UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM 10-K


Amendment No. 1





(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





 ̈  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)





1537 NW 65th Avenue,
Plantation, FL 33313





(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





Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.




Yes  ̈
     No x




Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.




Yes  ̈
     No x




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




Yes x
     No  ̈




Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the 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 large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):




Large
      accelerated filer    o
            
            Accelerated
      filer    oNon-accelerated
      filer    o (Do not check if
      a smaller reporting company)
            
            Smaller
      reporting company    x




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




Yes  ̈
     No x




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.








INDEX





Part
      IItem
      1.
                Business
                3Item
      1A.
                Risk
      Factors
                20Item
      1B.
                Unresolved
      Staff Comments
                20Item
      2.
                Properties
                20Item
      3.
                Legal
      Proceedings
                20Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                20Part
      IIItem
      5.
                Market
      for Registrant’s Common Equity; Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                20Item
      6.
                Selected
      Financial Data
                23Item
      7.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                23Item
      7A.
                Quantitative
      and Qualitative Disclosures about Market Risk
                31Item
      8.
                Financial
      Statements and Supplementary Data
                31Item
      9.
                Changes
      in Disagreements With Accountants on Accounting and Financial
      Disclosure
                31Item
      9A.
                Controls
      and Procedures
                32Item
      9B.
                Other
      Information
                32Part
      IIIItem
      10.
                Directors
      and Executive Officers of the Registrant
                33Item
      11.
                Executive
      Compensation
                38Item
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                39Item
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence
                41Item
      14.
                Principal
      Accountant Fees and Services
                41Part
      IVItem
      15.
                Exhibits
      and Financial Statement Schedules
                42Signatures
                44




2





Forward
Looking Statements





This Annual Report on Form 10-K, Amendment No.
1,   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.





On October 3, 2003, we entered into a non-assignable license
agreement between Biotherapeutics, Inc. and us, which was amended on November
11, 2003, to make the license agreement assignable. This agreement was in
settlement of a  lawsuit that we filed against Biotherapeutics
alleging that Biotherapeutics owed us $850,000 in connection with a merger
agreement between us and Biotherapeutics, which was
cancelled.





The 2003 license agreement provides that for  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





Our wholly owned subsidiary, ReceptoPharm, uses the raw
material, Cobra Venom, for the drugs that it studies.  We currently have no
supplier agreement or arrangements for obtaining Cobra Venom, which we obtain on
an as-needed basis.   There are at least three Cobra Venom based suppliers
each in the United States and the Peoples Republic of China from which
ReceptoPharm may acquire Cobra Venom, in addition to other suppliers in Thailand
and India.  Dr. Paul Reid, ReceptoPharm’s Chief Executive Officer, is
responsible for locating cobra venom suppliers on an as-needed basis, which
involves  obtaining a small test amount from a supplier for scientific
validation of that raw material prior to purchase.  Apart from Cobra Venom,
we do not currently use raw materials in our business.


11





Dependence on one or a Few Major Customers





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




Patents, Trademarks, Licenses and Intellectual
Property





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





Bio Therapeutics Patents





We hold the license to certain intellectual property belonging
to Bio Therapeutics that has either been granted a patent or is in the patent
application process as follows:




U.S. Patent No. 5,989,857, Polypeptide compositions and
methods was granted in November 1999 with 10 claims. The patent outlines
a method of preparing a bioactive polypeptide in a stable, inactivated form, the
method comprising the step of treating the polypeptide with ozonated water in
order to oxidize and/or stabilize the cysteine residues, and in turn, prevent
the formation of disulfide bridges necessary for
bioactivity.




U.S. Patent No. 6,670,148, Compositions comprising bioactive
peptides prepared without formation of native disulfide bondswas granted
in December 2003, with 9 claims. The patent further describes a method of
preparing a bioactive polypeptide in a stable, inactivated form, the method
comprising the step of treating the polypeptide with ozonated water in order to
oxidize and/or stabilize the cysteine residues, and in turn, prevent the
formation of disulfide bridges necessary for bioactivity. The method can involve
the use of ozonated water to both oxidize the disulfide bridges in a bioactive
polypeptide, and to then stabilize the resultant cysteine residues. Optionally,
and preferably, the method can involve the use of ozonated water to stabilize
the cysteine residues, and thereby prevent the formation of disulfide bridges,
in a polypeptide produced by recombinant means in a manner that allows the
polypeptide to be recovered with the disulfide bridges
unformed.




U.S. Patent Application Number 11415377, Buccal Delivery System, with
20 claims. The patent describes a delivery formulation and system for delivering
inactivated bioactive peptides to the body. The formulation includes effective
amounts of the peptide as well as a mucosal permeation enhancer selected from
the group consisting of quaternary ammonium salts. The system can be used by
spraying the formulation into the buccal cavity, e.g., to the roof of the mouth.
This application is currently listed as abandoned as of December
2009.


12


U.S. Patent Application Number 11431126, Immunokine composition and
method with 31 claims. The patent describes a composition and method for
preventing HIV infection of mammalian cells. One aspect of the invention relates
to an anti-immunodeficiency virus immunokine capable of binding to a cellular
protein in a manner that prevents HIV infection of that cell. The compositions
can include either an active bioactive polypeptide, such as native cobratoxin,
and/or an inactivated bioactive polypeptide, such as cobratoxin in which one or
more of the native disulfide bridges have been prevented from forming. The term
"immunokine" is used to refer to an inactivated bioactive polypeptide, whether
inactivated by chemical, genetic, and/or synthetic means as described herein,
with the proviso that a corresponding active bioactive polypeptides can be
included where applicable (e.g., for in vitro use). This application is
currently listed as abandoned as of June 2009





ReceptoPharm Patents





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





U.S. Patent Application Number 11/217,713, Modified venom and venom components
as anti-retroviral agents with 10 claims was filed in September 2005. The
present invention describes a method of treatment of human subject suffering
from infection with HIV, comprising administering a disease mitigating amount of
a detoxified, modified cobra venom composition in an amount effective to
ameliorate at least one symptom of said infection. This patent is meant to
protect and support the Company’s work in our production of anti-viral
treatments. Currently, this would be applied to RPI-MN and
RPI-78.




U.S. Patent Application Number 11/592,896, Modified elapid venoms as
stimulators of the immune reaction with 20 claims was filed in November
2006. The patent describes a method of protection from infections by
administering a detoxified and neurotropically active modified venom containing
alpha-cobratoxin. Protection includes bacterial, viral and parasitic infections.
This patent is meant to protect and support the Company’s work in our production
of anti-infective treatments. Currently, this would be applied to RPI-MN and
RPI-78.




U.S.
Patent Application Number 11/642,312, Use of cobratoxin as an analgesicwith 5 claims was filed in December 2006. The patent describes a
composition of matter for an analgesic and its method of use is disclosed. The
method of use is for the treatment of chronic pain,
especially to the treatment of heretofore intractable pain as associated with
advanced cancer. The pain associated with neurological conditions, rheumatoid
arthritis, viral infections and lesions is also contemplated. The method
includes administering to a host an alpha-neurotoxin that is characterized by
its ability to blocking of the action of acetylcholine at nicotinic
acetylcholine receptors. This patent is meant to protect and support the
Company’s work in our production of drugs for the treatment of pain. After our
year ending December 31, 2008, this patent  will be applied to
Cobroxin and Nyloxin.




U.S.
Patent Application Number 10/947,434, Modified Anticholinergic Neurotoxins
as Modulators of the Autoimmune Reactionwas filed in September 2004. The
patent describes a method of treatment of a human patient suffering from
Multiple Sclerosis comprising the administration of a disease-mitigating amount
of a composition consisting of detoxified and modified alpha-cobratoxin in a
saline solution. This patent is meant to protect and support the Company’s work
in our production of drugs for the treatment of auto-immune diseases.





U.S. Patent Application Number 11/784,607, Treatment of Autoimmune Disorders
Using Detoxified Cobratoxin was filed in April 2007. The patent describes
a method of treating patients suffering from autoimmune disorders comprising the
administration of detoxified cobra venom. This patent is meant to protect and
support the Company’s work in our production of drugs for the treatment of
auto-immune diseases. Currently, this would be applied to
RPI-78MN.




U.S. Patent Application Number 12/317,115, Alpha-neurotoxin Proteins with
Anti-inflammatory Properties and Uses Thereof was filed in December 2008.
The patent describes a method of treating an arthritic condition comprising the
administration to a subject in need thereof an effective amount of a
pharmaceutical composition comprising an isolated alpha-neurotoxin protein or an
effective fragment thereof. This patent is meant to protect and support the
Company’s work in our production of drugs for the treatment of inflammatory
diseases.


13




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 escalating minimum payments
starting at $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.




On or
about July 2009, we ceased paying the minimum royalties to Nanologix for the
licensed patents and have allowed full rights to those patents to revert back to
Nanologix.




We own 11 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.





U.S. Patent No. 5,989,902, Method for determining the
antimicrobial agent sensitivity of a nonparaffinophilic hydrophobic
microorganism and an associated apparatus was granted in November 1999
with 3 claims. The patent describes a method for determining a sensitivity of a
nonparaffinophilic hydrophobic microorganism to an antimicrobial agent. The
method includes providing at least one receptacle containing an aqueous broth
including a carbon source and introducing the nonparaffinophilic hydrophobic
microorganism into the receptacle. The method further includes placing into the
receptacle (i) a slide coated with a hydrophobic material and (ii) a
predetermined quantity of the antimicrobial agent to be tested. By observing the
nonparaffinophilic hydrophobic microorganism growth or lack thereof on the
slide, it can be determined whether the predetermined quantity of the
antimicrobial agent is effective in inhibiting growth of the nonparaffinophilic
hydrophobic microorganism on the slide. An associated apparatus is also
disclosed.





U.S. Patent No. 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 was
granted in November 1999 with 17 claims. The method of the invention involves
providing a first receptacle and a second receptacle. The first receptacle
contains a sterile aqueous broth and the second receptacle contains an aqueous
broth including a carbon source. The method then includes placing into the first
receptacle a first support surface having a paraffin wax coating thereon and
placing into the second receptacle a second support surface having a hydrophobic
material coating thereon. A body specimen, such as sputum, is then introduced
into each of the first and second receptacles. The presence of a
nonparaffinophilic hydrophobic microorganism in the body specimen is determined
by observing (i) a lack of microorganism growth on the paraffin coated material
of the first support surface and (ii) a presence of microorganism growth on the
hydrophobic material coating of the second support surface. The presence of the
nonparaffinophilic hydrophobic microorganism can be further confirmed by
performing a DNA extraction. An associated DNA extraction procedure is also
provided.





U.S. Patent No. 5,935,806, Method and apparatus for speciating
and identifying MAI (Mycobacterium Avium Intracellulare) and testing the same
for antibiotic sensitivity was granted in August 1999 with 3 claims. The
patent describes a method of speciating and identifying MAI in a specimen
comprises placing a paraffin coated slide in a receptacle containing a sterile
aqueous solution inoculated with the specimen, analyzing the slide after
exposure to the specimen to determine the presence or absence of atypical
Mycobacteria, and after the analysis step, if atypical Mycobacteria are
determined to be present, performing at least one speciation assay to ascertain
if the atypical Mycobacteria are MAI. A related apparatus is also disclosed for
speciating and identifying MAI in a specimen comprising a paraffin-wax coated
slide, a tube having a sterile aqueous solution contained therein, the tube
adapted to hold the slide, and at least one speciation assay means for
performing an assay to determine the presence or absence of MAI in the specimen
after the specimen is introduced into the tube holding the solution and the
slide. An apparatus and method for determining the sensitivity of MAI to
different antibiotics and dosages thereof is also
provided.


14




U.S. Patent No. 5,882,920, Apparatus for determining the
presence or absence of a paraffinophilic microorganism was granted in
March 1999 with 4 claims. The patent describes a method of determining the
presence of a paraffinophilic microorganism in a specimen taken from a patient.
The method includes providing a receptacle containing an aqueous solution and
adjusting the solution to mimic the in vivo clinical conditions of the patient.
The method then further includes inoculating the solution with the specimen and
then placing in the receptacle a paraffin coated slide to bait the
paraffinophilic microorganism. The slide is then analyzed after exposure to the
specimen to determine the presence or absence of the paraffinophilic
microorganism. An associated apparatus is also disclosed.




U.S. Patent No. 5,854,014, Apparatus for testing
paraffinophilic microorganisms for antimicrobial sensitivity was granted
in December 1998 with 2 claims. The patent describes an apparatus for
determining the antimicrobial agent sensitivity of a paraffinophilic
microorganism from a specimen obtained from a patient. The apparatus includes a
receptacle containing an aqueous solution, an amount of antimicrobial agent to
be tested and the specimen. The apparatus further consists of a paraffin coated
slide placed into the receptacle.




U.S. Patent No. 5,846,760, Method for determining a presence or
absence of a nonparaffinophilic hydrophobic microorganism in a body specimen and
an associated kit was granted in December 1998 with 15 claims. The method
of the invention involves providing a first receptacle and a second receptacle.
The first receptacle contains a sterile aqueous broth and the second receptacle
contains an aqueous broth including a carbon source. The method then includes
placing into the first receptacle a first support surface having a paraffin wax
coating thereon and placing into the second receptacle a second support surface
having a hydrophobic material coating thereon. A body specimen, such as sputum,
is then introduced into each of the first and second receptacles. The presence
of a nonparaffinophilic hydrophobic microorganism in the body specimen is
determined by observing (i) a lack of microorganism growth on the paraffin
coated material of the first support surface and (ii) a presence of
microorganism growth on the hydrophobic material coating of the second support
surface. An associated kit is also disclosed.




U.S. Patent No. 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 was granted in July 1998 with
40 claims. The patent describes a method of testing a body specimen taken from a
patient for the presence or absence of a microorganism. A transport/isolator
assembly is provided which includes a receptacle and a baiting assembly
including a baiting section having disposed thereon a coating material. A
baiting liquid and the body specimen are then introduced into the receptacle.
The method further comprises securing the baiting assembly to the receptacle so
that at least a portion of the coated section is introduced into the baiting
liquid. The transport/isolator assembly containing the baiting liquid and the
body specimen are then transported to a laboratory for subsequent observation of
the coated section for growth or lack thereof of the microorganism. A further
method of processing the body specimen and an associated isolator/transport
assembly kit as well as an associated isolator/transport assembly are also
disclosed.




U.S. Patent No. 5,569,592, Apparatus for testing MAI
(Mycobacterium Avium Intracellulare) for antimicrobial agent sensitivity
was granted in October 1996 with 3 claims. The patent describes an apparatus for
determining the sensitivity of MAI to different antimicrobial agents and dosages
thereof is provided. The apparatus comprises a plurality of test tubes adapted
to contain an amount of an antimicrobial agent to be tested and MAI complex
organisms to be assayed and a separate paraffin coated slide adapted for
placement in each of the test tubes. The growth of the MAI complex organisms on
the slide can be used to determine the concentration of the antimicrobial agent
necessary to resist MAI complex organism growth on the slide. An associated
method is also disclosed.


15


U.S. Patent No. 5,472,877, Apparatus for determining the
presence or absence of MAI (Mycobacterium Avium Intracellulare) was
granted in December 1995 with 6 claims. The patent describes a method of
speciating and identifying MAI in a specimen comprises placing a paraffin coated
slide in a receptacle containing a sterile aqueous solution inoculated with the
specimen, analyzing the slide after exposure to the specimen to determine the
presence or absence of atypical Mycobacteria, and after the analysis step, if
atypical Mycobacteria are determined to be present, performing at least one
speciation assay to ascertain if the atypical Mycobacteria are MAI. A related
apparatus is also disclosed for speciating and identifying MAI in a specimen
comprising a paraffin-wax coated slide, a tube having a sterile aqueous solution
contained therein, the tube adapted to hold the slide, and at least one
speciation assay means for performing an assay to determine the presence or
absence of MAI in the specimen after the specimen is introduced into the tube
holding the solution and the slide. An apparatus and method for determining the
sensitivity of MAI to different antibiotics and dosages thereof is also
provided.





U.S. Patent No. 5,316,918, Method and apparatus for testing MAI
(Mycobacterium Avium Intracellulare) for antimicrobial agent sensitivity
was granted in May 1994 with 7 claims. The patent describes an apparatus and
method for determining the sensitivity of MAI to different antimicrobial agents
and dosages thereof is provided. The apparatus comprises a plurality of test
tubes adapted to contain an amount of an antimicrobial agent to be tested and
MAI complex organisms to be assayed and a separate paraffin coated slide adapted
for placement in each of the test tubes. The growth of the MAI complex organisms
on the slide can be used to determine the concentration of the antimicrobial
agent necessary to resist MAI complex organism growth on the slide. An
associated method is also disclosed.





U.S. Patent No. 5,153,119, Method for speciating and
identifying MAI (Mycobacterium Avium Intracellulare) was granted in
October 1992 with 15 claims. The patent describes a method of speciating and
identifying MAI in a specimen comprises placing a paraffin coated slide in a
receptacle containing a sterile aqueous solution inoculated with the specimen,
analyzing the slide after exposure to the specimen to determine the presence or
absence of atypical Mycobacteria, and after the analysis step, if atypical
Mycobacteria are determined to be present, performing at least one speciation
assay to ascertain if the atypical Mycobacteria are MAI. A related apparatus is
also disclosed for speciating and identifying MAI in a specimen comprising a
paraffin-wax coated slide, a tube having a sterile aqueous solution contained
therein, the tube adapted to hold the slide, and at least one speciation assay
means for performing an assay to determine the presence or absence of MAI in the
specimen after the specimen is introduced into the tube holding the solution and
the slide. An apparatus and method for determining the sensitivity of MAI to
different antibiotics and dosages thereof is also provided.




16





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.


17




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.


18


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.


19




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




From
May 2006 to July 2009, 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 made no cash payment for the use of this space;
instead, we were permitted to use such space in return for our President serving as
Waiora’s
Chairman of its Scientific Advisory Board. After our December 31, 2008 fiscal
year end and as of August 2009, we moved into ReceptoPharm’s executive
offices located at 1537 NW 65th Avenue, Plantation, Florida
33313.




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.




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.




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




20




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.


21




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.


22




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.





Results
of Operations





Year
Ended December 31, 2008 compared to the Year Ended December 31,
2007




23





Explanatory
Note





It is
important to note that our results of operations for the year ended December 31,
2008 include the results of operations of our now wholly owned subsidiary,
ReceptoPharm, from the date we acquired it at April 10, 2008 to our year end at
December 31, 2008, reflecting at least an eight (8) month period. During the
year ended December 31, 2007, our results of operations only include
ReceptoPharm’s results of operations for the three month period ended March 31,
2007. Accordingly, the increased expenses described below are attributable to
our acquisition of ReceptoPharm and their ongoing operations.





Results of
Operations


Revenue
for the year ended December 31, 2008 was $4,045; we did not have any revenue
during the year ended December 31, 2007. Our revenue during 2008 was
attributable to the sale of test kits by our subsidiary, Designer
Diagnostics.





General
and administrative expenses increased $485,261 or 98% from $494,741 for the year
ended December 31, 2007 to $980,002 for the year ended December 31,
2008.





Research
and development expenses increased $157,610 or 218% from $72,180 for the year
ended December 31, 2007 to $229,790 for the year ended December 31,
2008.





During
the year ended December 31, 2008, we incurred a non-cash expense for purchased
research and development costs of $2,397,749, which represented the excess of
the purchase price paid over the fair value of the assets received and
liabilities assumed, related to our acquisition of ReceptoPharm on April 10,
2008





Stock
based compensation expense decreased $103,050 or 17% from $603,050 for the year
ended December 31, 2007 to $500,000 for the year ended December 31,
2008.





Interest
expense decreased from $76,075 for the year ended December 31, 2007 to $57,555
for the year ended December 31, 2008. This decrease was primarily attributable
to a decreased level of indebtedness related to loans made to us by our Chief
Executive Officer. In March 2008, we converted $1,200,000 of such loans into
48,000,000 shares of our common stock to our Chief Executive
Officer.





Uncertainties and
Trends





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





·
            Whether we successfully develop
      and commercialize the products from our research and development
      activities.





·
            If we fail to compete effectively
      in the intensely competitive biotechnology area, our operations and market
      position will be negatively
impacted.





·
            If we fail to successfully
      execute our planned partnering and out-licensing of products or
      technologies, our future performance will be adversely
      affected.





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





·
            Biotechnology industry related
      litigation is 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,
      we will face increased costs, and possibly penalties and business
      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.


24





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


25





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.


26





·
            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).


27





·
            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.


28





·
            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
      distribution.





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;


29


·
            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.


30





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


31





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
effective as of December 31, 2008.





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 ineffective. 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.





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 oversee certain
accounting procedures, arrange for training of our accounting personnel that
will be beneficial to strengthening our internal controls over financial
reporting, 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.





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.


32





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
                      
                      2002Stewart
      Lonky, M.D.
                      
                      61
                      
                      Director
      (1)
                      
                      2004Paul
      F. Reid
                      
                      45
                      
                      Director
      (2)
                      
                      April
      2008Harold
      H. Rumph
                      
                      79
                      
                      Director
      (2)
                      
                      April
      2008Garry
      R. Pottruck
                      
                      53
                      
                      Director
      (3)
                      
                      July
      2009


33





(1)
            Dr. Lonky is a member of our
      Audit Committee and Compensation
  Committee.





(2)
            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.





(3)
            After
      our Fiscal Year ending December 31, 2008, Garry Pottruck became our
      Director on July 29, 2009. Stanley J. Cherelstein was our Director as of
      the filing of our Form 10-K for our fiscal year ending December 31, 2008,
      but resigned on July 29, 2008.





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.





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.


34





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.





Garry Pottruckbecame our
director and Chairman of our Audit and Compensation Committees after our
December 31, 2008 year end, on July 29, 2009 . Since October 2005, he has been a
Principal in the accounting and consulting firm, Argy, Wiltse & Robinson, PC
(“Argy”), headquartered in McLean, Virginia. From July 1997 through October
2005, he was managing partner in the certified public accounting firm, Friedberg
& Pottruck, PA, located in Deerfield Beach, Florida until that firm was
acquired by Argy. Friedberg & Pottruck specialized in providing accounting,
tax and consulting services to physician practices. Mr. Pottruck held financial
executive positions with several companies, both public and private, from 1984
through 1994, including more than three years as Chief Accounting
Officer/Controller at Scopas Technology Company, Inc., a NASDAQ listed,
development stage biotechnology research and development organization. Prior to
1984, Mr. Pottruck worked for public accounting firms after graduating with a
B.S. Degree in Accounting from the C.W. Post School of Professional Accountancy
at Long Island University in 1979. He is currently a member of both the Florida
and American Institutes of Certified Public Accounting, and is licensed as a
Certified Public Accountant in both Missouri and Florida.




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.


35





Section
16(a) Compliance of Officers and Directors




As of
April 15, 2009, when we filed our Form 10-K for our fiscal year ending December
31, 2008 and based on our review of Forms 3, 4, 5, and Schedule 13D furnished
to us during the last fiscal year, our directors had then failed to file
certain reports required of them to be filed pursuant to Exchange Act Section
16(a). Since that time and as indicated immediately below, a former Director and
other Directors have filed the required forms, but other Directors have
not.


Stanley
Cherelstein, Former Director


As of
the date we filed for Form 10-K for the Fiscal Year ending December 31, 2008,
Mr. Cherelstein, our then Director, failed to file Forms 4.





Since
that time, Mr. Cherelstein filed Forms 4 on November 11 and 12,
2009.





Rik
Deitsch, Chief Executive Officer


As of
the date we filed for Form 10-K for the Fiscal Year ending December 31, 2008,
Mr. Deitsch had filed a Form 4 on March 27, 2008 and a Schedule 13D on March 28,
2008. Because there were no further transactions or changes pertaining to Mr.
Deitsch, he was current in his individual filings as of our December 31, 2008
year end.





Stewart
Lonky, Director


As of
the date we filed our Form 10-K for the Fiscal year ending December 31, 2008,
Mr. Lonky failed to file Forms 3 and 4.





Since
that time, he filed Forms 3 and 4 on January 13, 2010





Paul
F. Reid


As
of the date we our Form 10-K for the Fiscal Year ending December 31, 2008, Mr.
Reid failed to Form 3 and still has not filed that Form.


Harold
J. Rumph, Director





As of
the date we filed our Form 10-K for the Fiscal year ending December 31, 2008,
Mr. Rumph failed to file Form 3.





Since
that time, he filed Form 3 on November 5, 2009





Garry
Pottruck


As of the
date we filed our Form 10-K for our Fiscal Year ended December 31, 200, Mr.
Pottruck was not our Director, having later been elected as our Director on July
29, 2009, at which time he was required to file a Form 3.   On
January 21, 2010, Mr. Pottruck filed a Form 3.




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. Pottruck became the Chairman/Member of
the Audit Committee as of July 29, 2009. Dr. Lonky also serves on the Audit
Committee. Mr. Cherelstein, who resigned as our Director on July 29, 2009, was
previously the Chairman of the Audit Committee and our 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.


36





(ii)
Compensation Committee


On
November 5, 2004, our Board of Directors established a Compensation Committee.
We do not have a Compensation Committee Charter. Dr. Lonky serves on our
Compensation Committee and Mr. Pottruck became our Compensation Committee’s
Chairman as of July 29, 2009. Prior to his resignation on July 29, 2009, Mr.
Cherlestein was our Compensation Committee 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.


37





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





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





The
following executive compensation disclosure reflects all compensation awarded
to, earned by or paid to the executive officers below, for the fiscal years
ended December 31, 2008 and 2007.





SUMMARY
COMPENSATION TABLE





Nameandprincipal
                                            position
                                          
                                          Year
                                          
                                          Salary ($)
                                          
                                          Bonus ($)
                                          
                                          Stock
                                            Awards ($)
                                          
                                          Option
                                            Awards ($)
                                          
                                          Non- Equity
                                            Incentive
                                            Plan
                                            Compensation ($)
                                          
                                          Nonqualified
                                            Deferred
                                            Compensation
                                            Earnings ($)
                                          
                                          All Other
                                            Compensation
                                            ($)
                                          
                                          Total
                                            ($)Rik
                                            Deitsch
                                          
                                          2008
                                          
                                          
                                          130,000
                                          
                                          
                                          —
                                          
                                          
                                          125,000
                                          
                                          
                                          —
                                          
                                          
                                          —
                                          
                                          
                                          —
                                          
                                          
                                          —
                                          
                                          
                                          255,000Chief
      Executive Officer, Chief
                                            Financial
      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
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                62,500Garry
      Pottruck
                                
                                
                                
                                
                                75,000
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                75,000





(1)
            The common stock awards
      reflected above to Directors Deitsch and  Lonky and former
      Director Cherelstein were awarded on March 13, 2008.  The common
      stock award to Director Pottruck was granted after our December 31, 2008
      fiscal year end, on  July 29,
  2009.


38





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
                            Common Stock
                            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.


39





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 Cherelstein*Director791
      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
                                                            %





*After
our year end ending December 31, 2008, Mr. Cherelstein resigned as our Director
on July 29, 2009.


40





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.


41





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/Description3.1
                
                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)


42


10.1
                                  
                                  Agreement
      and Plan of Merger dated April 9, 2008by and among Nutra
      Pharma Corp., a California corporation (“Nutra
      Pharma”), NP Acquisition Corporation, a Nevada corporation wholly
      owned by Nutra Pharma (“Acquisition”),
      Receptopharm, Inc., a Nevada corporation (“Receptopharm”)
      and the stockholders of Receptopharm  (incorporated by
      reference from Form 8-K filed on April 14,
      2008).10.18
                                  
                                  Patent
      Assignment Agreement dated January 24, 2006 between Nanologix, Inc. and
      Nutra Pharma Corp. (incorporated by reference from Form 10-K for
      period ending December 31, 2006)10.19
                                  
                                  International
      License Agreement between NanoLogix, Inc. and Nutra Pharma Corp.
      (incorporated by reference from Form 10-K for period ending December
      31, 2006)20.3
      License Agreement between Biotherapeutics, Inc. and Nutra Pharma Corp
      (incorporated by reference from Form 10-KSB for the period ending
      December 31, 2003)20.4
      Amendment to License Agreement between Biotherapeutics, Inc. and Nutra
      Pharma Corp (incorporated by reference from Form 10-KSB for the
      period ending December 31, 2003)14.1
                                  
                                  Code
      of Ethics (incorporated by reference from Report on Form 10-K/A filed
      on May 7, 2004).20.3
                                  
                                  License
      Agreement between Biotherapeutics, Inc. and Nutra Pharma Corp
      (incorporated by reference from Form 10-KSB for the periodending
      December 31, 2003)20.4
                                  
                                  Amendment
      to License Agreement between Biotherapeutics, Inc. and Nutra Pharma Corp
      (incorporated by reference from Form 10-KSB forthe
      period ending December 31, 2003)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).
  43
  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, Principal  Financial
                    Officer,
      and Principal Accounting
Officer
  Dated:
January 25, 2010
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated.
 
 Signature
                                  
                                  Title
                                  
                                  Date/s/ Rik
      J. Deitsch
                                  
                                  Chairman
      of the Board,
                                    President,
                                    Chief
      Executive Officer, Principal
                                    Financial
      Officer,
                                  
                                  January
      25, 2010Rik
      J. Deitsch
                                  
                                  Principal
      Accounting Officer/s/
      Garry R. Pottruck
                                  
                                  Director
                                  
                                  January
      25, 2010/s/
      Stewart Lonky
                                  
                                  Director
                                  
                                  January
      25, 2010Stewart
      Lonky/s/
      Paul F. Reid
                                  
                                  Director
                                  
                                  January
      25, 2010Paul
      Reid/s/
      Harold H. Rumph
                                  
                                  Director
                                  
                                  January
      25, 2010Harold
      H. Rumph
  44
 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.
  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
                                              
                                              
                                              494,741
                                              
                                              
                                              
                                              980,002
                                              
                                              
                                              
                                              7,851,215Research
      and development
                                              
                                              
                                              72,180
                                              
                                              
                                              
                                              229,790
                                              
                                              
                                              
                                              2,042,207Purchased
      research and development
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,397,749
                                              
                                              
                                              
                                              2,397,749General
      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
                                              )Total
      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
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  175,000Purchased
      research and development
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  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. Cancellation 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 stockholder
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  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, 2007 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.
  Reclassifications
  F-7
  Certain
amounts included in the prior periods’ financial statements have been
reclassified to conform to current year presentations. In addition, the Company
has reclassified the impairment of goodwill of $2,397,749(see
Note 2) to purchased research and developmentand
certain amounts aggregating $72,180 and $229,790 during 2007 and 2008 have been
reclassified from general and administrative expense to research and
development.
  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.
  F-9
  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.
  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
                          
                          $
                          4,056,095Investmentinandadvances
      to Receptopharm
                          
                          
                          (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:
  F-10
  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
                                
                                $
                                2,469,413Allocation
      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 purchased
research and development.
  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 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.
  F-11
  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.
  On April
23, 2002, the Company issued 1,000,000 shares of restricted common stock to a
lender as collateral for a loan. The loan was never funded and the Company
placed a stop transfer order on the stock certificate. The lender is currently
in Chapter 11 Bankruptcy. These shares have not been reflected as issued and
outstanding.
  On May
23, 2002, a stockholder of the Company returned a total of 10,394,000 shares of
common stock to the Company for cancellation. The Company did not pay any
consideration to the stockholder. Accordingly, the Company adjusted
stockholders' equity for the treasury shares with no cost.
  In 2002,
the Company issued a total of 656,000 shares of restricted common stock to
various individuals and companies in exchange for services rendered. These
issuances were made at various times throughout the year. The Company recorded
stock-based compensation expense of $671,530 to reflect the fair market value of
the common stock issued. Fair market value was based on the closing price of the
Company's common stock on the date of each grant.
  On
December 23, 2002, the Company rescinded the NPI Agreement dated November 23,
2001, pursuant to a Rescission, Settlement and Release Agreement. NPI's sole
stockholder agreed to facilitate the return of 2,092,500 of the 4,500,000 shares
of common stock to the Company for cancellation. Subsequently, through December
31, 2004, an additional 2,199,000 shares were returned to the Company by
Individual Stockholders that received shares of common stock of the Company
directly from NPI's sole stockholder. The remaining 208,500 shares are deemed by
the Company to be irretrievable, and accordingly, the Company recorded a
charge to operations of $23,375 for these shares in 2003. As part of this
Rescission Agreement, NPI's sole stockholder received 450,000 shares of common
stock directly from an existing stockholder who was also an Officer and Director
of the Company. The Company recorded a charge to operations of $229,500 in 2003
to reflect the value of the settlement for the benefit of the
Company.
  In June
2003, a stockholder of the Company transferred 500,000 shares of his common
stock to the Company's President/Chief Executive Officer. Such shares were
valued at $75,000, the fair market value on the date of the transfer, and the
accompanying financial statements have been revised to reflect a charge to
operations as compensation with a corresponding increase in additional
paid-in-capital.
  On
June 9, 2003, the Company converted a stockholder loan payable in the
amount of $862,012, by issuing 10,300,000 shares of its restricted common stock.
 The conversion price of $0.08 represented a discount of approximately 50%
from the fair market value of the common stock as measured by the closing price
on the day prior to the conversion.  Accordingly, the Company recorded
financing costs of $786,000 in connection with this transaction.
  In 2003,
the Company issued a total of 2,196,828 shares of restricted common stock,
including 15,000 shares issued pursuant to the Company's Equity Compensation
Plan to various individuals and companies in exchange for services rendered. Of
this total, 1,500,000 shares were issued to officers and directors of the
Company. These issuances were made at various times throughout the year. The
Company recorded stock-based compensation expense of $1,360,267 to reflect the
fair market value of the common stock issued. Fair market value was based on the
closing price of the Company's common stock on the date of each
grant.
  F-12
  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.
  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.
  F-13
  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.
  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.
  F-14
  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.
  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.
  F-15
  On April
1, 2006, the Company and Mr. Doherty entered into a termination agreement
whereby Mr. Doherty agreed to resign his position as Chairman of Board of the
Company. Upon the effectiveness of the termination agreement on April 1, 2006,
the Company issued a five-year option to Mr. Doherty to purchase 2,000,000
shares of common stock at an exercise price of $.27 per share. The option vested
immediately on the date of grant. The Company recorded stock based compensation
expense of $260,000 to reflect the fair value of the option grant. The fair
value of the option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: expected
volatility 127%; risk-free interest rate of 4.8%; expected life of 5 years; and
no expected dividends.
  A summary
of stock options is as follows:
  Weighted
                                  
                                  
                                  WeightedNumber
                                  
                                  
                                  average
                                  
                                  
                                  averageof
                                  
                                  
                                  exercise
                                  
                                  
                                  fairshares
                                  
                                  
                                  price
                                  
                                  
                                  valueBalance
      at December 31, 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.
  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 $0.02 per share which was the fair
market value of the Company’s common stock on the date of grant.
  F-17