**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)





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





For
      the
      fiscal year ended December 31, 2006




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





For
      the
      transition period from _________ to ________





Commission
      file number 000-32141





**NUTRA
      PHARMA CORP.**


(Name
      of
      registrant as specified in its charter)




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





791
      Park
      of Commerce Boulevard, Suite 300


Boca
      Raton, Florida 33487


(Address
      of principal executive offices)





**(954)
      509-0911**


(Issuer's
      telephone number)





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





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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the registrant was required to file such reports)and
      (2) has been subject to such filing requirements for the past 90 days. Yes
x No o





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





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





The
      registrant's revenues for the fiscal year ended December 31, 2006 were
      $20,200.





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
      30,
      2007 is $5,272,894.





As
      of
      March 30, 2007, there were 73,280,682 shares of common stock issued and
      outstanding.





Transitional
      Small Business Disclosure Format (Check one): Yes o No x











INDEX





Part
                IItem
                1.
            Description
                of Business
            
            3Item
                2.
            Description
                of Property
            
            20Item
                3.
            Legal
                Proceedings
            
            21Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            21Part
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            
            21Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            
            24Item
                7.
            Financial
                Statements
            
            29Item
                8.
            Changes
                in and Disagreements with Accountants and Financial Disclosure
            
            30Item
                8A.
            Controls
                and Procedures
            
            30Item
                8B.
            Other
                Information
            
            30Part
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            
            30Item
                10.
            Executive
                Compensation
            
            33Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            34Item
                12.
            Certain
                Relationships and Related Transactions
            
            36Item
                13.
            Exhibits
            
            36Item
                14.
            Principal
                Accountant Fees and Services
            
            37Signatures
            
            
            38









Forward-Looking
      Statements





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





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





**PART
      I**


**Item
      1. Description of Business**





HOW
      WE
      ARE ORGANIZED





We
      were
      incorporated in the state of California on February 1, 2000. We have been
      conducting our operations as a development stage company under the name, Nutra
      Pharma Corp. since October 31, 2001. We have never been the subject of a
      bankruptcy, receivership, material reclassification, merger, consolidation,
      or
      purchase or sale of a significant amount of assets not in the ordinary course
      of
      business, or similar such proceeding or event.





OUR
      BUSINESS MODEL




We
      are a
      biopharmaceutical company that plans to engage in the acquisition, licensing
      and
      commercialization of pharmaceutical products and technologies for the management
      of neurological disorders, cancer, autoimmune and infectious diseases.
      ReceptoPharm, a biopharmaceutical company, in which we own a 38% interest,
      has  conducted
      research and development of two drugs, RPI-MN and RPI-78M for the potential
      treatment of  the
      following diseases:


·
              Multiple
                  Sclerosis (MS);
  ·
              HIV/AIDS;
  ·
              Chronic
                  pain;
  ·
              Myasthenia
                  Gravis (Autoimmune Disease); and
  ·
              Adrenomyeloneuropathy
                  (AMN).




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




3





OUR
      BUSINESS MODEL




We
      are a
      biopharmaceutical company that plans to engage in the acquisition, licensing
      and
      commercialization of pharmaceutical products and technologies for the management
      of neurological disorders, cancer, autoimmune and infectious diseases.
      ReceptoPharm, a biopharmaceutical company, in which we own a 38% interest,
      has
      conducted clinical development and research of potential treatments for the
      following diseases:


·
              Multiple
                  Sclerosis (MS);
  ·
              HIV/AIDS;
  ·
              Chronic
                  pain;
  ·
              Myasthenia
                  Gravis (Autoimmune Disease); and
  ·
              Adrenomyeloneuropathy
                  (AMN).





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





To
      date,
      we have not generated any significant revenues.




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





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





*Equity
      Interest in ReceptoPharm - Drug Discovery Platform*




In
      February 2004, we agreed to invest $2,000,000 in cash to acquire up to a 49.5%
      equity interest in ReceptoPharm Inc., a privately held development stage
      biopharmaceutical company located in Fort Lauderdale, Florida, which is
      developing technologies to treat the neorological diseases, adrenomyeloneuropathy,
      amyotrophic lateral sclerosis, and myasthenia
      gravisand to treat the viral diseases, HIV and
      hepatitis. On
      February 10, 2006, we completed our $2,000,000 investment and at that date,
      we
      owned approximately 38% of the issued and outstanding common stock of
      ReceptoPharm.  We received less than a 49.5% interest in ReceptoPharm
      because our interest was diluted as a result of ReceptoPharm issuing additional
      shares of its common stock to various consultants and employees in exchange
      for
      services rendered. As of December 31, 2006, we have loaned ReceptoPharm $825,000
      for its working capital purposes. After December 31, 2006, we have loaned
      ReceptoPharm an additional $100,000 for working capital purposes.





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




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





We
      have
      terminated our relationship with XenaCare, LLC and written off our investment
      with that entity, as follows:





*XenaCare,
      LLC - Investment Written Off*




In
      February of 2004 we had agreed to invest up to $250,000 in 15 Site of Care
      physician’s offices with XenaCare, LLC, a healthcare management company engaged
      in the business of manufacturing and distributing non-prescription
      pharmaceuticals through physicians' offices. As of November of 2005, we had
      invested $175,000 in that XenaCare business model; however, as of December
      2005,
      XenaCare changed their business model to providing dietary supplements and
      topical creams through direct-sales channels.





At
      December 31, 2005, we evaluated our investment in XenaCare and determined that
      the recoverability of the investment was in doubt and as a result, we have
      written-off the entire amount of the $175,000 investment. We have notified
      XenaCare that we will not invest the additional $75,000 provided for in the
      February 2004 agreement.




4




BUSINESS
      STRATEGY




**General**




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




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




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





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




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





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





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




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





**Clinical
      Trial Applications**




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




5





OUR
      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 sin foreign countries
                  that will permit local clinical trials and regulatory approval
                  outside the
                  United States;


·
              Drug
                  sales should we be successful in obtaining FDA approval; and


·
            Test
                kit sales sold through our wholly owned subsidiary, Designer Diagnostics,
                Inc.




MARKETING





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





EMPLOYEES





As
      of
      December 31, 2006 and as of March 30, 2007, we have 3 full time employees
      consisting of: (a) Rik Deitsch, our President; (b) Neil Roth, President of
      Designer Diagnostics, Inc.; and (c) Nina Goldstein, our Executive Administrative
      Assistant.




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





OUR
      CURRENT TECHNOLOGIES





RECEPTOPHARM,
      INC.




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





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





ReceptoPharm
      believes its product focus will greatly 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). ).




6





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




**Drug
      Description**


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




**Disease
      Targets**




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




**HIV
      Infection** .




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





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





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





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




7





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




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




8




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.




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




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




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




**Value
      Added Research**




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




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




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




9





BIO-THERAPEUTICS,
      INC.





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


·
              Alteration
                  of Proteins and Peptides - These include patented methods for altering
                  the
                  3-Dimensional structure of certain proteins and peptides. The natural
                  peptides bind to receptors in the body with toxic effects. This
                  technology
                  allows us to alter the structure of these peptides, preserving
                  their
                  receptor-binding characteristics, while making them non-toxic and
                  therapeutic. Different receptors have various functions in many
                  disease
                  states. By the peptides binding to these receptors in a controlled
                  fashion
                  certain symptoms of diseases may be treated. In connection with
                  MS,
                  binding to the acetylcholine receptor on the nerves allows for
                  more
                  efficient nerve conduction. With HIV, binding to chemokine receptors
                  may
                  prevent the virus from entering and infecting new
                  cells;
 
 ·
              Innovative
                  aerosolized drug delivery system - Many therapeutic agents cannot
                  be
                  effectively delivered by aerosol formulation due to their large
                  size
                  and/or irregular shapes. Since these therapeutic agents cannot
                  be ingested
                  orally without being degraded by the digestive system, patients
                  have no
                  alternative but to inject these drugs directly. We have a non-exclusive
                  license to a proprietary aerosol formulation, for which a patent
                  is now
                  pending, which greatly enhances the permeability of the mucous
                  membranes
                  found on the roof of the mouth and the back of the throat. This
                  allows for
                  the easy and efficient systemic delivery into the bloodstream of
                  a much
                  wider variety of proteins and peptides. This non-exclusive license
                  for
                  "Buccal Delivery System" (patent-pending) includes claims that
                  identify
                  the active mucosal enhancer, its combination with therapeutic agents
                  and
                  the mode of delivery through aerosol. This may allow for the effective
                  and
                  pain-free delivery of peptide and protein therapeutics for the
                  treatment
                  of HIV and MS.





As
      more
      fully described in our Legal Proceedings Section, Bio Therapeutics filed a
      Motion to Enforce a Settlement Agreement against us in the Circuit Court of
      Broward County Florida alleging breaches of a license agreement we have with
      Bio
      Therapeutics. This litigation has continued to date.





DESIGNER
      DIAGNOSTICS, INC.





NonTuberculosis
      Mycobacterium (NTM)





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





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





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




·
            Para-Tuberculosis·
            Nocardia





·
            Pseudomonas·
            MAC
                (M.avium Complex)





10




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.





GOVERNMENT
      REGULATION





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





In
      order
      to obtain FDA approval to market a new biological or pharmaceutical product,
      proof of product safety, purity, potency and efficacy, and reliable
      manufacturing capability must be submitted. This requires companies to conduct
      extensive laboratory, preclinical 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 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.




11





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 it's 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.




12





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.





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




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





PRODUCT
      LIABILITY





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





RESEARCH
      AND DEVELOPMENT





During
      2005 and 2006, we spent $224,349 and $410,921, respectively on research and
      development activities. Because we have no significant revenues our research
      and
      development activities have been funded through loans from our President.





COSTS
      ASSOCIATED WITH ENVIRONMENTAL COMPLIANCE





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.




13





SOURCES
      AND AVAILABILITY OF RAW MATERIALS





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





CUSTOMER
      DEPENDENCY





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
      AND INTELLECTUAL PROPERTY





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





Bio
      Therapeutics Patents





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


·
              U.S.
                  Patent No. 5,989,857, which was granted in November 1999 with 10
                  claims.
 
 ·
              U.S.
                  Patent No. 6,670,148, which was granted in December 2003, with
                  9 claims.
                  The patent further describes the method for preparing a bioactive
                  peptide
                  (protein) found in cobra venom, in a stable, inactivated form,
                  by treating
                  the peptide with ozone.
 
 ·
              Buccal
                  Delivery System, on which a patent is pending. This application
                  describes
                  a throat spray that permits efficient delivery of the modified
                  peptide
                  drugs to the body through oral
                  mucosa.
 
 ·
              Technology
                  contained in one pending U.S. patent application for the further
                  development of bioactive peptides in cobra venom for use in the
                  treatment
                  of HIV and MS.
 
 ·
              Technology
                  contained in two pending U.S. patent applications for Immunokine
                  Composition and Method, which describes a method for developing
                  modified
                  peptides from alpha-cobratoxin.
 
 ·
              Technology
                  contained in two patents pending for the topical delivery of our
                  proprietary wound healing treatment, which was developed in conjunction
                  with Bio Therapeutics. One of these products is in the form of  an
                  ointment style skin protectant and the other a foaming
                  aerosol.




ReceptoPharm
      Patents





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


·
              Modified
                  venom and venom components as anti-retroviral agents. The present
                  invention relates to a class of proteins, and a method for treatment
                  of
                  neurological and viral diseases in humans and
                  animals.
  14
  ·
              Modified
                  anticholinergic neurotoxins as modulators of the autoimmune reaction.
                  The
                  invention has application to the treatment of certain human autoimmune
                  diseases, including especially multiple sclerosis, myasthenia gravis,
                  and
                  rheumatoid arthritis.
 
 ·
              Method
                  of use of crotoxin as an anti-retroviral agent. Provides a composition
                  of
                  matter and a method of using the composition for treating and preventing
                  of retroviral infections of mammalian
                  cells.
 
 ·
              Method
                  of production and use of crotoxin as an analgesic. A pharmaceutical
                  composition including one of crotoxin, mojavetoxin or a related
                  toxin and
                  a carrier for use in the treatment of chronic
                  pain,
 
 ·
              Modified
                  alpha-neurotoxins as painkillers. A composition of matter, a process
                  of
                  production thereof, and a method for the treatment of chronic
                  pain.
 
 ·
              Modified
                  neurotoxins as therapeutic agents for the treatment of diseases
                  and
                  methods of making. a method for treatment of neurological and viral
                  diseases and especially to the treatment of heretofore intractable
                  diseases.




Designer
      Diagnostics Patents





We
      own 11
      issued U.S. patents and have licensing rights to 18 issued U.S. patents covering
      technologies related to growing, detecting, identifying, defining antibiotic
      sensitivity and designing apparatus for the detection of 32 different
      paraffin-eating microorganisms.





Owned
      Patents





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




#5,776,722
            
            Method
                of testing a body specimen taken from a patient for the presence
                or
                absence of a microorganism a further associated method and associated
                apparatus#5,569,592
            
            Apparatus
                for testing MAI (Mycobacterium Avium Intracellulare) for antimicrobial
                agent sensitivity#5,472,877
            
            Apparatus
                for determining the presence or absence of MAI (Mycobacterium Avium
                Intracellulare)#5,316,918
            
            Method
                and apparatus for testing MAI (Mycobacterium Avium Intracellulare)
                for
                antimicrobial agent sensitivity#5,153,119
            
            Method
                for speciating and identifying MAI (Mycobacterium Avium
                Intracellulare)




15




Licensed
                Patents




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




#5,663,056
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microorganism and an associated
                apparatus#5,654,194
            
            Method
                of identifying a nonparaffinophilic microrganism using various milieus
                and
                an associated apparatus#5,641,645
            
            Method
                for determining the antimicrobial agent sensitivity of a
                nonparaffinophilic microrganism using various milieus and an associated
                apparatus#5,639,675
            
            Method
                of identifying a nonparaffinophilic microorganism using various mileus
                and
                an associated apparatus#5,637,501
            
            Apparatus
                for automatically testing the antibiotic sensitivity of a paraffinophilic
                microorganism




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.





COMPETITION




The
      $60
      billion Biologics market is currently dominated by five main product lines:
      erythropoietin, insulin, interferons, monoclonal antibodies, and a botulinum
      neurotoxin, better known as Botox®. Consequently,  ReceptoPharm
      is part of the new, emerging Therapeutic Proteins market that is the fastest
      growing segment of the Pharmaceutical Industry. In 2001, erythropoietin revenues
      were $6 billion. In 2005 erythropoietin revenues were $7.5 billion, an increase
      of 25% over 2001. In 2001, Insulin revenues were $1.7 billion. In 2005, Insulin
      sales surpassed $2.2 billion, an increase of 29% over 2001. Interferons sales
      for 2005 were reported at $3.8 billion, a doubling of 2001 sales reported at
      $1.9 billion. Monoclonal antibodies sales in 2001 were reported to be $3.1
      billion. In 2005, monoclonal antibodies sales were $15.6 billion, an increase
      of
      500% over 2001. Botox®, now best known for its ability to remove wrinkles
      reported revenues of $309.5 million in 2001. In 2005, this purified neurotoxin
      derived from the bacteria that causes food poisoning and was originally used
      as
      a powerful and effective therapeutic agent to correct a variety neuromuscular
      disorders and spastic muscle conditions such as crossed eye and dysphonia
      reported sales of $830.9 million, an increase of 268% over 2001. Only one
      anti-HIV drug, Fuzeon® (Trimeris/Roche), is a biopharmaceutical and has only
      recently gained approval for sale but it is expected to reach sales over $200
      million in its third year. However, evidence suggests the ReceptoPharm’s
      products could be more effective than Fuzeon due to their novel mechanism of
      action and ability to inhibit drug-resistant strains of HIV.




**Target
      Market**




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.




17




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




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




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




**Market
      Values**




**Human
      Healthcare**




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




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




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




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




**Market
      Competition**




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




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




18




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**




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




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




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




**Ability
      to Compete**





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 very desirable properties:




19




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




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




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




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




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





**Competitive**  **Weaknesses**





While
      the
      rewards for a successful drug can be substantial, it is a cash intensive
      business with a possibility that a drug may not provide efficacy in controlled
      clinical studies. 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.





Purchase
      and Licensing of NanoLogix Patents





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; (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.





REPORTS
      TO SECURITY HOLDERS





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





**Item
      2.     Description of Property**




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




20




**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. We also entered into a related
      License Agreement and Amendment to the License Agreement ("License Agreement")
      with Bio Therapeutics.




In
      the
      April 4, 2005 motion, Bio Therapeutics alleges that we breached certain
      provisions of the License Agreement and requests that the Court grant its motion
      to enforce the Settlement Agreement by declaring the License Agreement
      terminated, enjoining us from further use of license products that was granted
      to us by the License Agreement. This action does not seek money damages, but
      does request an award of attorney’s fees and costs to Bio Therapeutics. We
      intend to defend against this action. There have been no significant matters
      pertaining to this motion since April 2005. We do not believe that this action
      will have a material effect upon our operations and financial condition.




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





There
      were no matters submitted to a vote of security holders in 2006.





**PART
      II**




**Item
      5.    Market for Common Equity and Related Stockholder
      Matters**





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.




2005
            
            2006High
                Bid
            
            Low
                Bid
            
            High
                Bid
            
            Low
                BidFirst
                Quarter
            
            
            0.40
            
            
            0.25
            
            
            .33
            
            
            .17Second
                Quarter
            
            
            0.40
            
            
            0.27
            
            
            .26
            
            
            .14Third
                Quarter
            
            
            0.35
            
            
            0.25
            
            
            .16
            
            
            .08Fourth
                Quarter
            
            
            0.28
            
            
            0.13
            
            
            .14
            
            
            .08





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




21





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**





At
      December 31, 2006, based upon records obtained from our transfer agent, there
      were 248 holders of record of our common stock. Our transfer agent records
      do
      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 the Board of Directors deems relevant.




22





SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





Equity
      Compensation Plan Information





On
      December 3, 2003, our Board of Directors approved the Employee/Consultant Stock
      Compensation Plan (the "Plan"). The Plan was not submitted to our shareholders
      for approval. The purpose of the 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 Plan is 2,500,000.





Our
      board
      of directors is responsible for the administration of the Plan 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. Our 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.





On
      December 9, 2003, we filed a Registration Statement on Form S-8 with the
      Securities and Exchange Commission that covered the issuance of up to 2,500,000
      shares of common stock under the Plan. As of December 31, 2003, we had issued
      a
      total of 15,000 shares under the Plan. These shares were issued to a consultant
      for services rendered during 2003. During 2004, we issued an additional
      2,480,000 shares to consultants for services rendered **.**





The
      following table summarizes our equity compensation plan information as of
      December 31, 2006.




Plan
                  Category
            
            Number
                      of
                    Securities
                      to
                    be
                      issued upon
                    exercise
                      of outstanding
                    options,
                      warrants
                    and
                      rights
            
            Weighted
                    average
                    exercise
                      price
                    of
                      outstanding
                    options,
                    warrants
                    and
                      rights
            
            Number
                      of
                    securities
                    remaining
                    available
                    for
                    Future
                    IssuanceEquity
                compensationplans
                approved by
            
            
            N/A
            
            
            N/A
            
            
            N/ASecurity
                holdersEquity
                compensationplans
                notapproved
                bySecurity
                holders
            
            
            -0-
            
            
            N/A
            
            
            5,000Total
            
            
            -0-
            
            
            N/A
            
            
            5,000





RECENT
      SALES OF UNREGISTERED SECURITIES


During
        our fourth quarter of 2006, as specifically described below, we sold and/or
        issued shares of our restricted common stock for services. We relied upon
        Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (“the
        Securities Act”) for the offer and sale of these shares. We believed Section
        4(2) was available because: (a) there was no general solicitation in the
        offer
        or sale; (b) all purchasers were accredited investors; (c) we placed restrictive
        legends on the certificates representing these securities issued to the
        accredited investors stating that the securities were not registered under
        the
        Securities Act and are subject to restrictions on their transferability and
        resale; and (d) the offer and sale did not involve a public offering.


23








On
      November 28, 2006, we issued 19,250 shares of our restricted common stock to
      a
      consultant in exchange for services rendered. The shares were valued at $0.11
      per share or an aggregate of $2117.50, which was equal to the market value
      of
      our common stock on the date the shares were issued.





On
      November 28, 2006, we issued 25,000 shares of our restricted common stock to
      a
      consultant in exchange for services rendered. The shares were valued at $0.11
      per share or an aggregate of $2,750, which was equal to the market value of
      our
      common stock on the date the shares were issued.





On
      November 28, 2006, we issued 25,000 shares of our restricted common stock to
      a
      consultant in exchange for services rendered. The shares were valued at $0.11
      per share or an aggregate of $2,750, which was equal to the market value of
      our
      common stock on the date the shares were issued.





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





Pending
      adequate financing, we plan on spending total estimated expenses of $500,000
      for
      the next 12 months, which will include: (a) $380,000 pertaining directly to
      our
      own operations and (b) $120,000 pertaining to funding Designer Diagnostics’
operations.





EXPENSES
      PERTAINING TO OUR OPERATIONS




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





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





FUNDING
      OF DESIGNER DIAGNOSTICS, INC.





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




24




OUR
      PLAN
      OF OPERATIONS TO DATE:





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





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





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




(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 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.




·
            To
                date, we have invested a total of $175,000 of a $250,000 committed
                investment in XenaCare, a healthcare management company, originally
                for
                the investment in 15 Site of Care physician’s offices with XenaCare, LLC,
                which has been converted into an equity interest in
                XenaCare..





·
            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.




25




·
            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.




·
            In
                June of 2006, ReceptoPharm published the results of their EAE rat
                model of
                Multiple Sclerosis (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 aseries
                of microarray studieswith
                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 2007Designer
                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 during
                    n the
                    2nd and 3rd quarters of 2007, 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 Nanogene Biotechnology, a Chinese biotech company.
                    The
                    proposed joint venture will develop the antiviral drug, RPI-MN, for
                    the Chinese market.


26
 ·
                In
                    March of 2007, ReceptoPharm published an article in the Critical
                    Reviews
                    in Immunology special conference issue. The article, entitled
                    “Alpha-Cobratoxin” discussed Alpha-Cobratoxin as a possible therapy for
                    Multiple Sclerosis reviews the literature leading to the development
                    for
                    this application and discusses the background and reasoning behind
                    ReceptoPharm’s research on its treatment for Multiple Sclerosis
                    (MS).




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


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;




·
            Biotechnology
                companies;





·
            Medical
                device distributors; and




·
            Governmental
                organizations.





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





Third-party
      researchers are currently validating Designer Diagnostics’ TB Test Kit and we
      anticipate research completion by the end of our second quarter of 2007.
      Designer Diagnostics has a distribution agreement in principle with Svizera
      Pharmaceuticals in India, providing for the distribution of these test kits.
      The
      agreement is contingent upon a thirty-day test of the TB Test Kits and required
      validation. Svizera,is the exclusive supplier of current TB diagnostic kits
      to
      the World Health Organization, and supplied over 15 million of those kits to
      the
      World Health Organization in 2005.





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 areas: 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 Adrenomyeloneuropathy
        (AMN).


27








Adrenomyeloneuropathy
      (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 Adrenomyeloneuropathy
      (AMN) drug, which is currently under development. ReceptoPharm has an agreement
      with 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 ReceptoPharms's HIV/MS drugs under development.
      ReceptoPharm is in the process of attempting to secure agreements with third
      parties to conduct such clinical studies.





*Acquisition
      of ReceptoPharm*




In
      June
      of 2006, we signed a Letter of Intent with ReceptoPharm to fully acquire
      ReceptoPharm. We currently own 38.1% of ReceptoPharm. To complete the
      acquisition of ReceptoPharm we would be required to purchase the remaining
      61.9%.





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,
      2006
      since we have experienced recurring net losses and at December 31, 2006, a
      working capital deficiency. Further, as stated in Note 1 to our consolidated
      financial statements for the year ended December 31, 2006, we have experienced
      significant losses from operations totaling $2,431,178 and $5,152,154 for the
      years ended December 31, 2006 and 2005, and an accumulated deficit of
      $19,944,143 for the period from our inception to December 31, 2006.
      Additionally, we had a working capital and stockholders’ deficit at December 31,
      2006 of $1,862,888. For the twelve months ended December 31, 2006, we incurred
      a
      net loss of $2,431,178. Our ability to continue as a going concern is contingent
      upon our ability to secure additional financing, increase ownership equity,
      and
      attain profitable operations.





We
      have
      estimated expenses of $500,000 pertaining to our twelve month Plan of Operations
      or $41,666 of monthly expenditures. Based upon our current cash at December
      31,
      2006 of $18,892, we have funds sufficient to conduct our operations for less
      than one month.





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.




28





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.





REPORTS
      TO SECURITY HOLDERS





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





**Item
      7.    Financial Statements**





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




29





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





Not
      applicable





**Item
      8A.    Controls and Procedures**





As
      required by Rule 13a-15 under the Exchange Act, as of December 31, 2006, the
      end
      of the period covered by this Annual Report on Form 10-KSB, we carried out
      an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures. This evaluation was carried out by our sole executive
      officer Rik Deitsch, who is our Chief Executive Officer and Principal Financial
      Officer, and a member of our board of directors. Based upon his evaluation,
      Mr.
      Deitsch concluded that our disclosure controls and procedures are effective
      to
      ensure that information required to be disclosed by us in reports that we file
      or submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in Securities and Exchange Commission rules
      and forms. However, Mr. Deitsch did recommend to the Board of Directors that
      we
      should seek to hire an experienced Chief Financial Officer, which would improve
      the review process of our controls and procedures.





Changes
      in internal controls over financial reporting





There
      have been no changes in our system of internal control over financial reporting
      in connection with the evaluation by our Chief Executive Officer and Principal
      Financial Officer during our fiscal quarter ended December 31, 2006 that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.





**ITEM
      8B.    Other Information**





None.





**PART
      III**





**Item
      9.    Directors, Executive Officers, Promoters and Control
      Persons; Compliance With Section 16(a) of the Exchange Act**





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,
      2006(1)





Name
            
            Age
            
            Position
                with the Company
            
            Director
                SinceRik
                J. Deitsch
            
            38
            
            Chairman,
                President,
            
            2002Chief
                Executive Officer,and
                Chief Financial OfficerStanley
                J Cherelstein
            
            47
            
            Director
                (2)
            
            2004Stewart
                Lonky, M.D.
            
            59
            
            Director
                (3)
            
            2004Tanvir
                Khandaker, M.D.
            
            36
            
            Director
            
            2005




30




(1)  On
      June 1, 2005, we appointed Michael Doherty as our executive Chairman until
      he resigned on April 1, 2006. Michael Doherty was Executive Chairman of the
      Board from June 1, 2005 until his resignation on April 1, 2006.




(2) 
      Stanley Cherelstein is the Chairman of our Audit Committee and Compensation
      Committee. Additionally, he is our Audit Committee Financial
      Expert.





(3)  
      Dr. Lonky is a member of our Audit Committee and Compensation
      Committee.





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





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




31





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





**Dr.
      Tanvir Khandaker** has been
      our director since January 24, 2005. Since November 2001, he has been the
      President and a Director of Khandaker Partners, an independent research firm
      located in New York, New York, which specializes in fundamental analysis of
      public companies. From January 1999 to December 2001, Dr. Khandaker was a
      Research Associate at the Brigham and Women's Hospital of the
      Harvard Medical School and from January 1998 to December 1999, Dr. Khandaker
      was
      a Research Associate at the Massachusetts General Hospital of the Harvard
      Medical School. In December 1995, Dr. Khandaker received a medical degree from
      the Robert Mitford Medical College located in Dhaka, Bangladesh, and from
      January 1996 to April 1997, he was a Resident in Internal Medicine and Surgery
      at Robert Mitford Medical College.





FAMILY
      RELATIONSHIPS





None





LEGAL
      PROCEEDINGS





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




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




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




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




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





Section
      16(a) Compliance of Officers and Directors


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




32




Audit
      Committee/Compensation Committee





On
      November 5, 2004, our Board of Directors established an audit committee and
      a
      compensation committee. Mr. Cherelstein and Dr. Lonky serve on both committees
      and Mr. Cherelstein is the Chairman of both committees. Mr. Cherelstein is
      also
      the audit committee financial expert.





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 on our website at www.nutrapharma.com. We
      will
      provide any person without charge, a copy of our code of ethics upon the receipt
      of a written request sent to our headquarters at 3473 High Ridge Road, Boynton
      Beach, Florida, 33426. We intend to disclose any changes in or waivers from
      its
      code of ethics by posting such information on our website or by filing a Form
      8-K.





**Item
      10. Executive Compensation**





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





The
      following executive compensation disclosure reflects all compensation awarded
      to, earned by or paid to the executive officers below, for the fiscal years
      ended December 31, 2006 and 2005.  The following table summarizes all
      compensation for fiscal years 2006 and 2005 received by all of officers in
      fiscal year 2006.





SUMMARY
                COMPENSATION TABLEName
                and principal position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-
              Equity
              Incentive
              Plan
              Compen-
              sation
              ($)
            
            Nonquali-
              fied
              Deferred
              Compen-
              sation
              Earnings
              ($)
            
            All
                Other
              Compen-
              sation
                ($)
            
            Total
                ($)Rik
                Deitsch
              Chief
                Executive Officer, Chief Financial Officer, President andDirector
            
            
            2006
              2005
            
            
            130,000
              120,000
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            130,000
              120,000Michael
                Doherty
              Former
                Executive Chairman of the Board of Directors
            
            
            2006
              2005
            
            
            —
                —
            
            
            —
              —
            
            
            —
              —
            
            
            260,000
              —
            (1)
            
            —
              —
            
            
            —
              —
            
            
            —
              —
            
            
            260,000
              —





(1)
      Michael Doherty was our Executive Chairman of the Board from June 1, 2005 to
      April 1, 2006, at which time he resigned as our Executive Chairman. On June
      1,
      2005, we and Michael Doherty entered into agreements whereby Michael Doherty
      was
      appointed as our Executive Chairman of the Board and we granted Doherty &
Company thirteen million six hundred thousand (13,600,000) options to purchase
      our common stock and Doherty and Company was appointed as our Financing Agent.
      Michael Doherty is the sole owner of Doherty and Company. On April 1, 2006,
      we,
      Doherty and Company, and Michael Doherty completed a Termination Agreement
      whereby the employment and/or contractual relationship established by the
      Doherty Agreements was terminated and ceased as of the execution of the
      Termination Agreement and the 13,600,000 options were cancelled; however, in
      consideration of entering into the Termination Agreement, we granted Doherty
      and
      Company options to purchase two million (2,000,000) shares of our common stock
      exercisable at a price of $.27 per share until May 31, 2010. Upon the grant
      of
      the 2,000,000 options to Michael Doherty on April 1, 2006, the 2,000,000 Options
      vested.




33




DIRECTOR
      COMPENSATION





Other
      than compensation paid to Mr. Doherty described above, our directors did not
      receive any compensation during 2006 for services provided to the
      Company.





Stock
      Option Grants in Last Fiscal Year





We
      did
      not grant incentive and non-qualified stock options in 2006 to any executive
      officer.





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





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





The
      following tables sets forth, as of March 30, 2007, 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 73,280,262
      shares issued and outstanding as of March 30, 2007.





Security
      Ownership of Beneficial Owners




Name
                and Address of Beneficial Owner
            
            Shares
                  of
                  Common
                  Stock
                  Beneficially
                    Owned
            
            Percent
                      of
                    Common
                    Stock
                    OutstandingOpus
                International*
            
            
            11,692,556
            
            
            16.0
            %19
                Hillsyde CourtCockeysville,
                Maryland 21030Total
            
            
            11,692,556
            
            
            16.0
            %




34




*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 material to Opus International's
      reporting obligations; however, Opus International has failed to respond to
      our
      request for information. We have, however, been advised that the purported
      collateral, i.e. the stock certificate, provided by Opus International to
      Clarisco Stiftung, may not be perfected or be in negotiable form. We have been
      unable to obtain any additional information regarding the status of this matter.





Security
      Ownership of Management





Name
                  and Address ofDirector
                or Executive Officer
            
            Shares
                    of
                    Common
                      Stock
                      Beneficially
                        Owned
            
            Percent
                    of
                    Common
                      Stock
                    OutstandingRik
                J. Deitsch
            
            
            1,500,000
            
            
            2.0
            %Chief
                Executive Officer/President791
                Park of Commerce BlvdSuite
                300Boca
                Raton, Florida 33487Stanley
                J Cherelstein
            
            
            500,000
            
            
            0.7
            %Director791
                Park of Commerce Blvd.Suite
                300Boca
                Raton, Florida 33487Dr.
                Stewart Lonky
            
            
            500,000
            
            
            0.7
            %Director1158
                Chautaqua BoulevardPacific
                Palisades, California 90272Dr.
                Tanvir Khandaker
            
            
            500,000
            
            
            0.7
            %Director181
                Ogden AvenueJersey
                City, New Jersey 07307All
                executive officers and directors as
                a group (4) persons
            
            
            3,000,000
            
            
            4.1
            %




35





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





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





Our
      Chief
      Executive Officer/President, Rik Deitsch, has lent us funds for our operations.
      As of December 31, 2006, the total amount owed to Mr. Deitsch was $1,113,375,
      which includes accrued interest of $40,000. This demand loan is unsecured and
      bears interest at a rate of 4.0%. As of March 30, 2007, the total amount owed
      to
      Mr. Deitsch was $1,385,375.





*Lease
      information*




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




**Item
      13. Exhibits**





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




Report
                of Independent Registered Public Accounting Firm
            
            F-1Report
                of Independent Registered Public Accounting Firm
            
            F-2Consolidated
                Balance Sheet
            
            F-3Consolidated
                Statements of Operations
            
            F-4Consolidated
                Statements of Cash Flows
            
            F-5Consolidated
                Statement of Changes in Stockholders' Equity (Capital
                Deficit)
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-7





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





Exhibit
      Number/Description





3.1
            
            Certificate
                of Incorporation dated February 1, 2000 (incorporated by reference
                to the
                Company’s Registration Statement on Form SB-2/A, Registration No.
                33-44398, filed on April 6, 2001)3.2
            
            Certificate
                of Amendment to Articles of Incorporation dated July 5, 2000 (incorporated
                by reference to the Company’s Registration Statement on Form SB-2/A,
                Registration No. 33-44398, filed on April 6, 2001)3.3
            
            Certificate
                of Amendment to Articles of Incorporation dated October 31, 2001
                (incorporated by reference to the Company’s Registration Statement on Form
                SB-2/A, Registration No. 33-44398, filed on April 6,
                2001)10.17
            
            Termination
                Agreement between Nutra Pharma Corp, Doherty & Company, LLC, and
                Michael Doherty (incorporated by reference to Form 8-K filed on April
                7,
                2006).




36




10.18
            
            Patent
                Assignment Agreement dated January 24, 2006 between Nanologix, Inc.
                and
                Nutra Pharma Corp. (i)10.19
            
            International
                License Agreement between NanoLogix, Inc. and Nutra Pharma Corp.
                (i)13.1
            
            Report
                on Form 10-QSB for period ended September 30, 2006 filed on November
                14,
                2006 (incorporated by reference)13.2
            
            Report
                on Form 10-QSB for period ended June 30, 2006 filed on August 21,
                2006
                (incorporated by reference)13.3
            
            Report
                on Form 10-QSB for period ended March 31, 2006 filed on May 22, 2006
                (incorporated by reference)13.4
            
            Report
                on Form 10-QSB for period ended September 30, 2006 filed on November
                22,
                2005 (incorporated by reference)13.5
            
            Report
                on Form 10-QSB for period ended June 30, 2005 filed on August 23,
                2005
                (incorporated by reference)13.6
            
            Report
                on Form 10-QSB for period ended March 31, 2006 filed on May 26, 2005
                (incorporated by reference)14.1
            
            Code
                of Ethics (incorporated by reference to Report on Form 10-KSB/A filed
                on
                May 7, 2004).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.(i)
            
            Filed
                Herewith




**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.
      We
      paid Stark Winter Schenkein & Co. audit fees as follows:




2005
            
            2006$
            39,970
            
            $
            35,300




TAX
      FEES





No
      such
      fees were paid to Stark Winter Schenkein & Co. in 2005 or 2006.




ALL
        OTHER
        FEES
 
 No
        such
        fees were paid to Stark Winter Schenkein & Co. in 2005 or
        2006.






37






**SIGNATURES**





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


**NUTRA
                PHARMA CORP.**/s/ Rik
              J.
              DeitschRik
                J. Deitsch, Chairman, President, Chief Executive Officer and Chief
                Financial Officer




Dated:
      April 17, 2007




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
                Rik
                  J. Deitsch
            
            Chairman
                of the Board, President,
                Chief
                  Executive Officer and
                  Chief
                    Financial Officer
            
            April
                17, 2007/s/
                Stanley Cherelstein
                Stanley
                  Cherelstein
            
            Director
            
            April
                17, 2007/s/
                Stewart Lonky
                Stewart
                  Lonky
            
            Director
            
            April
                17, 2007/s/
                Tanvir Khandaker
                Tanvir
                  Khandaker
            
            Director
            
            April
                17, 2007





38


REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Stockholders
        and Board of Directors
 Nutra
        Pharma Corp.
 
 We
        have
        audited the accompanying consolidated balance sheet of Nutra Pharma Corp.
        (a
        Development Stage Company) as of December 31, 2006, and the related consolidated
        statements of operations, stockholders’ (deficit)and cash flows for the years
        ended December 31, 2005 and 2006, and the period from inception (February
        1,
        2000) through December 31, 2006. These financial statements are the
        responsibility of the Company's management. Our responsibility is to express
        an
        opinion on these financial statements based on our audits. The Company’s
        financial statements for the period from inception (February 1, 2000) to
        December 31, 2003, were audited by other auditors whose report dated April
        3,
        2004, express an unqualified opinion and included a going concern paragraph
        on
        those financial statements. The financial statements for the period from
        inception (February 1, 2000) to December 31, 2003, reflect a net loss of
        $4,373,948 that is included in the related total for the period from inception
        (February 1, 2000) to December 31, 2006. The other auditors report has been
        furnished to us, and our opinion, insofar as it relates to the amounts included
        for such prior period, is based solely on the report of such other auditors.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates by management, as well as evaluating
        the overall financial statement presentation. We believe that our audits
        provide
        a reasonable basis for our opinion.
 
 In
        our
        opinion, based on our audits and the report of other auditors, the financial
        statements referred to above present fairly, in all material respects, the
        financial position of Nutra Pharma Corp. (a Development Stage Company) as
        of
        December 31, 2006, and results of its operations and its cash flows for the
        years ended December 31, 2005 and 2006, and for period from inception (February
        1, 2000) through December 31, 2006, in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 1 to the financial
        statements, the Company has incurred significant losses from operations and
        has
        a working capital deficit and no revenue generating operations. These factors
        raise substantial doubt about the Company’s ability to continue as a going
        concern. Management’s plans in regard to this matter are also discussed in Note
        1. The financial statements do not include any adjustments that might result
        from the outcome of this uncertainty.
  Stark
        Winter Schenkein & Co., LLP
 
 /s/
        Stark
        Winter Schenkein & Co., LLP
  Denver,
        Colorado
 April
        5,
        2007
  F-1
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  To
        the
        Board of Directors and Stockholders of
 Nutra
        Pharma Corp.
  We
        have
        audited the consolidated statements of operations and cash flows of Nutra
        Pharma
        Corp. and its subsidiaries (the "Company"), a development stage company,
        for
        each of the periods from inception (February 1, 2000) through
        December 31, 2003, not presented herein, and the accompanying consolidated
        statements of changes in stockholders' equity for each of the periods from
        February 1, 2000 through December 31, 2003. 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 audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made 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, the statements of operations and cash flows, for each of the periods
        from February 1, 2000 through December 31, 2003, not presented herein,
        and the statement of changes in stockholders' equity for each of the periods
        from February 1, 2000 through December 31, 2003 present fairly, in all
        material respects, the consolidated results of their operations and their
        consolidated cash flows of Nutra Pharma Corp. and subsidiaries, for each
        of the
        periods from February 1, 2000 through December 31, 2003, in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has experienced recurring
        net
        losses through December 31, 2003 that raises substantial doubt about the
        Company's ability to continue as a going concern. Management's plans with
        regard
        to these matters are described in Note 1. The consolidated financial
        statements do not include any adjustments that might result from outcome
        of this
        uncertainty.
  /s/Eisner
        LLP
 Eisner
        LLP
 
 New
        York,
        New York
 April 3,
        2004
 
 F-2
  NUTRA
          PHARMA CORP.
 (A
          Development Stage Company)
 Consolidated
          Balance Sheet
 December
          31, 2006
  ASSETSCurrent
                    assets:Cash
                
                $
                18,892Inventory
                
                
                11,425Total
                    current assets
                
                
                30,317Property
                    and equipment, net
                
                
                38,481Other
                    assets
                
                
                36,960TOTAL
                    ASSETS
                
                $
                105,758LIABILITIES
                    AND STOCKHOLDERS' (DEFICIT)Current
                    liabilities:Accounts
                    payable
                
                $
                154,433Accrued
                    expenses
                
                
                461,057Due
                    to officers
                
                
                1,253,156Other
                    loans payable
                
                
                100,000Total
                    current liabilities
                
                
                1,968,646Stockholders'
                    (deficit):Common
                    stock, $0.001 par value, 2.0 billion sharesauthorized;
                    73,280,682 shares issued and outstanding
                
                
                73,280Additional
                    paid-in capital
                
                
                18,007,975(Deficit)
                    accumulated during the development stage
                
                
                (19,944,143
                )Total
                    stockholders' (deficit)
                
                
                (1,862,888
                )TOTAL
                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)
                
                $
                105,758
 
 See
          the
          accompanying notes to the financial statements.
  F-3
 NUTRA
          PHARMA CORP.
 (A
          Development Stage Company)
 Consolidated
          Statements of Operations
 For
                    thePeriod
                    FromFebruary
                    1,2000(Inception)ThroughYears
                      Ended December 31,
                
                December
                    31,2005
                
                2006
                
                2006Sales
                
                $
                -
                
                $
                20,200
                
                $
                20,200Cost
                    of sales
                
                
                -
                
                
                3,472
                
                
                3,472Gross
                    profit
                
                
                -
                
                
                16,728
                
                
                16,728Costs
                    and expenses:General
                    and administrative
                
                
                1,567,941
                
                
                1,385,971
                
                
                6,376,472Research
                    and development
                
                
                224,349
                
                
                410,920
                
                
                1,740,237General
                    and administrative - stock based compensation
                
                
                2,855,190
                
                
                605,421
                
                
                6,326,607Write-off
                    of advances to potential acquiree
                
                
                -
                
                
                -
                
                
                629,000Finance
                    costs
                
                
                -
                
                
                -
                
                
                786,000Interest
                    expense
                
                
                269,684
                
                
                45,594
                
                
                319,984Amortization
                    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
                
                
                60,000
                
                
                -
                
                
                60,000Write-off
                    of investment in Xenacare
                
                
                175,000
                
                
                -
                
                
                175,000Total
                    costs and expenses
                
                
                5,152,164
                
                
                2,447,906
                
                
                19,960,871Net
                    loss before provision (benefit) for income taxes
                
                
                (5,152,164
                )
                
                (2,431,178
                )
                
                (19,944,143
                )Provision
                    (benefit) for income taxes
                
                
                -
                
                
                -
                
                
                -Net
                    loss
                
                $
                (5,152,164
                )
                $
                (2,431,178
                )
                $
                (19,944,143
                )Per
                    share information - basic and diluted:Loss
                    per common share
                
                $
                (0.08
                )
                $
                (0.03
                )Weighted
                    average common shares outstanding
                
                
                64,404,699
                
                
                71,607,011
  See
          the
          accompanying notes to the financial statements.
  F-4
 NUTRA
          PHARMA CORP.
 (A
          Development Stage Company)
 Consolidated
          Statements of Changes in Stockholders' Equity
 Period
          From Inception (February 1, 2000) to December 31, 2006
  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 withrescission
                    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 withrescission
                    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 employeefor services
                      rendered - $.15 per share
                
                
                -
                
                
                -
                
                
                75,000
                
                
                -
                
                
                75,000Issuance
                    of common stock in connection with acquisition - $.85 per
                    share
                
                
                4,502,549
                
                
                4,503
                
                
                3,822,664
                
                
                
                
                
                3,827,167Common
                    stock deemed irretrievable in connection withrescission
                    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 withrescission
                    of acquisition
                
                
                (199,000
                )
                
                (199
                )
                
                199
                
                
                -
                
                
                -Cancellation
                    of common stock issued in connection withsettlement
                    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
                
                $
                73,280
                
                $
                18,007,975
                
                $
                (19,944,143
                )
                $
                (1,862,888
                )
  See
          the
          accompanying notes to the financial statements.
  F-5
 NUTRA
          PHARMA CORP.
 (A
          Development Stage Company)
 Consolidated
          Statements of Cash Flows
  For
                    thePeriod
                    FromFebruary
                    1,2000(Inception)Years
                    EndedThroughYears
                      Ended December 31,
                
                December
                    31,2005
                
                2006
                
                2006Cash
                    flows from operating activities:Net
                    loss
                
                $
                (5,152,164
                )
                $
                (2,431,178
                )
                $
                (19,944,143
                )Adjustments
                    to reconcile net loss to netcash
                    used in operating activities:Amortization
                    of intangibles
                
                
                -
                
                
                -
                
                
                656,732Amortization
                    of license agreement
                
                
                -
                
                
                -
                
                
                155,210Depreciation
                
                
                37,184
                
                
                22,649
                
                
                64,700Write-off
                    of advances to potential acquiree
                
                
                -
                
                
                -
                
                
                629,000Stock-based
                    compensation
                
                
                2,855,190
                
                
                605,420
                
                
                8,435,353Finance
                    costs in connection with conversion ofstockholder
                    loan into common stock
                
                
                -
                
                
                -
                
                
                786,000Expenses
                    paid by stockholder
                
                
                -
                
                
                -
                
                
                474,140Losses
                    on settlements
                
                
                -
                
                
                -
                
                
                1,261,284Write-down
                    of investment in Infectech, Inc.
                
                
                -
                
                
                -
                
                
                620,805Equity
                    in loss of unconsolidated subsidiary
                
                
                -
                
                
                -
                
                
                853,540Write-down
                    of investment in Portage BioMed
                
                
                60,000
                
                
                -
                
                
                60,000Write-down
                    of investment in Xenacare
                
                
                175,000
                
                
                -
                
                
                175,000Non-cash
                    interest expense
                
                
                269,684
                
                
                45,594
                
                
                315,278Changes
                    in operating assets and liabilities:Increase
                    in inventory
                
                
                -
                
                
                (11,425
                )
                
                (11,425
                )Decrease
                    (increase) in other assets
                
                
                5,337
                
                
                (22,286
                )
                
                (36,960
                )Increase
                    (decrease) in accounts payable
                
                
                15,362
                
                
                (5,037
                )
                
                162,572Increase
                    (decrease) in accrued expenses
                
                
                204,930
                
                
                59,182
                
                
                460,169Net
                    cash (used in) operating activities
                
                
                (1,529,477
                )
                
                (1,737,081
                )
                
                (4,882,745
                )Cash
                    flows from investing activities:Cash
                    reduction due to deconsolidation of Infectech
                
                
                -
                
                
                -
                
                
                (2,997
                )Cash
                    acquired in acquisition of Infectech
                
                
                -
                
                
                -
                
                
                3,004Acquisition
                    of property and equipment
                
                
                (29,049
                )
                
                (9,889
                )
                
                (96,029
                )Investments
                    carried at cost
                
                
                (130,000
                )
                
                -
                
                
                (235,000
                )Net
                    cash (used in) investing activities
                
                
                (159,049
                )
                
                (9,889
                )
                
                (331,022
                )Cash
                    flows from financing activities:Common
                    stock issued for cash
                
                
                1,109,800
                
                
                622,000
                
                
                2,679,500Proceeds
                    from convertible loans
                
                
                -
                
                
                -
                
                
                304,750Proceeds
                    from notes payable
                
                
                -
                
                
                100,000
                
                
                100,000Loans
                    from stockholders, net of repayments
                
                
                238,321
                
                
                974,835
                
                
                2,148,409Net
                    cash provided by financing activities
                
                
                1,348,121
                
                
                1,696,835
                
                
                5,232,659Net
                    increase (decrease) in cash
                
                
                (340,405
                )
                
                (50,135
                )
                
                18,892Cash
                    - beginning of period
                
                
                409,432
                
                
                69,027
                
                
                -Cash
                    - end of period
                
                $
                69,027
                
                $
                18,892
                
                $
                18,892Supplemental
                    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 inacquisition
                    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 considerationin
                    acquisition of Infectech, Inc.
                
                $
                -
                
                $
                -
                
                $
                4,486,375Liabilities
                    assumed in acquisition of Infectech, Inc.
                
                
                
                
                
                
                
                $
                115,586Cancellation
                    of common stock
                
                $
                -
                
                $
                -
                
                $
                14,806Value
                    of common stock issued by stockholderto
                    third party in connection with settlement
                
                $
                -
                
                $
                -
                
                $
                229,500Value
                    of common stock issued by stockholderto
                    employee for services rendered
                
                $
                -
                
                $
                -
                
                $
                75,000Net
                    deferred taxes recorded in connectionwith
                    acquisition
                
                $
                -
                
                $
                -
                
                $
                967,586Notes
                    payable settled with common stock
                
                $
                -
                
                $
                -
                
                $
                98,000Settlement
                    of stockholder loan in exchangefor
                    common stock of subsidiary
                
                $
                -
                
                $
                -
                
                $
                1,384,931Settment
                    of debt with common stock
                
                $
                206,750
                
                $
                -
                
                $
                206,750Expenses
                    paid by stockhoder
                
                $
                -
                
                $
                -
                
                $
                119,140
  See
          the
          accompanying notes to the financial statements.
  F-6
  **NUTRA
        PHARMA CORP.**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**
 
 1.
        BASIS
        OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 *Organization*
 
 Nutra
        Pharma Corp., a development stage company ("Nutra Pharma" or "the Parent")
        is a
        holding company that owns intellectual property and operations in the
        biotechnology industry. Nutra Pharma incorporated under the laws of the state
        of
        California on February 1, 2000, under the original name of
        Exotic-Bird.com.
 
 *Basis
        of Presentation*
 
 The
        Company's financial statements are presented on a going concern basis, which
        contemplates the realization of assets and satisfaction of liabilities in
        the
        normal course of business.
 
 The
        Company has experienced significant losses from operations aggregating
        $2,431,178 and $5,152,164 for the years ended December 31, 2006 and 2005,
        and an
        accumulated deficit of $19,944,143 for the period from inception to December
        31,
        2006. In addition, the Company had a working capital and stockholders’ deficit
        at December 31, 2006 of $1,862,888 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 subsidiaries Receptopharm, Inc. and Designer Diagnostics,
        Inc.
        (collectively, the "Company"). In addition, the Company consolidated Nanologix,
        Inc. (formerly known as "Infectech, Inc.") during the period from October
        31,
        2003, through September 28, 2004 (see Note 3). 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-7
 *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, 2006. 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 the property and equipment accounts while replacements,
        maintenance and repairs, which do not extend the life of the assets, are
        expensed.
 
 Depreciation
        and amortization are computed by using the straight-line method over the
        estimated useful lives of the assets. The estimated useful lives are summarized
        as follows:
  Furniture
                    and equipment
                
                
                5
                    to 7 yearsAutomotive
                    equipment
                
                
                5
                    yearsLeasehold
                    improvements
                
                
                3
                    years
  Property
        and equipment consists of the following:
 Automotive
                    equipment
                
                $
                7,500Furniture
                    and equipment
                
                
                32,579Leasehold
                    improvements
                
                
                68,560108,639Less:
                    accumulated depreciation
                
                
                (70,158
                )$
                38,481
 
 Depreciation
        charged to operations aggregated $22,649 and $37,184 during 2006 and 2005
        respectively.
 
 *Long
        Lived Assets*
 
 The
        carrying value of long-lived assets is reviewed on a regular basis for the
        existence of facts and circumstances that suggest impairment. Should there
        be an
        impairment, the Company measures the amount of the impairment based on the
        amount that the
        carrying value of the impaired asset exceeds the discounted cash flows expected
        to result from the use and eventual disposal of the from the impaired
        assets.
  F-8
  During
        the year ended December 31, 2004, the Company recorded an impairment charge
        related to its investment in Nanologix, Inc. in the amount of $620,805 (see
        Note
        3).
 
 *Research
        and Development*
 
 Research
        and development is charged to operations as incurred.
 
 *Income
        Taxes*
 
 The
        Company follows SFAS 109 "Accounting for Income Taxes" for recording the provision
        for income taxes. Deferred tax assets and liabilities are computed based
        upon
        the difference between the financial statement and income tax basis of
        assets
        and liabilities using the enacted marginal tax rate applicable when the
        related asset or liability is expected to be realized or settled. Deferred income
        tax expenses or benefits are based on the changes in the asset or liability
        each
        period. If available evidence suggests that it is more likely than
        not
        that some portion or all of the deferred tax assets will not be realized,
        a
        valuation allowance is required to reduce the deferred tax assets to the
        amount
        that is more likely than not to be realized. Future changes in such valuation
        allowance are included in the provision for deferred income taxes in the
        period
        of change.
 
 *Loss
        per Share*
 
 The
        Company calculates net income (loss) per share as required by Statement of Financial
        Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss)
        per share is 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*
 
 The
        Company accounts for equity instruments issued to employees for services
        based
        on the fair value of the equity instruments issued and accounts for equity
        instruments issued to other than employees based on the fair value of the
        consideration received or the fair value of the equity instruments, whichever
        is
        more reliably measurable.
 
 The
        Company accounts for stock based compensation in accordance with SFAS 123,
        "Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow
        companies to either expense the estimated fair value of stock options or
        to
        continue to follow the intrinsic value method set forth in APB Opinion 25,
        "Accounting for Stock Issued to Employees" (“APB 25”) but disclose the pro forma
        effects on net income (loss) had the fair value of the options been expensed.
        The Company has elected to continue to apply APB 25 in accounting for its
        stock
        option incentive plans.
 
 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 with its fiscal year beginning January 1,
        2006.
 
 F-9
  *Equity
        Method*
 
 Investments
        in entities in which the Company has a 20% to 50% interest are
 carried
        at cost, adjusted for the Company's proportionate share of the undistributed
        income (loss) (see Note 3).
  *Recent
        Accounting Pronouncements*
 
 In
        August
        2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections."
        This
        statement applies to all voluntary changes in accounting principle and to
        changes required by an accounting pronouncement if the pronouncement does
        not
        include specific transition provisions, and it changes the requirements for
        accounting for and reporting them. Unless it is impractical, the statement
        requires retrospective application of the changes to prior periods' financial
        statements. This statement is effective for accounting changes and correction
        of
        errors made in fiscal years beginning after December 15, 2005.
 
 SFAS
        155
        - "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB
        Statements No. 133 and 140" This Statement, issued in February 2006, amends
        FASB
        Statements No. 133, "Accounting for Derivative Instruments and Hedging
        Activities", and No. 140, "Accounting for Transfers and Servicing of Financial
        Assets and Extinguishments of Liabilities". This Statement resolves issues
        addressed in Statement 133 Implementation Issue No. D1, "Application of
        Statement 133 to Beneficial Interests in Securitized Financial
        Assets."
 
 This
        Statement:
 a.
        Permits fair value remeasurement for any hybrid financial instrument that
        contains an embedded derivative that otherwise would require
        bifurcation
 
 b.
        Clarifies which interest-only strips and principal-only strips are not subject
        to the requirements of Statement 133
 
 c.
        Establishes a requirement to evaluate interests in securitized financial
        assets
        to identify interests that are freestanding derivatives or that are hybrid
        financial instruments that contain an embedded derivative requiring bifurcation
 
 d.
        Clarifies that concentrations of credit risk in the form of subordination
        are
        not embedded derivatives
 
 e. Amends
        Statement 140 to eliminate the prohibition on a qualifying special-purpose
        entity from holding a derivative financial instrument that pertains to a
        beneficial interest other than another derivative financial
        instrument.
 
 This
        Statement is effective for the Company for all financial instruments acquired
        or
        issued after the beginning of our fiscal year beginning January 1,
        2007.
 
 The
        fair
        value election provided for in paragraph 4(c) of this Statement may also
        be
        applied upon adoption of this Statement for hybrid financial instruments
        that
        had been bifurcated under paragraph 12 of Statement 133 prior to the adoption
        of
        this Statement. Earlier adoption is permitted as of the beginning of our
        fiscal
        year, provided we have not yet issued financial statements, including financial
        statements for any interim period, for that fiscal year. Provisions of this
        Statement may be applied to instruments that we hold at the date of adoption
        on
        an instrument-by-instrument basis.
 
 The
        Company is currently reviewing the effects of adoption of this statement
        but it
        is not expected to have a material impact on our financial
        statements.
 
 SFAS
        156
        - "Accounting for Servicing of Financial Assets--an amendment of FASB Statement
        No. 140"
  F-10
  This
        Statement, issued in March 2006, amends FASB Statement No. 140, "Accounting
        for
        Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",
        with respect to the accounting for separately recognized servicing assets
        and
        servicing liabilities. This Statement:
 
 1.
        Requires an entity to recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        servicing contract in certain situations.
 
 2.
        Requires all separately recognized servicing assets and servicing liabilities
        to
        be initially measured at fair value, if practicable.
 
 3.
        Permits an entity to choose either the amortization method or the fair value
        measurement method for each class of separately recognized servicing assets
        and
        servicing liabilities.
 
 4.
        At its
        initial adoption, permits a one-time reclassification of available-for-sale
        securities to trading securities by entities with recognized servicing rights,
        without calling into question the treatment of other available-for-sale
        securities under Statement 115, provided that the available-for-sale securities
        are identified in some manner as offsetting the entity's exposure to changes
        in
        fair value of servicing assets or servicing liabilities that a servicer elects
        to subsequently measure at fair value.
 
 5.
        Requires separate presentation of servicing assets and servicing liabilities
        subsequently measured at fair value in the statement of financial position
        and
        additional disclosures for all separately recognized servicing assets and
        servicing liabilities.
 
 Adoption
        of this Statement is required as of the beginning of the first fiscal year
        that
        begins after September 15, 2006. The adoption of this statement is not expected
        to have a material impact on our financial statements.
 
 In
        September 2006, the FASB issued Statement No. 157, "Fair Value Measurements".
        This Statement defines fair value, establishes a framework for measuring
        fair
        value in generally accepted accounting principles and expands disclosure
        about
        fair value measurement. The implementation of this guidance is not expected
        to
        have any impact on the Company's financial statements.
 
 In
        September 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 158, "Employers' Accounting for Defined
        Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
        No. 87, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires companies
        to
        recognize a net liability or asset and an offsetting adjustment to accumulated
        other comprehensive income to report the funded status of defined benefit
        pension and other postretirement benefit plans. SFAS No. 158 requires
        prospective application, recognition and disclosure requirements effective
        for
        the Company's fiscal year ending December 31, 2007. Additionally, SFAS No.
        158
        requires companies to measure plan assets and obligations at their year-end
        balance sheet date. This requirement is effective for the Company's fiscal
        year
        ending December 31, 2009. The Company does not expect that it will have a
        material impact on its financial statements.
 
 In
        September 2006, the United States Securities and Exchange Commission ("SEC")
        SAB
        No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying
        Misstatements in Current Year Financial Statements." This SAB provides guidance
        on the consideration of the effects of prior year misstatements in quantifying
        current year misstatements for the purpose of a materiality assessment. SAB
        108
        establishes an approach that requires quantification of financial statement
        errors based on the effects of each of the company's balance sheet and statement
        of operations financial statements and the related financial statement
        disclosures. The SAB permits existing public companies to record the cumulative
        effect of initially applying this approach in the first year ending after
        November 15, 2006 by recording the necessary correcting adjustments to the
        carrying values of assets and liabilities as of the beginning
        of that
        year
        with the offsetting adjustment recorded to the opening balance of retained
        earnings. Additionally, the use of the cumulative effect transition method
        requires detailed disclosure of the nature and amount of each individual
        error
        being corrected through the cumulative adjustment and how and when it arose.
        The
        Company is currently evaluating the impact, if any, that SAB 108 may have
        on the
        Company's results of operations or financial position.
  F-11
  In
        July
        2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
        in
        Income Taxes-an interpretation of FASB Statement No. 109." This Interpretation
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. This Interpretation also provides guidance on
        derecognition, classification, interest and penalties, accounting in interim
        periods, disclosure, and transition. The Interpretation is effective for
        fiscal
        years beginning after December 15, 2006 and the Company is currently evaluating
        the impact, if any, that FASB No. 48 may have on the Company's results of
        operations or financial position.
 
 2.
        ACQUISITIONS, JOINT VENTURE AND RESCISSIONS
 
 *Acquisition
        of Nutra Pharma, Inc.*
 
 On
        November 23, 2001, the Company acquired 100% of the issued and outstanding common
        stock of Nutra Pharma, Inc. ("NPI"), a privately held company, from its sole
        stockholder, pursuant to an agreement and plan for exchange of common stock.
        NPI was formed on May 3, 2001 under the laws of the State of Nevada and at
        the
        time of this acquisition, its only asset was an exclusive worldwide license
        agreement (the "License Agreement") to distribute a medicinal compound. The
        principal products that were intended to be developed from this medicinal compound
        were products designed to treat and heal open wounds and other skin disorders
        such as acne and psoriasis. NPI was a development stage company, as it had
        not
        realized any revenue from the date of its inception on May 3, 2001 through
        the date that it was acquired by the Company.
 
 The
        Company issued 4,500,000 shares of its restricted common stock to NPI's sole
        stockholder, in exchange for the outstanding common stock of NPI. At the
        time of
        the acquisition, NPI owed $1,750,000 to Terra BioPharma, S.A. ("TBPH"), a
        Panamanian company, as the licensor under the License Agreement. The term
        of the
        License Agreement was for a period of five (5) years commencing in May 2001.
        Payments to TBPH under the License Agreement were to be made in installments
        through May 2003.
 
 This
        acquisition was accounted for as the purchase of a license. The Company valued
        the shares issued in this transaction at $0.025 per share, the price at which
        the
        Company sold shares of its common stock in a self-underwritten public offering
        in May 2001, for a total value of $112,500. The Company recorded the cost
        of
        the license at $1,862,500, which was equal to the $1,750,000 owed to TBPH
        plus
        the $112,500 value of the 4,500,000 shares issued.
  *Joint
        Venture with Terra BioPharma*
 
 On
        January 30, 2002, the Company entered into a Joint Venture Agreement (the
        "JV
        Agreement") with TBPH, whereby it acquired a 50% ownership interest in a
        newly
        formed Panamanian company called Terra Nutra, S.A. ("Terra Nutra"). This
        JV
        Agreement superseded the License Agreement between TBPH and NPI. The purpose
        of
        the joint venture was to patent the raw material composition, manufacturing
        process and various uses of the medicinal compound that was the subject of
        the
        License Agreement between TBPH and NPI. Pursuant to the JV Agreement, the
        parties agreed that the patent for the raw material composition and the patent
        for the manufacturing process would be owned by TBPH. Terra Nutra would own
        all
        future patents for all subsequent uses and products.
 
 F-12
  As
        part
        of the JV Agreement, the Company agreed to pay $1,740,000 to TBPH to secure
        the
        exclusive, worldwide distribution rights to all products derived from the
        medicinal compound. This sum was to be paid in monthly installments of varying
        amounts over a sixteen (16) month period beginning in July 2002. The Company
        also agreed to pay all costs associated with purchasing and developing the
        land
        that was to be used for growing the raw material that was required to produce
        the medicinal compound, the costs associated with the construction of a
        manufacturing plant used to process the raw material and the costs associated
        with clinical trials and patent applications. The JV Agreement acknowledged
        that
        amounts paid toward these costs would be deducted from the amounts owing
        under
        the License Agreement. The Company also agreed to pay a 3% royalty to TBPH
        on
        gross sales from any product ultimately derived from the medicinal
        compound.
 
 *Rescission
        of Acquisition of Nutra Pharma Inc., and Joint Venture with Terra* *BioPharma*
 
 On
        May
        14, 2002, the Company notified TBPH of its intent to rescind the JV Agreement.
        The Company also notified NPI's sole stockholder of its intent to rescind
        the
        NPI Agreement to recover the 4,500,000 shares that were issued to NPI's sole
        stockholder in connection with the November 23, 2001 NPI Agreement. The Company
        also notified certain other stockholders holding a portion of the 4,500,000
        shares of common stock (the "Individual Stockholders") that had received
        shares
        through a transfer from NPI's sole stockholder. The notifications specified
        that
        the Company had rescinded the NPI Agreement and had instructed its transfer
        agent to place a stop transfer on all stock certificates that represented
        the
        4,500,000 shares issued in connection with the NPI Agreement.
 
 On
        October 23, 2002, the Company received a total of 2,037,500 shares of its
        common
        stock from a group that included NPI's sole stockholder and other Individual
        Stockholders. These shares were cancelled and returned to the Company's
        Treasury.
 
 On
        December 23, 2002, the Company, and NPI's sole stockholder agreed to rescind
        the
        NPI Agreement dated November 23, 2001. Pursuant to a Rescission, Settlement
        and
        Release Agreement, NPI's sole stockholder agreed to facilitate the return
        of
        2,092,500 of the 4,500,000 shares of common stock that were issued by the
        Company in connection with the NPI Agreement. Of the 2,092,500 shares, 2,037,500
        were previously returned on October 23, 2002. As part of this Rescission
        Agreement, upon the receipt by the Company of the additional 55,000 shares,
        NPI's sole stockholder would receive 450,000 shares of common stock directly
        from an existing stockholder who was also an Officer and Director of the
        Company.
 
 On
        January 17, 2003, the Company received a total of 55,000 shares of its common
        stock from three Individual Stockholders. These shares were cancelled and
        returned to the Company's Treasury.
 
 On
        February 10, 2003, the Company received 1,000,000 shares of its common stock
        from an Individual Stockholder. These shares were cancelled and returned
        to
        Treasury.
 
 On
        June
        19, 2003, the Company received 1,000,000 shares of its common stock from
        an
        Individual Stockholder. These shares were cancelled and returned to
        Treasury.
 
 On
        January 21, 2004, the Company received 150,000 shares of its common stock
        from
        an Individual Stockholder. These shares were cancelled and returned to
        Treasury.
 
 On
        February 23, 2004, the Company received 30,000 shares of its common stock
        from
        an Individual Stockholder. These shares were cancelled and returned to
        Treasury.
 
 At
        March
        31, 2004, the Company had an agreement in place to recover an additional
        15,000
        shares from an Individual Stockholder. Upon the return of those shares in
        August
        2004, a total of 4,287,500 of the 4,500,000 shares originally issued to NPI's
        sole stockholder have been returned. The remaining 212,500 shares were deemed
        by
        the Company to be irretrievable, and accordingly, the Company recorded a
        charge
        to operations of $23,375 in 2003 for these shares.
 
 F-13
  On
        May
        19, 2004, the Company received 4,000 shares of its common stock from an
        Individual Stockholder. These shares were cancelled and returned to Treasury.
        The Company had previously included these 4,000 shares as part of the 212,500
        shares that it deemed to irretrievable.
 
 In
        connection with these transactions, the Company recorded a loss on settlement
        of
        $53,340 in 2002, representing the write-off of the carrying value of the
        unamortized license agreement of $1,707,290, the cancellation of the remaining
        obligation to TBPH of $1,541,450 and the reduction to additional paid-in
        capital
        for the value of the common shares issued to NPI's sole stockholder of $112,500.
        Common shares received subsequent thereto have been cancelled and reflected
        as a
        reduction in the par value of common stock and a corresponding increase in
        additional paid-in capital. In addition, the 450,000 common shares transferred
        to NPI's sole stockholder by a stockholder of the Company was valued at market
        value of $229,500 on the date of transfer and has been recorded as a charge
        to
        operations in 2003 with a corresponding increase to additional paid-in
        capital.
 
 *Failed
        Acquisition of Bio Therapeutics, Inc.:*
 
 On
        May
        30, 2002, the Company entered into a definitive agreement (the "Share Exchange
        Agreement") to acquire 100% of the issued and outstanding common stock of
        Bio
        Therapeutics, Inc. ("Bio Therapeutics"), a privately held Florida corporation.
        Pursuant to this Share Exchange Agreement, the Company was obligated to issue
        11,137,139 shares of common stock in exchange for an equal number of shares
        of
        Bio Therapeutics, which represented 100% of the issued and outstanding common
        stock of Bio Therapeutics. The Share Exchange Agreement also contained a
        provision that in the event the Company's common stock was trading below
        $2.40
        on the closing date, the Company would be obligated to issue additional shares
        of its common stock to the stockholders of Bio Therapeutics in order to ascribe
        a final value of $2.40 for each share of Bio Therapeutics stock. In addition,
        as
        part of this Share Exchange Agreement, the Company agreed to loan Bio
        Therapeutics up to $500,000 for working capital purposes. The closing of
        this
        transaction was contingent upon the Company raising a minimum of $1,500,000
        through a private placement of its common stock. The Share Exchange Agreement
        also provided that the shares of the Company and the shares Bio Therapeutics
        that are being exchanged would be held by an escrow agent, who would hold
        all of
        the subject shares, and release them to the respective parties, only upon
        receiving written proof that the Company had successfully raised a minimum
        of
        $1,500,000.
 
 On
        August
        12, 2002, the Company entered into a Closing Agreement for the Exchange of
        Common Stock (the "Closing Agreement"), which amended the Share Exchange
        Agreement between the parties. The Closing Agreement stipulated that: (i)
        the
        Company had satisfied its obligation to loan up to $500,000 to Bio Therapeutics,
        and (ii) the closing shall take place in two phases. In connection with the
        First Closing, the Company was obligated to issue 11,130,889 shares of its
        common stock in exchange for an equal amount of Bio Therapeutics common stock,
        which represented 100% of the issued and outstanding common stock of Bio
        Therapeutics. All share certificates to be issued by each party would be
        issued
        to a Trustee who would hold the shares until the Final Closing. The Final
        Closing was contingent upon the Company raising a minimum of $1,500,000 through
        a private placement of its common stock.
 
 On
        September 27, 2002, the parties further amended the Closing Agreement as
        follows: (i) the number of shares to be issued by the Company in exchange
        for
        100% of the issued and outstanding shares of Bio Therapeutics is now 1,790,889,
        and (ii) in the event that the Company's common stock was trading below $1.20
        on
        the closing date, the Company would be obligated to issue additional shares
        of
        its common stock to the shareholders of Bio Therapeutics in order to ascribe
        a
        final value of $1.20 for each share of Bio Therapeutics stock.
 
 As
        of
        December 31, 2002, the Company had written off its loan receivable balance
        of
        $629,000, due to uncertainty about the extent and timing of
        collection.
 
 F-14
  On
        April
        23, 2003, Bio Therapeutics withdrew from and terminated the Share Exchange
        Agreement due to the fact that the Company had been unsuccessful in raising
        the
        minimum amount of $1,500,000 through a private placement of its common stock.
        Upon the termination of the Share Exchange Agreement, the Trustee returned
        certificates representing a total of 9,156,961 shares of the Company's common
        stock to the Company for cancellation. The Trustee returned an equal amount
        of
        Bio Therapeutics stock to Bio Therapeutics's legal counsel. The number of
        shares
        returned by the Trustee to the Company and Bio Therapeutics in connection
        with
        the termination of the Share Exchange Agreement represented 100% of the shares
        issued by each party.
  On
        May
        21, 2003, the Company commenced legal proceedings against Bio Therapeutics
        in
        order to collect amounts owing under the loan that the Company made to Bio
        Therapeutics in connection with the Share Exchange Agreement.
 
 On
        November 14, 2003, the Company entered into a final Settlement Agreement
        (the
        "Settlement") with Bio Therapeutics. The Settlement provided for the dismissal
        of the lawsuit that the Company initiated against Bio Therapeutics. The
        Settlement also provided the Company with a non-exclusive license to certain
        intellectual property of Bio Therapeutics, including patents and patents
        pending
        for the development of therapies for Multiple Sclerosis and HIV. Also as
        part of
        the Settlement, the Company agreed to extinguish the entire amount of the
        loan
        receivable from Bio Therapeutics. With respect to the license received in
        connection with the Settlement, the Company deemed it to have a nominal value
        as
        its fair market value was not readily ascertainable. See Note 12.
 
 3.
        NANOLOGIX, INC. (FORMERLY INFECTECH, INC.)
 
 On
        September 19, 2003, the Company entered into an agreement (“Acquisition
        Agreement”) to acquire up to 100% of the issued and outstanding common stock of
        Nanologix, Inc., a Delaware corporation (“Nanologix”). Nanologix is a
        development stage company based in Sharon, Pennsylvania, which is engaged
        in the
        development of diagnostic test kits used for the rapid identification of
        infectious human and animal diseases. Nanologix owns patented technologies,
        which allow for the rapid detection of disease-causing pathogens. Nanologix
        also
        owns a patented technology designed for use in the bioremediation of
        contaminated soil and water.
 
 The
        Acquisition Agreement provided for the acquisition by the Company of up to
        100%
        of the issued and outstanding common stock of Nanologix, through an exchange
        of
        one (1) share of the Company’s common stock for every two (2) shares
        of Nanologix common stock. The Company recorded the acquisition of Nanologix
        as
        the purchase of assets, principally patents and other intangibles. The value
        of
        the Company’s common stock issued in connection with this transaction was $0.85
        per share, which was the market value of the Company’s common stock on
        September 22, 2003, the date the terms of the acquisition were agreed to
        and announced.
 
 Through
        December 31, 2003, the Company issued an aggregate of 4,502,549 shares of
        its common stock in exchange for 9,005,098 shares of Nanologix common stock.
        This initial exchange resulted in the Company owning approximately 58% of
        the
        issued and outstanding common stock of Nanologix. In January 2004, the
        Company issued an additional 426,275 shares of its common stock, in exchange
        for
        852,550 shares of Nanologix common stock. In September 2004, the Company
        issued an additional 293,288 shares of its common stock in exchange for 586,576
        shares of Nanologix common stock. These exchanges increased the Company’s
        ownership interest in Nanologix from 58% to 67%.
 
 On
        September 28, 2004, the Company transferred 6,000,000 shares of Nanologix,
        Inc. common stock to a shareholder of Nutra Pharma, to discharge a $1,384,931
        demand loan from such shareholder. After giving effect to this transfer,
        the
        Company owned a total of 4,444,224 shares or approximately 29% of the issued
        and
        outstanding common stock of Nanologix (which was 15,537,050
        shares).
 
 F-15
  Subsequent
        to September 28, 2004, the Company owned a minority interest in Nanologix
        and accordingly, applied the equity method of accounting to its investment
        in
        Nanologix. The Company’s share of Nanologix’s earnings or losses is included in
        its statement of operations as a single amount. During the year ended
        December 31, 2004, Nanologix incurred a loss of $6,658,838. The Company’s
        portion of the loss using the equity method of accounting of $1,664,710 exceeded
        the carrying value of the Company’s investment which was $853,540 at
        December 31, 2004, and as such, the $853,540 was charged to operations at
        December 31, 2004. This charge reduced the carrying value of the Company’s
        investment in Nanologix to $0.
 
 At
        December 31, 2005, the Company owned a total of 4,556,174 shares of the
        issued and outstanding common stock of Nanologix. These shares were returned
        to
        Nanologix on January 25, 2006, (see below).
 
 The
        aggregate market value of the Company’s 4,556,174 shares of Nanologix common
        stock, based on the trading price of Nanologix common stock as quoted on
        the
        pink sheets of $.08 per share at December 31, 2005, was $364,494.
 
 On
        January 25, 2006, the Company and Nanologix entered into a definitive agreement
        pursuant to which Nanologix agreed to assign its ownership of 11 patents
        to the
        Company which protect Nanologix' infectious disease diagnostic test kit
        technology. Nanologix also granted the Company a license to utilize 18
        additional patents related to the diagnostic test kits. As consideration,
        the
        Company agreed to return 100% or 4,556,174 shares of common stock of Nanologix
        that it owned to Nanologix. In addition, the Company agreed to pay Nanologix
        a
        royalty of 6% of gross sales of any products that are developed which utilize
        any of the 29 licensed patents. The Company also issued Nanologix a five-year
        option to purchase 1,000,000 of the Company's common stock at an exercise
        price
        of $.20.
  4.
        ACQUISITION OF RECEPTOPHARM, INC.
 
 On
        December 12, 2003, the Company entered into an acquisition agreement (the
“Agreement”), whereby it agreed to acquire up to a 49.5% interest in
        ReceptoPharm, Inc. (“ReceptoPharm”), a privately held biopharmaceutical company
        based in Ft. Lauderdale, Florida. ReceptoPharm is a development stage company
        engaged in the research and development of proprietary therapeutic proteins
        for
        the treatment of several chronic viral, autoimmune and neuro-degenerative
        diseases.
 
 Pursuant
        to the Agreement, the Company acquired its interest in ReceptoPharm’s common
        equity for $2,000,000 in cash, which equates to a purchase price of $.45
        per
        share. ReceptoPharm intends to use such funds to further research and
        development, which could significantly impact future results of
        operations.
 
 At
        December 31, 2005, the Company had funded a total of $1,860,000 to ReceptoPharm
        under the Agreement, which equated to a 37% ownership interest in ReceptoPharm.
        In February 2006, the Company funded an additional $140,000 to ReceptoPharm,
        thereby completing the $2,000,000 investment. As of December 31, 2006, the
        Company owns 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 is treating its capital investment in
        ReceptoPharm as a vehicle for research and development. Because the Company
        is
        solely providing financial support to further the research and development
        of
        ReceptoPharm, such amounts are being charged to expense as incurred by
        ReceptoPharm. ReceptoPharm presently has no ability to fund these activities
        and
        is dependent on the Company to fund its operations. In these circumstances,
        ReceptoPharm is considered a variable interest entity and has been consolidated.
        The creditors of ReceptoPharm do not have recourse to the general credit
        of the
        Company.
 
 F-16
  A
        summary
        of financial position and results of operations of Receptopharm is as
        follows:
 2006
                
                2005Current
                    assets
                
                $
                11,134
                
                $
                73,116Property
                    and equipment
                
                
                38,481
                
                
                51,240Other
                    assets
                
                
                8,133
                
                
                8,133$
                57,748
                
                $
                132,489Current
                    liabilities
                
                $
                1,465,909
                
                $
                561,095Stockholders'
                    deficit
                
                
                (1,408,161
                )
                
                (428,606
                )$
                57,748
                
                $
                132,489Sales
                
                $
                -
                
                $
                -Net
                    loss
                
                $
                (1,130,804
                )
                $
                (1,602,577
                )
  5.
        SETTLEMENT OF DEMAND LOAN - STOCKHOLDER
 
 From
        inception to May 2004, the Company funded its ongoing operational costs through
        unsecured, non-interest bearing, demand loans from certain of its shareholders,
        which included loans from the Company's former Chairman of the Board, Zirk
        Engelbrecht. At June 30, 2004, the balance on the loan due to Mr. Engelbrecht
        was $1,384,931. On August 1, 2004, Mr. Engelbrecht assigned the loan to Opus
        International, LLC, a company that Mr. Engelbrecht claims is controlled by
        his
        wife, Marcy Engelbrecht. On or about August 9, 2004, a Managing Member of
        Opus
        International, LLC made a formal demand for repayment of the loan in the
        amount
        of $1,384,931.
 
 On
        September 28, 2004, the Company entered into a settlement agreement with
        Opus
        International, which provided for the following terms:
  ·
  ·
  · The
        Company accepted the resignation of Mitchell Felder and David C. McClelland
        as
        directors.
 
 In
        connection with the settlement, the Company recorded a loss of $955,069,
        representing the difference between the Company's carrying value per share
        of
        the Nanologix common stock and the value of the Nanologix common stock ascribed
        in the settlement which was $0.23 per share.
  6.
        CONVERTIBLE LOANS
 
 In
        November 2004, in accordance with the terms of completed Subscription
        Agreements, the Company received total proceeds of $206,750 from four
        (4) investors. These agreements provide that upon the expiration of a
        6 month term from the date of execution, each of the four investors has the
        option of: (a) being repaid the amount of their investment together with
        15% interest per annum; (b) converting their investment into shares of the
        Company’s common stock at a conversion price of $0.17 per
        share
        up to an aggregate of 1,216,176 shares, if all four investors convert; or
        (c)
        converting their investment into a number of shares of common stock of the
        Company equal to the sum of the principal and accrued interest on the note,
        divided by the conversion price equal to a price which is 35% below (i) the
        average of the last reported sales prices for the shares of Common Stock
        on the
        NASDAQ National Market, the American Stock Exchange, the NASDAQ Small Cap
        Market
        or the Over-the-Counter Bulletin Board for the 5 trading days immediately
        prior
        to such date or (ii) if there have been no sales on any such market on any
        applicable day, the average of the highest bid and lowest ask prices on such
        market at the end of any applicable day, or (iii) if the market value cannot
        be
        calculated as of such date on any of the foregoing bases, the Market Price
        will
        be at the fair market value as reasonably determined in good faith by our
        Board
        of Directors.
  F-17
  Each
        investor had piggyback registration rights that would have required the Company
        to register any shares held by them if the Company voluntarily filed a
        registration statement, or immediately if an investor decided to convert
        their
        investment into shares of common stock.
 
 In
        May 2005, the loan holders amended their original agreements. The new
        agreements released the Company from its requirements to register the loan
        holders’ shares. Each loan holder received approximately ten percent in
        additional shares as part of the new agreement. In full settlement of the
        debt,
        the Company issued an aggregate of 1,458,000 shares of common stock to settle
        the debt. The fair value of these shares at the date of the settlement was
        $481,140. The Company recorded interest expense of $261,782 for the value
        of the
        shares in excess of the debt settled. (See Note 8.)
  7.
        DUE TO
        OFFICERS
 
 At
        December 31, 2005, the Company owed its President, Rik Deitsch $90,000 in
        connection with demand loans made to the Company by Mr. Deitsch. During the
        year
        ended December 31, 2006, the Company borrowed and additional $1,023,375 from
        Mr.
        Deitsch. The balance owed to Mr. Deitsch at December 31, 2006 is $1,113,375
        plus
        accrued interest of $40,000. This demand loan is unsecured and bears interest
        at
        a rate of 4.0%.
  At
        December 31, 2005, the Company's subsidiary ReceptoPharm owed in the aggregate
        $148,321 to three of its officers in connection with demand loans made by
        such
        officers during 2005. These demand loans are unsecured and bear interest
        at a
        rate of 5.0%. Interest added to these loans during 2006 was $5,594. Also,
        in
        2006, ReceptoPharm repaid a total of $48,540 to the three officers under
        these
        loans resulting in one of the officer loans being repaid in full. As a result,
        at December 31, 2006, ReceptoPharm owed an aggregate of $99,781 to two of
        its
        officers.
  8.
        STOCKHOLDERS' DEFICIT
 
 On
        October 31, 2001, Nutra Pharma amended its articles of incorporation to increase
        the number of authorized shares of common stock from 100,000,000 to 2
        billion.
 
 On
        November 7, 2001, Nutra Pharma affected a 20-for-1 forward stock split which
        increased the total issued and outstanding shares of common stock from 2,000,000
        shares to 40,000,000 shares. All share and per share amounts have been
        retroactively adjusted for all periods presented to reflect the stock
        split.
 
 In
        May
        2001, the Company raised $25,000 through the sale of 1,000,000 shares of
        its
        common stock at a price of $0.025 per share in a self-underwritten initial
        public offering.
 
 In
        November 23, 2001, the Company issued 4,500,000 shares in connection with
        the
        acquisition of Nutra Pharma, Inc. (see Note 2 - Acquisitions, Joint Venture
        and
        Rescissions). The Company valued the 4,500,000 shares issued in this transaction
        at a price of $0.025 per share, for a total value of $112,500. The value
        of
        $0.025 per share
        was
        based on the price at which the Company sold shares of its common stock in
        an
        initial public offering in May 2001, the most recent cash transaction of
        its
        common stock.
  F-18
  On
        April
        23, 2002, the Company issued 1,000,000 shares of restricted common stock
        to a
        lender as collateral for a loan. The loan was never funded and the Company
        placed a stop transfer order on the stock certificate. The lender is currently
        in Chapter 11 Bankruptcy. These shares have not been reflected as issued
        and
        outstanding.
 
 On
        May
        23, 2002, a stockholder of the Company returned a total of 10,394,000 shares
        of
        common stock to the Company for cancellation. The Company did not pay any
        consideration to the stockholder. Accordingly, the Company adjusted
        stockholders' equity for the treasury shares with no cost.
 
 In
        2002,
        the Company issued a total of 656,000 shares of restricted common stock to
        various individuals and companies in exchange for services rendered. These
        issuances were made at various times throughout the year. The Company recorded
        stock-based compensation expense of $671,530 to reflect the fair market value
        of
        the common stock issued. Fair market value was based on the closing price
        of the
        Company's common stock on the date of each grant.
 
 On
        December 23, 2002, the Company rescinded the NPI Agreement dated November
        23,
        2001, pursuant to a Rescission, Settlement and Release Agreement. NPI's sole
        stockholder agreed to facilitate the return of 2,092,500 of the 4,500,000
        shares
        of common stock to the Company for cancellation. Subsequently, through December
        31, 2004, an additional 2,199,000 shares were returned to the Company by
        Individual Stockholders that received shares of common stock of the Company
        directly from NPI's sole stockholder. The
        remaining 208,500 shares are deemed by the Company to be irretrievable, and
        accordingly, the Company recorded a charge to operations of $23,375 for these
        shares in 2003. As
        part
        of this Rescission Agreement, NPI's sole stockholder received 450,000 shares
        of
        common stock directly from an existing stockholder who was also an Officer
        and
        Director of the Company. The Company recorded a charge to operations of $229,500
        in 2003 to reflect the value of the settlement for the benefit of the
        Company.
 
 In
        June
        2003, a stockholder of the Company transferred 500,000 shares of his common
        stock to the Company's President/Chief Executive Officer. Such shares were
        valued at $75,000, the fair market value on the date of the transfer, and
        the
        accompanying financial statements have been revised to reflect a charge to
        operations as compensation with a corresponding increase in additional
        paid-in-capital.
 
 On
        June 9, 2003, the Company converted a stockholder loan payable in the
        amount of $862,012, by issuing 10,300,000 shares of its restricted common
        stock.
 The conversion price of $0.08 represented a discount of approximately 50%
        from the fair market value of the common stock as measured by the closing
        price
        on the day prior to the conversion.  Accordingly, the Company recorded
        financing costs of $786,000 in connection with this transaction.
 
 In
        2003,
        the Company issued a total of 2,196,828 shares of restricted common stock,
        including 15,000 shares issued pursuant to the Company's Equity Compensation
        Plan to various individuals and companies in exchange for services rendered.
        Of
        this total, 1,500,000 shares were issued to officers and directors of the
        Company. These issuances were made at various times throughout the year.
        The
        Company recorded stock-based compensation expense of $1,360,267 to reflect
        the
        fair market value of the common stock issued. Fair market value was based
        on the
        closing price of the Company's common stock on the date of each
        grant.
 
 In
        2003,
        the Company issued a total of 4,502,549 shares of common stock in connection
        with its acquisition of Nanologix, Inc., which was valued at
        $3,827,167.
  F-19
  During
        the year ended December 31, 2004, the Company sold 5,390,000 shares of
        restricted common stock at $.17 per share and received proceeds of $922,700.
        Of
        the shares sold 1,285,000 were issued at December 31, 2004, and 4,105,000
        shares
        were recorded as a subscription.
 
 During
        the year ended December 31, 2004, the Company issued a total of 4,054,200
        shares
        of restricted common stock to various individuals and companies and accepted
        subscriptions for 2,000,000 shares of common stock from officers and directors
        in exchange for services rendered. These issuances were made at various times
        throughout the year. The Company recorded stock-based compensation expense
        of
        $2,865,996 to reflect the fair market value of the common stock issued. Fair
        market value was based on the closing price of the Company's common stock
        on the
        date of each grant, which ranged from $0.24 to $0.66 per share.
 
 During
        the year ended December 31, 2004, the Company issued a total of 775,538 shares
        of restricted common stock in connection with its acquisition of Nanologix,
        Inc., which was valued at $0.85 per share for a total of $659,207. This issuance
        was made in connection with the September 19, 2003, Acquisition Agreement
        between the Company and Nanologix, Inc.
 
 In
        June
        and July 2004, the Company received total proceeds of $98,000 from seven
        (7)
        investors. At the expiration of 90 days, each of the seven investors had
        the
        option of: (a) being repaid the amount of their investment together with
        15%
        interest; (b) converting their investment into shares of the Company's common
        stock at the price of $0.20 per share, or (c) converting their investment
        into
        shares of common stock of Nanologix, Inc at the price $0.10 per share. Upon
        the
        expiration of the 90-day term, each investor opted to convert their investment
        into Nanologix shares. The Company arranged for a former Nanologix
        officer/director, Robert Ollar, to deliver his own shares of Nanologix common
        stock to the seven investors in full satisfaction of the $98,000 that the
        investors had lent to the Company. These shares did not have a restrictive
        legend on the certificates. In exchange for Robert Ollar using his 1,590,133
        shares of Nanologix, the Company issued him 595,067 shares of its common
        stock
        on November 18, 2004.
 
 During
        2004 certain third parties returned an aggregate of 120,000 shares of common
        stock for cancellation.
 
 During
        the year ended December 31, 2005, the Company sold 790,000 shares of restricted
        common stock at $.17 per share and received proceeds of $134,300. The Company
        also issued 4,877,500 shares of restricted common stock at $.20 per share
        and
        received proceeds of $975,500.
 
 In
        May
        2005, the Company issued an aggregate of 1,458,000 shares of common stock
        to
        settle the debt described in Note 5. The fair value of these shares at the
        date
        of the settlement was $481,140. The Company recorded a charge to interest
        expense of $261,782 for the value of the shares in excess of the debt
        settled.
 
 In
        October 2005, the Company entered into a one-year consulting agreement with
        Xinhua Financial Network whereby Xinhua was retained to introduce the Company
        to
        potential strategic and operational partners in The People's Republic of
        China
        and elsewhere in Asia. In connection with this agreement, the Company issued
        a 5
        year warrant to purchase 10,000,000 of common stock to Xinhua at a price
        of
        $.70. The warrant is callable by the Company at a price of $1.00 in the event
        that market price for the Company's common stock exceeds $1.00.
 
 The
        Company recorded stock based compensation expense of $1,500,000 to reflect
        the
        fair market value of the warrant on the date of issuance. Fair market value
        was
        calculated using the Black-Scholes option pricing model with the following
        assumptions: expected holding period of 5 years; expected volatility of 125%;
        risk free interest rate of 4.0%.
 
 F-20
  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.
 
 Equity
        Compensation Plans
 
 On
        December 3, 2003, the Board of Directors of the Company approved the
        Employee/Consultant Stock Compensation Plan (the "Plan"). The purpose of
        the
 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 Plan is 2,500,000.
 
 The
        Board
        of Directors is responsible for the administration of the Plan and has full
        authority to grant awards under the Plan. Awards may take the form of stock
        grants, options or warrants to purchase common stock. The Board of Directors
        has
        the authority to determine: (a) the employees and consultants that will receive
        awards under the Plan, (b) the number of shares, options or warrants to be
        granted to each employee or consultant, (c) the exercise price, term and
        vesting
        periods, if any, in connection with an option grant, and (d) the purchase
        price
        and vesting period, if any, in connection with the granting of a warrant
        to
        purchase shares of common stock of the Company.
 
 As
        of
        December 31, 2006, the Company had issued a total of 2,495,000 shares under
        the
        Plan. These shares were issued to various consultants for services rendered
        to
        the Company during 2003 and 2004.
  9.
        STOCK
        OPTIONS
 
 Nanologix
        Inc.
 
 On
        January 25, 2006, the Company and Nanologix entered into a definitive agreement
        pursuant to which Nanologix agreed to assign its ownership of 11 patents
        to the
        Company which protect Nanologix' infectious disease diagnostic test kit
        technology (See Note 3.) In connection with this agreement, the Company also
        issued Nanologix a five-year option to purchase 1,000,000 of the Company's
        common stock at an exercise price of $.20. This option vested immediately
        on
        January 25, 2006, the date of grant.
  F-21
  The
        Company recorded stock based compensation expense of $210,000 to reflect
        the
        fair value of the option grant. The fair value of the option grant was estimated
        on the date of grant using the Black-Scholes option pricing model with the
        following assumptions: expected volatility 125%; risk-free interest rate
        of
        4.0%; expected life of 5 years; and no expected dividends.
 
 Doherty
        & Company, LLC
 
 On
        June 1, 2005 the Company retained Doherty & Company, LLC (“Doherty
& Company”), to provide the services of Michael Doherty as executive
        Chairman of the Company. Concurrently, the Company also retained Doherty
&
Company to act as the Company’s agent in connection with prospective private
        capital-raising activities.
 
 The
        Company granted a five-year option to purchase Thirteen Million Six Hundred
        Thousand (13,600,000) shares of the Company’s common stock at an exercise price
        equal to $0.27 per share, vesting over a two-year period. The option expires
        on
        May 31, 2010. The initial vesting of 6,800,000 options was contingent on
        the Company, through the efforts of Mr. Doherty and Doherty & Company,
        raising at least $500,000 of additional equity, debt or equity linked financing
        prior to October 31, 2005. This contingency was not met, and as of December
        31, 2005, none of the 13,600,000 options were vested.
 
 On
        April
        1, 2006, the Company and Mr. Doherty entered into a termination agreement
        whereby Mr. Doherty agreed to resign his position as Chairman of Board of
        the
        Company. Upon the effectiveness of the termination agreement on April 1,
        2006,
        the Company issued a five-year option to Mr. Doherty to purchase 2,000,000
        shares of common stock at an exercise price of $.27 per share. The option
        vested
        immediately on the date of grant. The Company recorded stock based compensation
        expense of $260,000 to reflect the fair value of the option grant. The fair
        value of the option grant was estimated on the date of grant using the
        Black-Scholes option pricing model with the following assumptions: expected
        volatility 127%; risk-free interest rate of 4.8%; expected life of 5 years;
        and
        no expected dividends.
 
 A
        summary
        of stock options is as follows:
 Number
                    of shares
                
                Weighted
                    average exercise price
                
                Weighted
                    average fair valueBalance
                    at December 31, 2005
                
                
                -
                
                
                -
                
                
                -Issued
                
                
                3,000,000
                
                $
                .25
                
                $
                .16Forfeited
                
                
                -
                
                
                -
                
                
                -Balance
                    December 31, 2006
                
                
                3,000,000
                
                $
                .25
                
                $
                .16
 
 The
        following table summarizes information about fixed-price stock
        options **:**
 Exercise
                      Prices
                  
                  Weighted
                      Average Number Outstanding
                  
                  Weighted
                      Average Contractual Life
                  
                  Weighted-
                      Average Exercise Price$.20
                  
                  
                  1,000,000
                  
                  
                  4.05
                      years
                  
                  $
                  .20$.27
                  
                  
                  2,000,000
                  
                  
                  1.25
                      years
                  
                  $
                  .273,000,000
 
 All
        options are vested and exercisable.
 
 F-22
  10.
        INCOME TAXES
 
 The
        Company accounts for income taxes under SFAS 109, which requires use of the
        liability method. SFAS 109 provides that deferred tax assets and liabilities
        are
        recorded based on the differences between the tax bases of assets and
        liabilities and their carrying amounts for financial reporting purposes,
        referred to as temporary differences. Deferred tax assets and liabilities
        at the
        end of each period are determined using the currently enacted tax rates applied
        to taxable income in the periods in which the deferred tax assets and
        liabilities are expected to be settled or realized.
 
 The
        provision for income taxes differs from the amount computed by applying the
        statutory federal income tax rate to income before provision for income taxes
        for the years ended December 31, 2006 and 2005. 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, 2006, the Company has a net operating loss carry forward of
        approximately $4,000,000. This loss will be available to offset future taxable
        income. If not used, this carry forward will expire through 2026. The deferred
        tax asset of approximately $1,400,000 relating to the operating loss carry
        forward has been fully reserved at December 31, 2006. The increase in the
        valuation allowance related to the deferred tax asset was approximately $200,000
        during 2006. The principal difference between the accumulated deficit for
        income
        tax purposes and for financial reporting purposes results from Stock based
        compensation of approximately $8,400,000, non-cash finance charges of
        approximately $1,100,000, non-cash losses on settlements of approximately
        $1,000,000, non-cash losses related to Nanologix of approximately $1,700,000,
        losses of Receptopharm, Inc. of approximately $3,000,000 and the amortization
        on
        intangibles of approximately $800,000.
  11.
        INVESTMENTS
 
 **Letter
        of Intent to Acquire Portage BioMed LLC**
 
 On
        October 28, 2004, the Company entered into a non-binding letter of intent
        to acquire 100% of the issued and outstanding common stock of Portage BioMed
        LLC, a biotechnology research company (“Portage BioMed”). The proposed terms
        reflected in the non-binding letter of intent are: (i) beginning on
        November 1, 2004, the Company will pay $40,000 per month to Portage BioMed
        for working capital, until such time that Portage BioMed generates sufficient
        cash flow to sustain its operations; (ii) the Company will issue an
        aggregate of 1,000,000 shares of its restricted common stock to Portage BioMed’s
        four members in exchange for their interest in Portage BioMed; (iii) the
        Company will also issue an aggregate of 550,000 shares of its restricted
        common
        stock to Portage BioMed’s four members for four consecutive quarters commencing
        six months from the closing date of the transaction and upon the completion
        of
        certain agreed upon quarterly milestones; and (iv) Rik J. Deitsch, the
        Company’s Chief Executive Officer, will be appointed to Portage BioMed’s Board
        of Directors and one current Portage BioMed Director will be appointed as
        a
        Director of the Company. As of December 31, 2005 the Company had made payments
        totaling $60,000 to Portage BioMed in connection with the non-binding letter
        of
        intent.
 
 At
        December 31, 2005, management determined that it will no longer pursue the
        completion of a definitive agreement with Portage BioMed and as such, it
        has
        written-off its entire investment of $60,000.
  F-23
  **Investment
        in XenaCare LLC**
 
 On
        November 1, 2004, the Company completed an agreement with XenaCare LLC
“XenaCare”, a healthcare management company engaged in the business of
        manufacturing and distributing non-prescription pharmaceuticals to physicians’
offices. This agreement provides that the Company make an investment of up
        to
        $250,000 in 15 Site of Care physician locations to be managed by XenaCare.
 
 As
        of
        December 31, 2005, the Company had made payments totaling $175,000 to XenaCare
        in connection with this agreement. At December 31, 2005, management evaluated
        its investment in XenaCare and determined that the recoverability of the
        investment was in doubt and as a result, the Company has written-off the
        entire
        amount of its investment of $175,000. The Company has also notified XenaCare
        that it will not invest the additional $75,000 pursuant to the agreement.
  12.
        CONTINGENCIES
 
 On
        April 4, 2005, a Motion to Enforce Settlement Agreement was filed against
        the Company in the Circuit Court of Broward County Florida by Bio Therapeutics,
        Inc. f/k/a Phylomed Corp. in Nutra Pharma Corp. v. Bio Therapeutics, Inc.
        (17th
        Judicial Circuit, Case No. 03-008928 (03). This proceeding results from the
        Company’s alleged breach of a settlement agreement that was entered into between
        Bio Therapeutics and the Company in resolution of a previous lawsuit between
        the
        Company and Bio Therapeutics that was resolved by entering into a Settlement
        Agreement. The Company also entered into a related License Agreement and
        Amendment to the License Agreement (“License Agreement”) with Bio Therapeutics.
        In the April 4, 2005 motion, Bio Therapeutics alleges that the Company
        breached certain provisions of the License Agreement and requests that the
        Court
        grant its motion to enforce the Settlement Agreement by declaring the License
        Agreement terminated, enjoining the Company from further use of license products
        that was granted to the Company by the License Agreement, and awarding attorneys
        fees and costs to Bio Therapeutics.
 
 The
        Company intends to defend against this action. The Company does not believe
        that
        this action will have a material effect upon its operations; and if the license
        agreement is terminated does not believe there will be a material negative
        impact on the Company.
 
 13.
        SUBSEQUENT EVENT
 
 From
        January 1 through April 4, 2007, the Company’s president advanced an additional
        $272,000 to the Company for working capital.
 
 F-24