UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





(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, 2008





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-K or any
amendment to this Form 10-K. o





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





The
registrant's revenues for the fiscal year ended December 31, 2008 were
$4,045.





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,
2009 was $2,553,679.





As of
March 31, 2009, there were 211,276,482 shares of common stock issued and
outstanding.





Transitional
Small Business Disclosure Format (Check one): Yes o Nox










INDEX





Part
      IItem
      1.
                                                              Business
                                                              3Item
      1A.
                                                              Risk
      Factors
                                                              17Item
      1B.
                                                              Unresolved
      Staff Comments
                                                              17Item
      2.
                                                              Properties
                                                              17Item
      3.
                                                              Legal
      Proceedings
                                                              17Item
      4.
                                                              Submission
      of Matters to a Vote of Security Holders
                                                              17Part
      IIItem
      5.
                                                              Market
      for Registrant’s Common Equity; Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                              17Item
      6.
                                                              Selected
      Financial Data
                                                              20Item
      7.
                                                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                              20Item
      7A.
                                                              Quantitative
      and Qualitative Disclosures about Market Risk
                                                              27Item
      8.
                                                              Financial
      Statements and Supplementary Data
                                                              27Item
      9.
                                                              Changes
      in Disagreements With Accountants on Accounting and Financial
      Disclosure
                                                              27Item
      9A.
                                                              Controls
      and Procedures
                                                              28Item
      9B.
                                                              Other
      Information
                                                              28Part
      IIIItem
      10.
                                                              Directors
      and Executive Officers of the Registrant
                                                              29Item
      11.
                                                              Executive
      Compensation
                                                              32Item
      12.
                                                              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                              33Item
      13.
                                                              Certain
      Relationships and Related Transactions, and Director
      Independence
                                                              35Item
      14.
                                                              Principal
      Accountant Fees and Services
                                                              35Part
      IVItem
      15.
                                                              Exhibits
      and Financial Statement Schedules
                                                              35Signatures
                                                              36





2





Forward
Looking Statements





This
Annual Report on Form 10-K for the period ending December 31, 2008, 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 operational plans are dependent upon obtaining equity or other financing;
(d) we are subject to substantial Federal Food and Drug Administration ("FDA")
and other regulations which may increase our costs or otherwise 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.   Since October 31, 2001, we have been conducting our
operations as a development stage company under the name, Nutra Pharma
Corp.  We have never been the subject of a bankruptcy, receivership,
material reclassification, consolidation, merger, or purchase or sale of a
significant amount of assets not in the ordinary course of business, or similar
such proceeding or event, with the exception of our April 10, 2008 merger with
ReceptoPharm, Inc. (“ReceptoPharm”), a Nevada corporation, which made
ReceptoPharm, our wholly owned subsidiary.  From February 2004 to
February 2006, we acquired 4,444,444 shares of ReceptoPharm for $2.0 million,
which shares then represented approximately thirty-eight percent (38%) of
ReceptoPharm’s total outstanding common stock.   On April 10,
2008, we entered into a Share Exchange Agreement with ReceptoPharm whereby we
acquired the remaining 62% interest in ReceptoPharm to complete our acquisition
of ReceptoPharm as our wholly-owned subsidiary.





Designer
Diagnostics, a Nevada corporation we formed in January 2006, is also 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. 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, it 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 orLou 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 foreign country
approval(s) for the treatment of disease.





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





3





To date,
we have not generated any significant revenues; during our 2008 Fiscal Year we
generated nominal revenues of only $4,045.





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





Description
of Business





Summary





Our
Wholly Owned Subsidiary, ReceptoPharm - Drug Discovery Platform




ReceptoPharm
is a development stage biopharmaceutical company located in Plantation, Florida,
which is developing technologies to treat the neurological diseases: multiple
sclerosis; adrenomyeloneuropathy; amyotrophic lateral sclerosis; myasthenia
gravis; and to treat the viral diseases, HIV and hepatitis-C.





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




Designer
Diagnostics 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 11,000
units.





Non
Exclusive License from Bio-Therapeutics, Inc.





We have a
non-exclusive license to certain intellectual property of Bio-Therapeutics,
Inc., which consists of the following technology platforms: (a) alteration of
proteins and peptides; and (b) innovative aerosolized drug delivery
system.





Business
Strategy




We seek
to develop proprietary pharmaceutical products for human illnesses that qualify
for “fast-track” or “Orphan Drug” status under FDA regulations, which can
expedite regulatory review.  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. 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.





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 the use of drugs developed by ReceptoPharm and future 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 for the past three years has been to license our AMN, MS and HIV
technologies in our attempt to bring these technologies to market within 5
years.   Should we obtain adequate financing, our midterm
strategy remains the same —  to accomplish these midterm goals in the
next two years of that 5 year period.





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.





4





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 Designer Diagnostics,
  Inc.




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





Marketing





We
currently do not have a marketing program for our drug products because none of
our products have received FDA approval and our lack of financing has hampered
our efforts to navigate the regulatory process in a timely fashion; however, if
and when we have FDA approved drug treatments, we plan to develop a marketing
strategy to 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 its
President.





Employees





We have
five (5) full time employees consisting of: (a) Rik Deitsch, our President; (b)
Paul Reid, ReceptoPharm’s Chief Executive Office; (c) Nina Goldstein, our
Executive Administrative Assistant; (d) David Schmidt, our Chief Administrator;
and (e) Lawrence Raymond, ReceptoPharm’s Chief Scientific Officer.




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 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.





5





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 neurotransmitteracetylcholinethat
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).




We have
set forth below a summary of ReceptoPharm’s proposed drugs and their potential
applications.





Drug
Description





Drug
                
                Potential
      ApplicationsRPI-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





Although
we focused our drug development efforts from 2006 to 2008 on clinical trials for
ReceptoPharm’s HIV drug, RPI-MN, our primary focus now is on RPI-78M for the
treatment of AMN.  At this time, RPI-78M offers us a greater
opportunity then RPI-MN to bring a drug to market since the trials for RPI-78M
are less expensive and our HIV related drug, RPI-MN, is competing in the HIV
saturated drug market.





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.





6




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.





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 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 conducted in August 2007, all members of an untreated
animal control group developed signs of disease with different levels of
paralysis/muscle weakness. A similar group in the August 2007 study 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.





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.





7





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.




August
2007 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.





·
            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.





8





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 and MAC (M.avium Complex).




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 and
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  ReceptoPharm’s  or Designer Diagnostics’
product liability insurance coverage.





Research
and Development





We had no
research and development related expenses during our Fiscal Years 2007 and
2008.





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.





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.





11





·
            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,





·
            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.





12





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#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





13





#5,663,056
                      
                      Method
      for determining the antimicrobial agent sensitivity of a
      nonparaffinophilic microorganism and an associated
    apparatus#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 u se 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.





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.





14




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 (Biologics) - ReceptoPharm




Competition
is intense among companies that develop and market products based on advanced
cellular and molecular biology. ReceptoPharm competitors, including Amgen,
Aventis, Cephalon, Genetech, Genzyme, Immunex Corp. (a subsidiary of Amgen),
Novartis, Regeneron and Schering-Plough Corp that have far superior financial,
technological and operational resources. We face 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.




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 (Venom Based Drugs) - 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.





15





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:




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.




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





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.





RPI-78M
can be administered orally; however, we have not yet developed an orally
administered RPI-78M. RPI-78M has been routinely delivered by injection in a
manner similar to insulin, but research over the past two years has given rise
to administration by mouth.  Oral delivery presents patients with
additional “quality of life” benefits by eliminating or decreasing the
requirements for routine injections.  Should we receive adequate
funding, we plan to develop an orally administered RPI-78M by initiating new
trials with an oral version of that drug.





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 competitors are
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.





16





Item
1A.  Risk Factors





As a
Smaller Reporting Company, we are not required to provide information required
by this item; however, we have listed risk factors to our operations that appear
in our Forward Looking Statement disclosure on page 3.


Item
1B. Unresolved Staff Comments
  None
  Item
2. Properties




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 2010; (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.




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 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 us from further use of license products that was granted to it 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. On April 28,
2008, the Court (i) granted us a Cross Motion for Summary Judgment; (ii)
declared Bio Therapeutics Amended Motion for Summary Judgment moot; and (iii)
denied Bio Therapeutics Motion to Enforce a Settlement Agreement.




Patricia Meding, et. al. v.
ReceptoPharm, Inc. f/k/a Receptogen, Inc.




There are
no other legal proceedings that occurred during our Fiscal Year 2008 that are
reportable.




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





There
were no matters submitted during the fourth quarter of 2008 for a vote of our
security holders through the solicitation of proxies or otherwise.





PART
II





Item
5. Market
for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases
of Equity Securities




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.




2007
      Fiscal Year
                                          
                                          
                                          2008
      Fiscal YearHigh
      Bid
                                          
                                          
                                          Low
      Bid
                                          
                                          
                                          High
      Bid
                                          
                                          
                                          Low
      BidFirst
      Quarter
                                          
                                          $
                                          .13
                                          
                                          
                                          $
                                          .09
                                          
                                          
                                          $
                                          .05
                                          
                                          
                                          $
                                          .02Second
      Quarter
                                          
                                          $
                                          .10
                                          
                                          
                                          $
                                          .07
                                          
                                          
                                          $
                                          .06
                                          
                                          
                                          $
                                          .03Third
      Quarter
                                          
                                          $
                                          .07
                                          
                                          
                                          $
                                          .05
                                          
                                          
                                          $
                                          .05
                                          
                                          
                                          $
                                          .03Fourth
      Quarter
                                          
                                          $
                                          .05
                                          
                                          
                                          $
                                          .03
                                          
                                          
                                          $
                                          .04
                                          
                                          
                                          $
                                          .02





17





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





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, 2009, based upon records obtained from our transfer agent, there were
274 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.




Equity
Compensation Plan Information





Securities
authorized per issuance under Equity Compensation Plans as of December 31,
2008.





18





Equity
      Compensation Plan InformationPlan
      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
                                            
                                            17,005,000Total
                                            
                                            13,000,000
                                            
                                            $
                                            0.59
                                            
                                            17,005,000




The
figures contained in the above chart are composed of our 2003 and 2007 Employee
/Consultant Stock Compensation Plans and three (3) option and warrant related
agreements we have with two corporate entities and our former Chairman of the
Board/Executive Chairman, as follows:




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, 2008, 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 our common stock.




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 the
grant.




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 our Executive Chairman
and Chairman of the Board. Concurrently, we also retained Doherty & Company
to act as our agent in connection with prospective private capital-raising
activities. On April 1, 2006, we and Mr. Doherty entered into a termination
agreement whereby Mr. Doherty agreed to resign his position as our Chairman of
Board and Executive Chairman. 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.





19




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





There
were no sales of unregistered securities during our fourth quarter ending
December 31, 2008.  We reported all prior unregistered securities
sales on Forms 10Q and Forms 8-K during our Fiscal Year 2008.





We did
not repurchase any of our securities during our 2008 Fiscal Year nor have we
done so since our inception.




Item
6. Selected Financial Data
  As
a Smaller Reporting Company, we are not required to provide information required
by Item 6.




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





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, 2008
since we have experienced recurring net losses and at December 31, 2008
have a working capital deficiency. Further, as stated in Note 1 to our
consolidated financial statements for the year ended December 31, 2008, we have
experienced significant losses from operations totaling $164,951 and $4,162,108
for the years ended December 31, 2007 and 2008, respectively and had an
accumulated deficit of $24,271,202 for the period from our inception to December
31, 2008. We had a working capital and stockholders’ deficit at December 31,
2008 of $2,574,408 and $2,556,334, respectively. Our operations have been
largely reliant upon receiving loans from our Chief Executive Officer. At
December 31, 2008 and at April 10, 2009, we were indebted to our Chief Executive
Officer in the amount of $1,255,448 and $1,544,448, 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.





Uncertainties and
Trends




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


·
              Whether we successfully
      developand
      commercialize theproducts from our
      research and development
activities.




·
            If we fail to compete effectively
      in the intensely competitive biotechnologyarea, ouroperationsand market position will be negatively
      impacted.




·
            If wefail to successfully executeour plannedpartnering and out-licensing of
      products or technologies,our future performancewillbe adversely
      affected.




·
            The recenteconomic downturn and related
      credit and financial market crisis may adversely affect ourability to obtain financing,
      conduct our operations and realize opportunities to successfully bring our
      technologies to market.




·
              Biotechnology industryrelated litigationis substantial and may continue
      to rise, leading to greater costs and possible unpredictable
      litigation.




·
            If we fail to comply with
      extensive legal/regulatory requirements affecting
      the healthcare industry, wewill face increased costs, and
      possiblypenalties
      andbusiness losses.




Off-balance Sheet
Arrangements





We do not
have any off-balance sheet arrangements that would have any current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources.





20





PLAN OF
OPERATIONS





Pending
adequate financing, we plan on spending total estimated expenses of $2,575,000
for the next 12 months, which will include: (a) $380,000 pertaining directly to
our operations; (b) $120,000 pertaining to the operations of our subsidiary,
Designer Diagnostics and (c) $2,075,000 pertaining to the operations of our
subsidiary, ReceptoPharm. 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.




EXPENSES
PERTAINING TO OUR OPERATIONS




Type
      of Expenditure
                    
                    Total
                      Expenditure
                    
                    
                    Monthly
                      ExpenditureSalaries*
                    
                    $
                    175,000
                    
                    
                    $
                    14,583Travel
      related expenses for our Chief Executive Officer pertaining to research
      and due diligence
                    
                    
                    40,000
                    
                    
                    
                    3,333Professional
      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 RECEPTOPHARM, INC.





Type
      of Expenditure
                    
                    Total
                      Expenditure
                    
                    
                    Monthly
                      ExpenditureSalaries
                    
                    $
                    350,000
                    
                    
                    $
                    29,167Clinical
      Trial expenses
                    
                    
                    1,045,000
                    
                    
                    
                    87,083R
      & D Expenses
                    
                    
                    394,000
                    
                    
                    
                    32,833Cost
      of raw materials and production
                    
                    
                    236,000
                    
                    
                    
                    19,667Operating
      Expenses (Rent, Supplies, Utilities, etc..)
                    
                    
                    50,000
                    
                    
                    
                    4,167Total
                    
                    $
                    2,075,000
                    
                    
                    $
                    172,917





FUNDING
OF DESIGNER DIAGNOSTICS, INC.





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





21





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 Sclerosis (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




(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.




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





22





·
            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.




·
            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).





23





·
            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.




·
            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.





24




·
              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.
 
 ·
              During July 2008, ReceptoPharm
      successfully completed the Phase IIb/IIIIa clinical trial or its drug
      candidate for neurological and autoimmune disorders, RPI-78M as a
      treatment for AMN.
 
 ·
              During August 2008, ReceptoPharm
      renewed its collaborative agreement with the Centers for Disease Control
      and Prevention to study RPI-78M and RPI-MN for a possible therapy for
      Rabies.
 
 ·
              During August 2008, ReceptoPharm
      reported initial positive safety data from its Phase IIb/IIIIa clinical
      study of RPI-78M for treating
AMN.
 
 ·
              During November 2008, we
      announced that ReceptoPharm will provide RPI-78M under compassionate
      release to patients previously enrolled in the Phase IIb/IIIa clinical
      study of AMN.
 
 ·
              During December 2008, we
      announced that ReceptoPharm has received an agreement from an Ireland
      based biotechnology firm, Celtic Biotech, Ltd, to provide GMP certified
      drug production of CB-24 for Celtic Biotech’s upcoming European trial for
      the treatment of cancer
 
 ·
              After our 2008 Fiscal Year end,
      in February 2009, ReceptoPharm filed a patent application with the United
      States Patent and Trademark Office for the use of RPI-78 as a novel method
      for treating arthritis in
humans.
 
 ·
              After our 2008 Fiscal Year end,
      in February 2009, ReceptoPharm, in collaboration with Soochow University
      in China published positive data from its recent animal studies on the use
      of RPI-78 (Cobratoxin) as a method for treating
      arthritis.
 
 ·
              After our 2008 Fiscal year end,
      in March 2009, ReceptoPharm’s clean room manufacturing and laboratory
      facility achieved ISO class 5 certification from Biotec, a UK-based firm
      specializing in European clinical drug import and
      dstribution.




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.





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;





25





·
            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 with limited sales throughout 2007 and 2008. Our
sales efforts during 2007 and 2008 have been inhibited by the necessity for FDA
validation prior to active marketing in United States based markets. These
markets include the CDC (Centers for Disease Control and Prevention) and the WHO
(World Health Organization). Researchers at National Jewish Hospital in Denver,
Colorado who are currently validating Designer Diagnostics’ TB and NTM Test
Kits. This research has been protracted due to budget restrictions at the
hospital as well as our own limited funding. We currently anticipate the
completion of this research and regulatory filing by the fourth quarter of
2009.




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. 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.




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.  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.




We have
estimated expenses of $2,575,000 pertaining to our twelve month Plan of
Operations or $214,583 of monthly expenditures. Based on our current cash
position, we do not have enough funds to accomplish our operational plan. 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.





26





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.




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
7A Quantitative and Qualitative Disclosures About Market Risk
 
 Inapplicable.  We
have no investments in market risk sensitive instruments or in any other type
securities.


Item
8.  Financial Statements and Supplementary Data





The
information required by this item is included in pages F-1 to F-17 attached
hereto and incorporated herein by reference.  The index to our annual
financial statements as of and for the years ended December 31, 2008 and 2007
can be found under Item 13.




Item
9.  Changes in Disagreements With Accountants on Accounting and
Financial Disclosure





None





27





Item
9A. Controls and Procedures





Section 1.





Evaluation
of Disclosure Controls and Procedures:





We
maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act that are designed to insure that information
required to be disclosed in the reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the periods specified in
the Securities and Exchange Commission’s rules and forms and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer/Chief Financial Officer, or the persons performing
similar functions, to allow timely decisions regarding required
disclosure.  Under the supervision and participation of our Chief
Executive Officer/Chief Financial Officer, or the persons performing similar
functions, our management has evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this annual
report. Based on that evaluation, our Chief Executive Officer/Chief Financial
Officer, or the persons performing similar functions, concluded that our
disclosure controls and procedures were ineffective as of December 31,
2008.  We have taken the following initial steps and will continue to
take more steps to strengthen our disclosure controls and procedures, to
evaluate and to remedy deficiencies and to test these procedures and controls on
an ongoing basis: (a) we are seeking to hire a Chief Financial Officer, or an
employee who will perform the functions of a Chief Financial Officer, who will
strengthen the disclosure controls and procedures by implementing procedures
that enhance recording, processing, summarizing and reporting within the time
periods specified in the Commission’s rules and forms, simplifying certain
accounting procedures, arrange for training of our accounting personnel that
will be beneficial to strengthening our disclosure controls, expand our
documentation of accounting transactions and related reviews, improving the
timeliness and quality of financial reports to management, and improving the
communications between our accounting/finance department and all sectors of our
business;  and (b) we will increase our use of outside advisors to
improve our quality of disclosure.





Section
2.





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is the process designed by and under the supervision of our Chief Executive
Officer/Chief Financial Officer, or the persons performing similar functions, to
provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our financial statements for external reporting
in accordance with accounting principles generally accepted in the United States
of America. Management has evaluated the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
over Financial Reporting - Guidance for Smaller Public Companies .Under the
supervision and with the participation of our Chief Executive Officer/Chief
Financial Officer or the persons performing similar functions, our management
has assessed the effectiveness of our internal control over financial reporting
as of December 31, 2008 and concluded that it is effective.  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 the Company’s 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.





Evaluation of Changes in Internal
Control over Financial Reporting





Under the
supervision and with the participation of our Chief Executive Officer/Chief
Financial Officer, or those persons performing similar functions, our management
has evaluated changes in our internal controls over financial reporting that
occurred during the fourth quarter of 2008. Based on that evaluation, our Chief
Executive Officer/Chief Financial Officer, or those persons performing similar
functions, did not identify any change in our internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.





Important
Considerations





The
effectiveness of our disclosure controls and procedures and our internal control
over financial reporting is subject to various inherent limitations, including
cost limitations, judgments used in decision making, assumptions about the
likelihood of future events, the soundness of our systems, the possibility of
human error, and the risk of fraud. Moreover, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions and the risk that the degree of
compliance with policies or procedures may deteriorate over time. Because of
these limitations, there can be no assurance that any system of disclosure
controls and procedures or internal control over financial reporting will be
successful in preventing all errors or fraud or in making all material
information known in a timely manner to the appropriate levels of
management.





Item
9B. Other Information





In
conjunction with Item 9A above (Evaluation of Controls and Procedures),
specifically the evaluation of our disclosure controls and procedures, since
March 2008 we have interviewed several qualified candidates for the position of
Chief Financial Officer; however, we have been unable to come to acceptable
terms with any such candidate to become our Chief  Financial
Officer.   We will continue our efforts to hire a qualified Chief
Financial Officer on acceptable terms.  With respect to additional
outside advisers, we also have been unable to come to acceptable terms with
additional such advisor candidates, in large part due to our inability to obtain
sufficient funding.





28





PART
III





Item
10. 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,
2008




Name
                        
                        Age
                        
                        Position
      with the
                          Company
                        
                        Director
      SinceRik
      J. Deitsch
                        
                        41
                        
                        Chairman,
      President, Chief Executive Officer, and Chief Financial
      Officer
                        
                        2002Stanley
      J Cherelstein
                        
                        50
                        
                        Director
      (1)
                        
                        2004Stewart
      Lonky, M.D.
                        
                        61
                        
                        Director
      (2)
                        
                        2004Paul
      F. Reid
                        
                        45
                        
                        Director
      (3)
                        
                        April
      2008Harold
      H. Rumph
                        
                        79
                        
                        Director
      (3)
                        
                        April
      2008




(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
      April 10 2008, in conjunction with our April 10, 2008 merger with
      ReceptoPharm and ReceptoPharm becoming our wholly owned subsidiary, our
      Board of Directors appointed Paul F. Reid and Harold Rumph as our
      Directors.




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.





29





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 Coopers 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.




Dr. Stewart Lonky has been our
director since November 5, 2004. Dr. Lonky is a co-founder of the Tryon
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.





Paul F. Reid, PhD,became our
Director on April 10, 2008 when ReceptoPharm became our wholly owned
subsidiary.  From June 2001 to present, Paul F. Reid, PhD has been the
Chief Executive Officer of ReceptoPharm, our wholly owned subsidiary as of April
10, 2008.  From August 1996 to April 2001, Dr. Reid was the Head of
Scientific Affairs for Biotherapeutics,, Inc., a biotechnology company located
in Fort Lauderdale, Florida.  In 1987, Dr. Reid received a Bachelor of
Arts Degree in Microbiology from Trinity College in Dublin,
Ireland.  In 1993, Dr. Reid received a PhD Degree in
Neurobiochemtistry from the Imperial College in London, England.





Harold H.Rumph became our Director on
April 10, 2008 when ReceptoPharm became our wholly owned
subsidiary.  From May 2003 topresent, Harold H. Rumph
has been the President/Director of ReceptoPharm, Inc., a biotechnology company
located in Plantation, Florida. From September 1988 to April 2003, Mr. Rumph was
the President/Founder of Project Scheduling Services, Inc., a computerized
scheduling services company to the construction industry, located in Pompano
Beach, Florida. From 1962 to 1988, Mr. Rumph held managerial, marketing , and
other positions with IBM, RCA, Xerox , Harris Corporation and was a founder and
President of Biogenix, Inc., a biotechnology company located in Boca Raton,
Florida. From 1953 to 1962, Mr. Rumph served on active duty with various
responsibilities including Tactical Fighter Pilot and at Headquarters United
States Air Force Intelligence with the United States Air Force. In 1953, Mr.
Rumph received a Bachelor of Science Degree in Military Science from the United
States Naval Academy in Annapolis Maryland.




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.





30





Section
16(a) Compliance of Officers and Directors




Based on
our review of Forms 3, 4, 5, and Schedule 13D furnished to us during the last
fiscal year, all of our officers and directors have failed to file certain
reports required of them to be filed pursuant to Section 16(a) of the Exchange
Act, but plan to do so within four weeks of the filing of this Form
10-K.





Corporate
Governance:





a.
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 2008 Fiscal Year, our Audit Committee met three
(3) times, the last committee meeting of which occurred on November 18,
2008  in connection with our 2008 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 2008 Fiscal year, our Compensation Committee
met one (1) time during March 2008.   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.





b.
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.





c.
Board of Director Meetings.





We had
four (4) Board of Directors meetings during our 2008 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.





d.
Annual Shareholder Meetings





We held
no annual shareholder meeting during 2008.





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





31





e. 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
11: Executive Compensation




Thefollowing 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, 2008 and 2007.




SUMMARY
COMPENSATION TABLE




Name
      and principal position
                                  
                                  Year
                                  
                                  Salary
      ($)
                                  
                                  
                                  Bonus
      ($)
                                  
                                  
                                  Stock
                                    Awards ($)
                                  
                                  
                                  Option
                                    Awards ($)
                                  
                                  
                                  Non- Equity
                                    Incentive
                                    Plan
                                    Compensation ($)
                                  
                                  
                                  Nonqualified
                                    Deferred
                                    Compensation
                                    Earnings ($)
                                  
                                  
                                  AllOther
                                    Compensation
                                    ($)
                                  
                                  
                                  Total
                                    ($)Rik Deitsch
                                  
                                  2008
                                  
                                  
                                  130,000
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  125,000
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  255,000Chief
      Executive Officer, ChiefFinancial Officer, President
      and Chairman of the Board
                                  
                                  2007
                                  
                                  
                                  130,000
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  130,000




Compensation
of Directors




The
following director compensation disclosure reflects all compensation awarded to,
earned by or paid to the directors below for the fiscal year ended December 31,
2008.





DIRECTOR
COMPENSATION





Non-Equity
                
                NonqualifiedFees
      Earned
                  or
      Paid in
                
                Stock
                
                Option
                
                Incentive
                  Plan
                
                Deferred
                  Compensation
                
                All
      OtherCash
                
                Awards
                
                Awards
                
                Compensation
                
                Earnings
                
                Compensation
                
                TotalName
                
                ($)
                
                ($)(1)
                
                ($)
                
                ($)
                
                ($)
                
                ($)
                
                ($)Rik
      Deitsch
                
                
                
                
                125,000
                
                
                
                
                
                
                
                
                
                
                125,000Stan
      J Cherlelstein
                
                
                
                
                62,500
                
                
                
                
                
                
                
                
                
                
                62,500Stewart
      Lonky
                
                
                
                
                62,500
                
                
                
                
                
                
                
                
                
                
                62,500




(1)
            The
      common stock awards reflected above to Directors Deitsch, Cherelstein and
      Lonky were awarded on March 13,
2008.





32




Director
Compensation




There
are no standard arrangements to which directors are compensated for services
provided to us.  Should we obtain adequate funding or sufficient
revenues to justify standard arrangements for director compensation, we will
consider whether to adopt such a compensation plan.




Stock Option Grants in Last Fiscal
Year




We
did not grant incentive and non-qualified stock options in 2008 to any executive
officer or director.




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




The
following tables sets forth, as of March 31, 2009, 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 211,276,482
shares issued and outstanding as of March 31, 2009.




Security
Ownership of Beneficial Owners




Name
      and Address of Beneficial Owner
                              
                              Shares
      of Common
                                Stock
                                Beneficially
      Owned
                              
                              Percent
      of
                                CommonStock
                                OutstandingOpus
      International*
                                19
      Hillsyde Court
                                Cockeysville,
      Maryland 21030
                              
                              
                              11,692,556
                              
                              5.5
                              %Total
                              
                              
                              11,692,556
                              
                              5.5
                              %




*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.  Throughout our Fiscal Year 2008, we have made repeated attempts
to contact the principals of Clarisco Stiftung; however, they have failed to
respond in any manner.  Although we have been unable to obtain any
additional information regarding the status of this matter, we will continue our
efforts to do so.





33




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
                                                                                                                                          
                                                                                                                                          25.8
                                                                                                                                          %Stanley
      J CherelsteinDirector791
      Park of Commerce Blvd. Suite 300Boca
      Raton, Florida 33487
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          3,000,000
                                                                                                                                          
                                                                                                                                          1.4
                                                                                                                                          %Dr.
      Stewart LonkyDirector1158
      Chautaqua BoulevardPacific
      Palisades, California 90272
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          3,000,000
                                                                                                                                          
                                                                                                                                          1.4
                                                                                                                                          %Paul
      F. ReidDirector1537
      NW 65th
      AvePlantation,
      FL 33313
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          7,000,000
                                                                                                                                          
                                                                                                                                          3.3
                                                                                                                                          %Harold
      RumphDirector1537
      NW 65th
      AvePlantation,
      FL 33313
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          4,400,000
                                                                                                                                          
                                                                                                                                          2.1
                                                                                                                                          %All
      executive officers and directors as a group (5) persons
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          71,900,000
                                                                                                                                          
                                                                                                                                          34.0
                                                                                                                                          %





34




Item
13. Certain Relationships and Related Transactions, and Director
Independence


Loans
by our Chief Executive Officer to Us





At
December 31, 2007, we owed our President, Rik Deitsch $1,944,414 for demand
loans Mr. Deitsch made to us.  This amount included $105,039 of accrued
interest.





On March
14, 2008, our Board of Directors approved Mr. Deitsch’s offer to discharge
$1,200,000 of our outstanding loan in exchange for 48,000,000 shares of
restricted common stock issued to Mr. Deitsch.  The price per share in this
loan conversion was $0.025.





During
the year ended December 31, 2008, Mr. Deitsch loaned us an additional
$464,000.  The balance owed to Mr. Deitsch at December 31, 2008 was
$1,255,448, which includes accrued interest of $152,073.  This demand loan
is unsecured and bears interest at a rate of 4.0%.





From
January 1, 2009 through April 10, 2009, Mr. Deitsch loaned us an additional
$289,000 for working capital purposes.  As a result of these
additional loans and accrued interest from January 1, 2009 through March 31,
2009, we owed Mr. Deitsch $1,544,448 as of April 10, 2009.





Verbal
Lease Agreement between Stan Cherelstein, Waiora, Inc.’s President who is our
Director and Us




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 2010; (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.




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.




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 2008 and 2007 Fiscal Years, we paid Stark Winter Schenkein & Co.
audit fees as follows:
 
 2008
                                    
                                    2007$40,500
                                    
                                    $37,900
  TAX
FEES
  No such
fees were paid to Stark Winter Schenkein & Co. in 2007 or 2008.
  ALL OTHER
FEES
  No such
fees were paid to Stark Winter Schenkein & Co. in 2007 or
2008.


PART
IV
  Item
15. Exhibits and Financial Statement Schedules


(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)





35





10.18
                
                Patent
      Assignment Agreement dated January 24, 2006 between Nanologix, Inc. and
      Nutra Pharma Corp. (incorporated by reference to Form 10-K for period
      ending December 31, 2006)10.19
                
                International
      License Agreement between NanoLogix, Inc. and Nutra Pharma Corp.
      (incorporated by reference to Form 10-K for period ending December 31,
      2006)14.1
                
                Code
      of Ethics (incorporated by reference to Report on Form 10-K/A filed on May
      7, 2004).21.1
                
                Subsidiaries
      of the Registrant, 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 2002.99.1
                
                Form
      8-K filed on April 14, 2008 under Item 1.01 regarding acquisition of
      ReceptoPharm, Inc. as Nutra Pharma Corp.'s wholly owned subsidiary and
      Exhibit 10.1 (April 10, 2008 Agreement and Plan of Merger) attached
      thereto (incorporated by reference to this Form 10-K for the period ending
      December 31, 2008).







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:
April 15, 2009




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.





36





Signature
                                          
                                          Title
                                          
                                          Date/s/ Rik
      J. Deitsch
                                          
                                          Chairman
      of the Board, President,
                                            Chief
      Executive Officer and Chief Financial Officer
                                          
                                          April
      15,  2009Rik
      J. Deitsch/s/
      Stanley Cherelstein
                                          
                                          Director
                                          
                                          April
      15,  2009Stanley
      Cherelstein/s/
      Stewart Lonky
                                          
                                          Director
                                          
                                          April
      15,  2009Stewart
      Lonky





/s/
      Paul F. Reid
                            
                            Director
                            
                            April
      15,  2009Paul
      Reid/s/
      Harold H. Rumph
                            
                            Director
                            
                            April
      15,  2009Harold
      H. Rumph





37


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Stockholders
and Board of Directors
 Nutra
Pharma Corp.
 
 We have
audited the accompanying consolidated balance sheets of Nutra Pharma Corp. (a
Development Stage Company) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ (deficit)and cash flows for
the years ended December 31, 2008 and 2007, and the period from inception
(February 1, 2000) through December 31, 2008. 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, 2008. 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  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, 2008 and 2007, and results of its operations and its cash flows for
the years ended December 31, 2008 and 2007, and for period from inception
(February 1, 2000) through December 31, 2008, 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 13,
2009
  F-1




NUTRA
PHARMA CORP.
 (A
Development Stage Company)
 Consolidated
Balance Sheets
 
 December 31,
                  
                  
                  December 31,2007
                  
                  
                  2008ASSETSCurrent
      assets:Cash
                  
                  $
                  122,810
                  
                  
                  $
                  50,910Inventory
                  
                  
                  11,425
                  
                  
                  
                  10,770Prepaid
      expenses
                  
                  
                  -
                  
                  
                  
                  27,468Total
      current assets
                  
                  
                  134,235
                  
                  
                  
                  89,148Property
      and equipment, net
                  
                  
                  -
                  
                  
                  
                  9,941Other
      assets
                  
                  
                  9,950
                  
                  
                  
                  8,133TOTAL
      ASSETS
                  
                  $
                  144,185
                  
                  
                  $
                  107,222LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
                  
                  $
                  22,497
                  
                  
                  $
                  156,399Accrued
      expenses
                  
                  
                  30,000
                  
                  
                  
                  849,856Due
      to officers
                  
                  
                  1,944,414
                  
                  
                  
                  1,557,301Other
      loans payable
                  
                  
                  100,000
                  
                  
                  
                  100,000Total
      current liabilities
                  
                  
                  2,096,911
                  
                  
                  
                  2,663,556Stockholders'
      deficit:Common
      stock, $0.001 par value, 2,000,000,000 shares authorized; 211,276,482 and
      81,895,682 shares issued and outstanding, respectively
                  
                  
                  81,896
                  
                  
                  
                  211,277Additional
      paid-in capital
                  
                  
                  18,074,472
                  
                  
                  
                  21,503,591(Deficit)
      accumulated during the development stage
                  
                  
                  (20,109,094
                  )
                  
                  
                  (24,271,202
                  )Total
      stockholders' deficit
                  
                  
                  (1,952,726
                  )
                  
                  
                  (2,556,334
                  )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                  
                  $
                  144,185
                  
                  
                  $
                  107,222
 
 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 31,2007
                      
                      
                      2008
                      
                      
                      2008Sales
                      
                      $
                      -
                      
                      
                      $
                      4,045
                      
                      
                      $
                      24,245Cost
      of sales
                      
                      
                      -
                      
                      
                      
                      1,057
                      
                      
                      
                      4,529Gross
      profit
                      
                      
                      -
                      
                      
                      
                      2,988
                      
                      
                      
                      19,716Costs
      and expenses:General
      and administrative
                      
                      
                      566,921
                      
                      
                      
                      1,209,792
                      
                      
                      
                      8,153,185Research
      and development
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,740,237General
      and administrative - stock based compensation
                      
                      
                      603,050
                      
                      
                      
                      500,000
                      
                      
                      
                      7,429,657Write-off
      of advances to potential acquiree
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      629,000Finance
      costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      786,000Interest
      expense
                      
                      
                      76,075
                      
                      
                      
                      57,555
                      
                      
                      
                      453,614Amortization
      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
                      )Write-off
      of goodwill
                      
                      
                      -
                      
                      
                      
                      2,397,749
                      
                      
                      
                      2,397,749Total
      costs and expenses
                      
                      
                      164,951
                      
                      
                      
                      4,165,096
                      
                      
                      
                      24,290,918Net
      loss
                      
                      $
                      (164,951
                      )
                      
                      $
                      (4,162,108
                      )
                      
                      $
                      (24,271,202
                      )Per
      share information - basic and diluted:Loss
      per common share
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.03
                      )Weighted
      average common shares outstanding
                      
                      
                      77,113,846
                      
                      
                      
                      164,732,760
 
 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, 2008
 
 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 party in 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 employee for 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
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (647,939
                      )
                      
                      
                      -
                      
                      
                      
                      (647,939
                      )Issuance
      of common stock in exchange for services - $0.07 per share
                      
                      
                      8,615,000
                      
                      
                      
                      8,615
                      
                      
                      
                      594,435
                      
                      
                      
                      -
                      
                      
                      
                      603,050Common
      shares issued for cash -$0.025 per share
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      120,000
                      
                      
                      
                      -
                      
                      
                      
                      120,000Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (164,951
                      )
                      
                      
                      (164,951
                      )Balance
      - December 31, 2007
                      
                      
                      81,895,682
                      
                      
                      
                      81,896
                      
                      
                      
                      18,074,472
                      
                      
                      
                      (20,109,094
                      )
                      
                      
                      (1,952,726
                      )Issuance
      of shares subscribed for at December 31, 2007
                      
                      
                      4,800,000
                      
                      
                      
                      4,800
                      
                      
                      
                      (4,800
                      )
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of common stock for repayment of loan - $0.025 per share
                      
                      
                      48,000,000
                      
                      
                      
                      48,000
                      
                      
                      
                      1,152,000
                      
                      
                      
                      -
                      
                      
                      
                      1,200,000Issuance
      of common stock in exchange for services - $0.025 to $0.03 per
      share
                      
                      
                      19,500,000
                      
                      
                      
                      19,500
                      
                      
                      
                      480,500
                      
                      
                      
                      -
                      
                      
                      
                      500,000Common
      shares issued for cash -$0.025 per share
                      
                      
                      32,340,000
                      
                      
                      
                      32,340
                      
                      
                      
                      776,160
                      
                      
                      
                      -
                      
                      
                      
                      808,500Issuance
      of common stock in connection with acquisition of
    ReceptoPharm
                      
                      
                      30,000,000
                      
                      
                      
                      30,000
                      
                      
                      
                      1,020,000
                      
                      
                      
                      -
                      
                      
                      
                      1,050,000Reclass
      shares subscribed for but not yet issued - ReceptoPharm
                      
                      
                      (5,259,200
                      )
                      
                      
                      (5,259
                      )
                      
                      
                      5,259
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (4,162,108
                      )
                      
                      
                      (4,162,108
                      )Balance
      - December 31, 2008
                      
                      
                      211,276,482
                      
                      
                      $
                      211,277
                      
                      
                      $
                      21,503,591
                      
                      
                      $
                      (24,271,202
                      )
                      
                      $
                      (2,556,334
                      )
 
 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 31,2007
                              
                              
                              2008
                              
                              
                              2008Cash
      flows from operating activities:Net
      loss
                              
                              $
                              (164,951
                              )
                              
                              $
                              (4,162,108
                              )
                              
                              $
                              (24,271,202
                              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      of intangibles
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              656,732Amortization
      of license agreement
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              155,210Depreciation
                              
                              
                              -
                              
                              
                              
                              6,394
                              
                              
                              
                              71,094Write-off
      of advances to potential acquiree
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              629,000Deconsolidation
      of ReceptoPharm
                              
                              
                              (1,252,244
                              )
                              
                              
                              -
                              
                              
                              
                              (1,252,244
                              )Stock-based
      compensation
                              
                              
                              603,050
                              
                              
                              
                              500,000
                              
                              
                              
                              9,538,403Finance costs in
      connection with conversion of stockholder
      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
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              175,000Impairment
      of goodwill - ReceptoPharm
                              
                              
                              
                              
                              
                              
                              2,397,749
                              
                              
                              
                              2,397,749Non-cash
      interest expense
                              
                              
                              
                              
                              
                              
                              57,555
                              
                              
                              
                              372,833Changes
      in operating assets and liabilities:Decrease
      (increase) in inventory
                              
                              
                              
                              
                              
                              
                              655
                              
                              
                              
                              (10,770
                              )Decrease
      (increase) in prepaid expenses
                              
                              
                              
                              
                              
                              
                              (17,518
                              )
                              
                              
                              (17,518
                              )Decrease
      (increase) in other assets
                              
                              
                              30,644
                              
                              
                              
                              -
                              
                              
                              
                              (6,316
                              )Increase
      (decrease) in accounts payable
                              
                              
                              (21,866
                              )
                              
                              
                              (39,279
                              )
                              
                              
                              101,427Increase
      (decrease) in accrued expenses
                              
                              
                              
                              
                              
                              
                              280,458
                              
                              
                              
                              740,627Net
      cash (used in) operating activities
                              
                              
                              (805,367
                              )
                              
                              
                              (976,094
                              )
                              
                              
                              (6,664,206
                              )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
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3,004Cash
      acquired in acquisition of ReceptoPharm
                              
                              
                              -
                              
                              
                              
                              40,444
                              
                              
                              
                              40,444Acquisition
      of property and equipment
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (96,029
                              )Loan
      to ReceptoPharm
                              
                              
                              
                              
                              
                              
                              (300,000
                              )
                              
                              
                              (300,000
                              )Investments
      carried at cost
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (235,000
                              )Net
      cash (used in) investing activities
                              
                              
                              (1,754
                              )
                              
                              
                              (259,556
                              )
                              
                              
                              (592,332
                              )Cash
      flows from financing activities:Common
      stock issued for cash
                              
                              
                              120,000
                              
                              
                              
                              808,500
                              
                              
                              
                              3,608,000Proceeds
      from convertible loans
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              304,750Proceeds
      from notes payable
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              100,000Repayment
      of stockholder loans
                              
                              
                              -
                              
                              
                              
                              (108,750
                              )
                              
                              
                              (108,750
                              )Loans
      from stockholders
                              
                              
                              791,039
                              
                              
                              
                              464,000
                              
                              
                              
                              3,403,448Net
      cash provided by financing activities
                              
                              
                              911,039
                              
                              
                              
                              1,163,750
                              
                              
                              
                              7,307,448Net
      increase (decrease) in cash
                              
                              
                              103,918
                              
                              
                              
                              (71,900
                              )
                              
                              
                              50,910Cash
      - beginning of period
                              
                              
                              18,892
                              
                              
                              
                              122,810
                              
                              
                              
                              -Cash
      - end of period
                              
                              $
                              122,810
                              
                              
                              $
                              50,910
                              
                              
                              $
                              50,910Supplemental
      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
                              
                              $
                              -
                              
                              
                              $
                              1,200,000
                              
                              
                              $
                              1,406,750Expenses
      paid by stockhoder
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              119,140Value
      of common stock issued for the acquisition of ReceptoPharm
                              
                              $
                              -
                              
                              
                              $
                              1,050,000
                              
                              
                              $
                              1,050,000
 
 See the
accompanying notes to the financial statements.
  F-5


NUTRA
PHARMA CORP.
 (A
Development Stage Company)
 Notes
to Consolidated Financial Statements
 December
31, 2008 and 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
$4,162,108 and $164,951 for the years ended December 31, 2008 and 2007, and has
an accumulated deficit of $24,271,202 for the period from inception to December
31, 2008. In addition, the Company had working capital and stockholders’
deficits at December 31, 2008 of $2,574,407 and $2,556,333 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 2). The Company also consolidated ReceptoPharm Inc.
during the period from February 1, 2004 through March 31, 2007, and April 16,
2008, to December 31, 2008 (see Note 3).
 
 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, 2008 and 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.
 
 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.
  F-7
 
 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.
 
 Recent
Accounting Pronouncements
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115” (“SFAS 159”).  SFAS 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 SFAS 159 will become effective as
of the beginning of the 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 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 financial
statements.
  F-8
  In
February 2008, FASB Staff Position (FSP) No. 157-2, “Effective Date of
FASB Statement No. 157” was issued. FSP No. 157-2 defers the effective
date of SFAS No. 157 to fiscal years beginning after December 15,
2008, and interim periods within those fiscal years, or all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Examples of
items within the scope of FSP No. 157-2 are non-financial assets and
non-financial liabilities initially measured at fair value in a business
combination (but not measured at fair value in subsequent periods), and
long-lived assets, such as property, plant and equipment and intangible assets
measured at fair value for an impairment assessment under SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” The partial
adoption of SFAS 157 on February 1, 2008, with respect to financial assets and
financial liabilities recognized or disclosed at fair value in the financial
statements on a recurring basis, is not expected to have a material effect on
the Company’s consolidated financial statements. The Company is currently
assessing the impact, if any, of SFAS No. 157 relating to its planned
February 1, 2009, adoption of the remainder of the standard.
  In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities-an Amendment of FASB Statement
No. 133”, which became effective on November 15, 2008. This standard
changed the disclosure requirements for derivative instruments and hedging
activities.  Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations, and (c) how derivative instruments and
related hedging items affect an entity’s financial position, financial
performance, and cash flows. The adaptation of this standard had no material
impact on the Company’s financial statements.
  In
April 2008, the FASB issued FASB Staff Position (FSP) FSP 142-3,
“Determination of the Useful Life of Intangible Assets.” This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, “Goodwill and Other Intangible Assets.” The intent of
this FSP if to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows to
measure the fair value of the asset under FASB Statement No. 141 (Revised
2007), “Business Combinations,” and other U.S. generally accepted accounting
principles (GAAP). This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. The Company does not expect
the adoption of FAS 142-3 to have a material effect on its results of operations
and financial condition.
  In
May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1
“Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)”. FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008, on a
retroactive basis and will be adopted by the Company in the first quarter of
fiscal 2009. The Company does not expect the adoption of FSP APB 14-1 to have a
material effect on its results of operations and financial
condition.
  In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles,” which becomes effective upon approval by the
SEC. The standard sets forth the sources of accounting principles and provides
entities with a framework for selecting the principles used in the preparation
of financial statements that are presented in conformity with GAAP. It is not
expected to change any of the Company’s current accounting principles or
practices and therefore, is not expected to have a material impact on its
financial statements.
 
 2.
              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.
  F-9
 
 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.
 
 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
 
 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 a maximum of 30,000,000 shares of the Company’s
common stock.  Prior to April 10, 2008, the Company owned 4,444,445 shares
or approximately 38% of ReceptoPharm’s common stock.  As a result of this
transaction, the Company now owns 100% of the issued and outstanding common
stock of ReceptoPharm.
 
 The
exchange ratio in this transaction was four (4) Nutra Pharma shares for each
ReceptoPharm share.
 
 The
Company accounted for this acquisition under the purchase method of
accounting.  The calculation of the total purchase cost is as
follows:
 
 Total
      number of Nutra Pharma shares issued
                      
                      
                      30,000,000Market
      price of Nutra Pharma common stock on April 10, 2008
                      
                      $
                      0.035Value
      of shares issued
                      
                      $
                      1,050,000Loan
      to ReceptoPharm forgiven at closing
                      
                      
                      300,000Liabilities
      of ReceptoPharm assumed at closing
                      
                      
                      1,119,413Total
      purchase cost to be allocated
                      
                      $
                      2,469,413
  F-10
  Allocation
      of purchase cost:Fair
      value of ReceptoPharm assets at closing
                  
                  $
                  71,664Purchase
      cost in excess of fair value of assets acquired
                  
                  
                  2,397,749Total
      purchase cost
                  
                  $
                  2,469,413
 The
purchase cost in excess of the fair value of net assets acquired was recorded as
an goodwill. At December 31, 2008, the Company recorded an impairment charge for
the entire amount of the goodwill.
 
 Had the
acquisition of ReceptoPharm taken place at January 1, 2008 and 2007 the
unaudited consolidated results of operations would have been as
follows:
 
 2008
                    
                    
                    2007Revenue
                    
                    $
                    4,045
                    
                    
                    $
                    -Net
      loss
                    
                    $
                    4,400,389
                    
                    
                    $
                    1,952,852Net
      loss per share
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.03
                    )
 
 As of
December 31, 2008, the Company had issued a total of 24,740,800 shares of its
common stock in exchange for 6,185,200 shares of ReceptoPharm.  The
Company expects to issue the remaining 5,259,200 shares to the ReceptoPharm
shareholders during the 2009.
 
 3.
              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.
 
 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 the fair
market value of the common shares of $0.025.
 
 During
the year ended December 31, 2008, the Company borrowed an additional $464,000
from its President, Rik Deitsch. The balance owed to Mr. Deitsch at December 31,
2008, was $1,255,448 which includes accrued interest of $152,073.
 
 This
demand loan is unsecured and bears interest at a rate of 4.0%.
 
 In
addition, the Company is indebted to two officers of a subsidiary in the amount
of $301,853. These advances are due on demand and bear interest at 5% per
annum.
 
 4.
              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-11
 
 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
beirretrievable, and accordingly, the Companyrecorded a charge to operations of
$23,375 for these sharesin
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
theconversion.  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.
 
 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.
  F-12
 
 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%.
 
 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.
  F-13
 
 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.
 
 From
January 1 through December 31, 2008, the Company completed private placements of
restricted shares of its common stock, whereby it sold an aggregate of
18,440,000 shares at a price per share of $0.025.  The Company
received proceeds of $808,500 in connection with the sale of these
shares.  In addition, the Company granted one (1) warrant for each
share sold which gives the investor the right to purchase one (1) additional
share until December 31, 2012 at an exercise price of $0.10 per
share.
 
 During
March and September 2008 the Company issued an aggregate of 22,300,000 shares of
common stock for services. The shares were valued at their fair market value of
$500,000 which has been charged to operations.
 
 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.
  F-14
 
 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.
 
 5.
              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.
 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.
  F-15
 
 A summary
of stock options is as follows:
 
 Weighted
                                    
                                    
                                    WeightedNumber
                                    
                                    
                                    average
                                    
                                    
                                    averageof
                                    
                                    
                                    exercise
                                    
                                    
                                    fairshares
                                    
                                    
                                    price
                                    
                                    
                                    valueBalance
      at December 31, 2006, 2007 and 2008
                                    
                                    
                                    3,000,000
                                    
                                    
                                    $
                                    .25
                                    
                                    
                                    $
                                    .00
 
 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
                                
                                2.00
      years
                                
                                $
                                .20$
                                .27
                                
                                
                                2,000,000
                                
                                2.25
      years
                                
                                $
                                .273,000,000
 
 All
options are vested and exercisable.
 
 6.
              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, 2008 and 2007. 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 $5,300,000. This loss will be available to offset future taxable
income. If not used, this carry forward will expire through 2028. The deferred
tax asset of approximately $1,800,000 relating to the operating loss carry
forward has been fully reserved at December 31, 2008. The increase in the
valuation allowance related to the deferred tax asset was approximately $400,000
during 2008. The principal difference between the accumulated deficit for income
tax purposes and for financial reporting purposes results from Stock based
compensation of approximately $8,900,000, 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, goodwill impairment of
$2,400,000 and the amortization on intangibles of approximately
$800,000.
  F-16
 
 7.
CONTINGENCIES AND COMMITTMENTS
 
 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.
  On August
18, 2006, ReceptoPharm, our wholly owned subsidiary as of April 2008, was named
as a defendant in Patricia Meding, et. al. v.
ReceptoPharm, Inc. f/k/a Receptogen, Inc., Index No.: 18247/06 (New York
Supreme Court, Queens County). The original proceeding claimed that ReceptoPharm
owed the Plaintiffs, including Patricia Meding, a former ReceptoPharm officer
and shareholder and several corporations that she claims to own, the sum of
$118,928.15 plus interest and counsel fees on a series promissory notes that
were allegedly executed in 2001 and 2002. On August 23, 2007, the Queens County
New York Supreme Court issued a decision denying Plaintiffs motion for summary
judgment in lieu of a complaint, concluding that there were issues of fact
concerning the enforceability of the promissory notes. On May 23, 2008, the
Plaintiffs filed an amended complaint in which they reasserted their original
claims and asserted new claims. The Plaintiffs amended complaint seeks damages
of no less than $768,506 on their claims, and now alleges that in or about June
2004 ReceptoPharm breached its fiduciary duty to the Plaintiffs as shareholders
of ReceptoPharm by wrongfully canceling certain of their purported ReceptoPharm
share certificates. ReceptoPharm has filed an answer denying the material
allegations of the amended complaint and has asserted a series of counterclaims
against the Plaintiffs alleging claims for declaratory judgment, fraud, breach
of fiduciary duty, conversion and unjust enrichment as a result of the
promissory notes. Discovery in this matter has just started. We intend to
vigorously contest this matter.
 
 8.
SUBSEQUENT EVENTS
 
 ADDITIONAL OFFICER
LOANS
 
 From
January 1 through April 10, 2009, the Company’s president Rik Deitsch loaned an
additional $289,000 to the Company for working capital purposes.  As a
result of these additional loans and accrued interest from January 1 through
March 31, 2009, the Company owed Mr. Deitsch $1,544,448 as of April 10,
2009.
 
 SALE OF SHARES OF COMMON
STOCK IN CONNECTION WITH PRIVATE PLACEMENT
 
 On January 23, 2009, the Company
completed additional private placements of restricted shares of its common
stock, whereby it sold 1,400,000 shares at a price per share of
$0.025.  The Company received proceeds of $35,000 in connection with
the sale of these shares.
 
 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 30, 2009, the Company’s Board
of Directors authorized the issuance of an aggregate of 1,000,000 shares of its
restricted common stock in exchange for services rendered, as
follows:
 
 500,000 shares to each of two (2)
consultants
 
 The shares described above were valued
at $0.02per share which was the fair market
value of the Company’s common stock on the date of
grant.
  F-17