the date of each
      grant.





In
      2003,
      the Company issued a total of 4,502,549 shares of common stock in connection
      with its acquisition of Nanologix, Inc., which was valued at
      $3,827,167.


F-17


During
      the year ended December 31, 2004, the Company sold 5,390,000 shares of
      restricted common stock at $.17 per share and received proceeds of $922,700.
      Of
      the shares sold 1,285,000 were issued at December 31, 2004, and 4,105,000 shares
      were recorded as a subscription.





During
      the year ended December 31, 2004, the Company issued a total of 4,054,200 shares
      of restricted common stock to various individuals and companies and accepted
      subscriptions for 2,000,000 shares of common stock from officers and directors
      in exchange for services rendered. These issuances were made at various times
      throughout the year. The Company recorded stock-based compensation expense
      of
      $2,865,996 to reflect the fair market value of the common stock issued. Fair
      market value was based on the closing price of the Company's common stock on
      the
      date of each grant, which ranged from $0.24 to $0.66 per share.





During
      the year ended December 31, 2004, the Company issued a total of 775,538 shares
      of restricted common stock in connection with its acquisition of Nanologix,
      Inc., which was valued at $0.85 per share for a total of $659,207. This issuance
      was made in connection with the September 19, 2003, Acquisition Agreement
      between the Company and Nanologix, Inc.





In
      June
      and July 2004, the Company received total proceeds of $98,000 from seven (7)
      investors. At the expiration of 90 days, each of the seven investors had the
      option of: (a) being repaid the amount of their investment together with 15%
      interest; (b) converting their investment into shares of the Company's common
      stock at the price of $0.20 per share, or (c) converting their investment into
      shares of common stock of Nanologix, Inc at the price $0.10 per share. Upon
      the
      expiration of the 90-day term, each investor opted to convert their investment
      into Nanologix shares. The Company arranged for a former Nanologix
      officer/director, Robert Ollar, to deliver his own shares of Nanologix common
      stock to the seven investors in full satisfaction of the $98,000 that the
      investors had lent to the Company. These shares did not have a restrictive
      legend on the certificates. In exchange for Robert Ollar using his 1,590,133
      shares of Nanologix, the Company issued him 595,067 shares of its common stock
      on November 18, 2004.





During
      2004 certain third parties returned an aggregate of 120,000 shares of common
      stock for cancellation.





During
      the year ended December 31, 2005, the Company sold 790,000 shares of restricted
      common stock at $.17 per share and received proceeds of $134,300. The Company
      also issued 4,877,500 shares of restricted common stock at $.20 per share and
      received proceeds of $975,500.





In
      May
      2005, the Company issued an aggregate of 1,458,000 shares of common stock to
      settle the debt described in Note 5. The fair value of these shares at the
      date
      of the settlement was $481,140. The Company recorded a charge to interest
      expense of $261,782 for the value of the shares in excess of the debt
      settled.





In
      October 2005, the Company entered into a one-year consulting agreement with
      Xinhua Financial Network whereby Xinhua was retained to introduce the Company
      to
      potential strategic and operational partners in The People's Republic of China
      and elsewhere in Asia. In connection with this agreement, the Company issued
      a 5
      year warrant to purchase 10,000,000 of common stock to Xinhua at a price of
      $.70. The warrant is callable by the Company at a price of $1.00 in the event
      that market price for the Company's common stock exceeds $1.00.





The
      Company recorded stock based compensation expense of $1,500,000 to reflect
      the
      fair market value of the warrant on the date of issuance. Fair market value
      was
      calculated using the Black-Scholes option pricing model with the following
      assumptions: expected holding period of 5 years; expected volatility of 125%;
      risk free interest rate of 4.0%.


F-18


During
      the year ended December 31, 2005, the Company issued a total of 2,007,000 shares
      of restricted common stock to various consultants in exchange for services
      rendered. These issuances were made at various times throughout the year. The
      Company recorded stock-based compensation expense of $718,505 to reflect the
      fair market value of the common stock issued. Fair market value was based on
      the
      closing price of the Company's common stock on the date of each grant, which
      ranged from $0.26 to $0.37 per share.





During
      the year ended December 31, 2005, ReceptoPharm issued 1,100,000 shares of its
      common stock to two of its executive officers for services rendered. The shares
      were valued at their fair market value of $0.45 per share and the Company
      recorded a charge to operations of $495,000. ReceptoPharm also issued 314,855
      shares of its common stock to two consultants for services rendered. The shares
      were valued at their fair market value of $0.45 per share and the Company
      recorded a charge to operations of $141,685.





During
      the year ended December 31, 2006, the Company sold 3,110,000 shares of
      restricted common stock at $.20 per share and received proceeds of
      $622,000.





During
      the year ended December 31, 2006, the Company issued a total of 873,500 shares
      of restricted common stock to various consultants in exchange for services
      rendered. These issuances were made at various times throughout the year. The
      Company recorded stock-based compensation expense of $124,171 to reflect the
      fair market value of the common stock issued. Fair market value was based on
      the
      closing price of the Company's common stock on the date of each grant, which
      ranged from $0.11 to $0.21 per share.





During
      the year ended December 31, 2006, ReceptoPharm issued 25,000 shares of its
      common stock to a consultant for services rendered. The shares were valued
      at
      their fair market value of $0.45 per share and the Company recorded a charge
      to
      operations of $11,250.





On
      June
      27, 2007, the Company issued 5,000,000 shares of its common stock to its legal
      counsel for services. These shares were issued pursuant to an effective
      registration statement on Form S-8 and were not subject to a vesting period.
      The
      fair market value of the shares on the date of grant was $0.07 and accordingly,
      the Company recorded stock based compensation of $350,000.




On
      August
      27, 2007, the Company issued an aggregate of 615,000 shares of restricted common
      stock to two consultants in exchange for services rendered. The fair market
      value of the shares on the date of grant was $0.07 and accordingly, the Company
      recorded stock based compensation of $43,050.





On
      August
      27, 2007, the Company issued 3,000,000 shares to a consultant in exchange for
      services rendered. These shares were issued pursuant to an effective
      registration statement on Form S-8 and were not subject to a vesting period.
      The
      fair market value of the shares on the date of grant was $0.07 and accordingly,
      the Company recorded stock based compensation of $210,000.





In
      December 2007, the Company sold an aggregate of 4,800,000 shares of restricted
      common stock at $0.025 per share and received gross proceeds of $120,000. These
      shares were not issued to the purchasers until March 13, 2008.


F-19


Equity
      Compensation Plans





On
      December 3, 2003, the Board of Directors of the Company approved the
      Employee/Consultant Stock Compensation Plan (the "2003 Plan"). The purpose
      of
      the


2003
      Plan
      is to further the growth of Nutra Pharma by allowing the Company to compensate
      employees and consultants who have provided bona fide services to the Company,
      through the award of common stock of the Company. The maximum number of shares
      of common stock that may be issued under the 2003 Plan is
      2,500,000.




On
      June
      6, 2007 the Board of Directors of the Company approved the 2007
      Employee/Consultant Stock Compensation Plan (the "2007 Plan"). The purpose
      of
      the 2007 Plan is to further the growth of Nutra Pharma by allowing the Company
      to compensate employees and consultants who have provided bona fide services
      to
      the Company, through the award of common stock of the Company. The maximum
      number of shares of common stock that may be issued under the 2007 Plan is
      25,000,000.





The
      Board
      of Directors is responsible for the administration of the 2003 and 2007 Plans
      and has full authority to grant awards under the Plan. Awards may take the
      form
      of stock grants, options or warrants to purchase common stock. The Board of
      Directors has the authority to determine: (a) the employees and consultants
      that
      will receive awards under the Plan, (b) the number of shares, options or
      warrants to be granted to each employee or consultant, (c) the exercise price,
      term and vesting periods, if any, in connection with an option grant, and (d)
      the purchase price and vesting period, if any, in connection with the granting
      of a warrant to purchase shares of common stock of the Company.





As
      of
      December 31, 2007, the Company had issued a total of 2,495,000 shares under
      the
      2003 Plan. These shares were issued to various consultants for services rendered
      to the Company during 2003 and 2004.





As
      of
      December 31, 2007, the Company had issued a total of 8,000,000 shares under
      the
      2007 Plan. Of the total, 5,000,000 shares were issued to our law firm and
      3,000,000 were issued to a consultant. These shares were issued in exchange
      for
      services rendered to the Company during 2007.





9.
      STOCK
      OPTIONS





Nanologix
      Inc.





On
      January 25, 2006, the Company and Nanologix entered into a definitive agreement
      pursuant to which Nanologix agreed to assign its ownership of 11 patents to
      the
      Company which protect Nanologix' infectious disease diagnostic test kit
      technology (See Note 3.) In connection with this agreement, the Company also
      issued Nanologix a five-year option to purchase 1,000,000 of the Company's
      common stock at an exercise price of $.20. This option vested immediately on
      January 25, 2006, the date of grant.


F-20


The
      Company recorded stock based compensation expense of $210,000 to reflect the
      fair value of the option grant. The fair value of the option grant was estimated
      on the date of grant using the Black-Scholes option pricing model with the
      following assumptions: expected volatility 125%; risk-free interest rate of
      4.0%; expected life of 5 years; and no expected dividends.





Doherty
      & Company, LLC





On
      June 1, 2005 the Company retained Doherty & Company, LLC (“Doherty
& Company”), to provide the services of Michael Doherty as executive
      Chairman of the Company. Concurrently, the Company also retained Doherty &
Company to act as the Company’s agent in connection with prospective private
      capital-raising activities.





The
      Company granted a five-year option to purchase Thirteen Million Six Hundred
      Thousand (13,600,000) shares of the Company’s common stock at an exercise price
      equal to $0.27 per share, vesting over a two-year period. The option expires
      on
      May 31, 2010. The initial vesting of 6,800,000 options was contingent on
      the Company, through the efforts of Mr. Doherty and Doherty & Company,
      raising at least $500,000 of additional equity, debt or equity linked financing
      prior to October 31, 2005. This contingency was not met, and as of December
      31, 2005, none of the 13,600,000 options were vested.





On
      April
      1, 2006, the Company and Mr. Doherty entered into a termination agreement
      whereby Mr. Doherty agreed to resign his position as Chairman of Board of the
      Company. Upon the effectiveness of the termination agreement on April 1, 2006,
      the Company issued a five-year option to Mr. Doherty to purchase 2,000,000
      shares of common stock at an exercise price of $.27 per share. The option vested
      immediately on the date of grant. The Company recorded stock based compensation
      expense of $260,000 to reflect the fair value of the option grant. The fair
      value of the option grant was estimated on the date of grant using the
      Black-Scholes option pricing model with the following assumptions: expected
      volatility 127%; risk-free interest rate of 4.8%; expected life of 5 years;
      and
      no expected dividends.





A
      summary
      of stock options is as follows:





Weighted
            
            WeightedNumber
            
            average
            
            averageof
            
            exercise
            
            fairshares
            
            price
            
            valueBalance
                at December 31, 2005
            
            
            -Issued
            
            
            3,000,000
            
            $
            .25
            
            $
            .16Balance
                at December 31, 2006 And 2007
            
            
            3,000,000
            
            $
            .25
            
            $
            .16





The
      following table summarizes information about fixed-price stock
      options **:**





Weighted
            
            Weighted
            
            Weighted-Average
            
            Average
            
            AverageExercise
            
            Number
            
            Contractual
            
            ExercisePrices
            
            Outstanding
            
            Life
            
            Price$.20
            
            
            1,000,000
            
            
            3.05
                years
            
            $
            .20$.27
            
            
            2,000,000
            
            
            .25
                years
            
            $
            .273,000,000





All
      options are vested and exercisable.




In
        October 2005, the Company entered into a one-year
        consulting agreement with Xinhua Financial Network (“Xinhua”), providing that
        Xinhua will introduce us to potential strategic and operational partners
        in The
        People's Republic of China and elsewhere in Asia.  In connection with this
        agreement, we issued a 5-year warrant to Xinhua to purchase 10,000,000 shares
        of
        our common stock at an exercise price of $.70.  The warrant is callable by
        us a price of $1.00 in the event that our market price exceeds
        $1.00.




F-21


10.
      INCOME TAXES





The
      Company accounts for income taxes under SFAS 109, which requires use of the
      liability method. SFAS 109 provides that deferred tax assets and liabilities
      are
      recorded based on the differences between the tax bases of assets and
      liabilities and their carrying amounts for financial reporting purposes,
      referred to as temporary differences. Deferred tax assets and liabilities at
      the
      end of each period are determined using the currently enacted tax rates applied
      to taxable income in the periods in which the deferred tax assets and
      liabilities are expected to be settled or realized.





The
      provision for income taxes differs from the amount computed by applying the
      statutory federal income tax rate to income before provision for income taxes
      for the years ended December 31, 2007 and 2006. The sources and tax effects
      of
      the differences are as follows:




Income
                tax provision at the federal statutory rate
            
            
            34
            %Effect
                of operating losses
            
            
            (34
            )%0
            %





As
      of
      December 31, 2007, the Company has a net operating loss carry forward of
      approximately $4,000,000. This loss will be available to offset future taxable
      income. If not used, this carry forward will expire through 2027. The deferred
      tax asset of approximately $1,400,000 relating to the operating loss carry
      forward has been fully reserved at December 31, 2007. The increase in the
      valuation allowance related to the deferred tax asset was approximately $200,000
      during 2007. The principal difference between the accumulated deficit for income
      tax purposes and for financial reporting purposes results from Stock based
      compensation of approximately $8,400,000, non-cash finance charges of
      approximately $1,100,000, non-cash losses on settlements of approximately
      $1,000,000, non-cash losses related to Nanologix of approximately $1,700,000,
      losses of Receptopharm, Inc. of approximately $3,000,000 and the amortization
      on
      intangibles of approximately $800,000.





11.
      CONTINGENCIES





On
      April 4, 2005, a Motion to Enforce Settlement Agreement was filed against
      the Company in the Circuit Court of Broward County Florida by Bio Therapeutics,
      Inc. f/k/a Phylomed Corp. in Nutra Pharma Corp. v. Bio Therapeutics, Inc. (17th
      Judicial Circuit, Case No. 03-008928 (03). This proceeding results from an
      alleged breach of a settlement agreement that was entered into between Bio
      Therapeutics and the Company in resolution of a previous lawsuit between the
      Company and Bio Therapeutics.  In conjunction with the settlement
      agreement, the Company also entered into a related License Agreement and
      Amendment to the License Agreement (“License Agreement”) with Bio
      Therapeutics regarding certain pieces of intellectual property owned by Bio
      Therapeutics. In the April 4, 2005 motion, Bio Therapeutics alleges that
      the Company breached certain provisions of the License Agreement and requested
      that the Court grant its motion to enforce the Settlement Agreement by declaring
      the License Agreement terminated, enjoining the Company from further use of
      license products that were granted to the Company by the License Agreement,
      and
      awarding attorneys’ fees and costs to Bio Therapeutics.




In
      late
      2007, the Company moved for summary judgment on Bio Therapeutics' Motion to
      Enforce Settlement Agreement and at an oral argument on the motion in February
      2008, the Court granted the Company’s motion.  The Company is currently
      waiting for entry of the order granting its motion for summary judgment and
      denying Bio Therapeutics' Motion to Enforce Settlement Agreement. The Company
      does not believe that this action will have a material effect upon its
      operations, and if the license agreement is terminated the Company does not
      believe that there will be a material negative impact.





F-22


12.
      SUBSEQUENT EVENTS





ADDITIONAL
      OFFICER LOANS





From
      January 1 through February 8, 2008, the Company’s president Rik Deitsch loaned
      an additional $55,000 to the Company for working capital purposes. As a result
      of these additional loans and accrued interest from January 1 through February
      29, 2008, the Company owed Mr. Deitsch $2,012,749 as of February 29,
      2008.





CONVERSION
      OF OFFICER LOAN INTO COMMON STOCK





On
      March
      14, 2008, the Company’s Board of Directors approved an offer made by Mr.
      Deitsch, to discharge $1,200,000 of Mr. Deitsch’s outstanding loan to the
      Company in exchange for 48,000,000 shares of restricted common stock. The price
      per share in this loan conversion was $0.025. After this conversion, the
      remaining balance of Mr. Deitsch’s loan to the Company was
      $812,749.





SALE
      OF SHARES OF COMMON STOCK IN CONNECTION WITH PRIVATE PLACEMENT





On
      March
      19, 2008, the Company issued 4,800,000 shares of restricted common stock that
      were subscribed for at December 31, 2007 - see Note 8.





From
      January 1 through March 19, 2008, the Company completed additional private
      placements of restricted shares of its common stock, whereby it sold an
      aggregate of 14,940,000 shares at a price per share of $0.025. The Company
      received proceeds of $373,500 in connection with the sale of these
      shares.





In
      total,
      the Company sold 19,740,000 shares at a price per share of $0.025 and received
      proceeds of $493,500. In addition, the Company granted one (1) warrant for
      each
      share sold which gives each investor the right to purchase one additional share
      until December 31, 2012 at an exercise price of $0.10 per share.





STOCK
      BASED COMPENSATION




On
      March
      13, 2008, the Company’s Board of Directors authorized the issuance of an
      aggregate of 17,000,000 shares of its restricted common stock in exchange for
      services rendered, as follows:





1,000,000
      shares to each of four (4) consultants


2,000,000
      shares to one (1) consultant


1,000,000
      shares to an employee of the Company


5,000,000
      shares to Rik Deitsch, the Company’s Chairman and Chief Executive
      Officer


2,500,000
      shares to Stan Cherelstein, a Director of the Company


2,500,000
      shares to Stewart Lonkey, a Director of the Company





The
      shares described above were valued at $0.025 per share which was the fair market
      value of the Company’s common stock on the date of grant.





ADDITIONAL
      LOANS TO RECEPTOPHARM





From
      January 1 through April 1, 2008, the Company loaned $300,000 to Receptopharm
      for
      working capital purposes.





ACQUISITION
      OF RECEPTOPHARM





On
      April
      10, 2008, the Company completed a transaction pursuant to which it acquired
      the
      remaining sixty-two percent (62%) of Receptopharm’s issued and outstanding
      common shares in exchange for 30,000,000 shares of the Company’s common
      stock.  Prior to April 10, 2008, the Company owned 4,444,444 shares or
      approximately 38% of Receptopharm’s common stock (See Note 4.)  As a result
      of this transaction, the Company now owns 100% of the issued and outstanding
      common stock of Receptopharm.




F-23