UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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|þ                                                              | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended:December 31, 2008                   
| ̈                                                              | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from: _____________ to _____________



XenaCare Holdings, Inc.

(Name of small business issuer in its charter)

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|Florida                      | 2836         | 20-3075747         
|(State or Other Jurisdiction | (Commission  | (I.R.S. Employer   
|of Incorporation)            | File Number) | Identification No.)



14000 Military Trail, Suite 104

Delray Beach, Florida 33484

(Address of Principal Executive Office) (Zip Code)



(561) 496-6676

(Registrants telephone number, including area code)

(Former name or former address, if changed since last report)

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|Securities registered pursuant to Section 12(b) of the Act:
|                                                            | None             | 
|Securities registered pursuant to Section 12(g) of the Act:
|                                                            | (Title of Class) | 

Common Stock, $0.001 par value per share



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes  ̈  No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ̈  No þ

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

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No  ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.  ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

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|Large accelerated filer  ̈ |                                               | Accelerated filer  ̈        
|Non-accelerated filer  ̈   | (Do not check if a smaller reporting company) | Smaller reporting company þ

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

The aggregate market value of the Company's voting stock held by non-affiliates as of March 31, 2009 was approximately $13,435,425 based on the average closing bid and asked prices of such stock on that date as quoted on the Over the-Counter Bulletin Board.

There were 53,741,702 shares of common stock outstanding as of March 31, 2009.





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INDEX

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|PART I
1
Item 1.Business.
1
Item 1A.Risk Factors
7
Item 2.Properties.
11
Item 3.Legal Proceedings.
11
Item 4.Submission of Matters to a Vote of Security Holders.
11
PART II
12
Item 5.Market for Common Equity, Related Stockholder Matters and Small Business 
Issuer Purchases of Equity Securities.
12
Item 6.Selected Financial Data.
13
Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.
13
Item 7A.Quantitative and Qualitative Disclosure About Market Risk.
16
Item 8.Financial Statements.
16
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
19
Item 9A(T).Controls and Procedures.
19
Item 9B.Other Information.
20
PART III
21
Item 10.Directors, Executive Officers, and Corporate Governance
21
Item 11.Executive Compensation.
22
Item 12.Security Ownership of Certain Beneficial Owners and Management and 
Related Stockholder Matters.
23
Item 13.Certain Relationships and Related Transactions, and Director Independence.
23
Item 14.Principal Accounting Fees and Services.
24
PART IV
25
Item 15.Exhibits
25
SIGNATURES
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This annual report on Form 10-K (Report) contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements, including any statements relating to future actions and outcomes including but not limited to prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expense trends, future interest rates, outcome of contingencies and their future impact on financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as "expects," anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," may, will, should, contemplates, predicts, potential, or continue or variations and/or the negative of these similar terms. Forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company, us, our future performance, our beliefs and our Management's assumptions. All forward-looking statements made in this Report, including any future written or oral statements made by us or on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. Any assumptions, upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Report. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under Liquidity and Capital Resources. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.



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PART I

Item 1.

Business.

Organization and Overview

XenaCare Holdings, Inc. was organized under the laws of Florida in June 2005 to formulate, market and distribute a line of clinical and life style performance nutrition supplement products (NSPs).

Our Clinical products group includes our proprietary formulations - XenaCor, XenaTri and XenaZyme Plus along with BRS formulations and was established to:

·

educate doctors and healthcare professionals about theses NSPs and facilitate their sale and distribution through doctors offices, and

·

commence the formulation and brand building of a line of NSPs that replenish nutrients depleted by pharmaceutical medications. These NSP will be sold through mass media (radio and television) advertising, web sales and other channels of distribution.

Our Performance products group was established to formulate a line of NSPs for the energy/lifestyle performance market to be sold through mass media (radio and television) advertising, web sales and other channels of distribution.

Our most recent product addition, Sun Pill, is directed to the energy/lifestyle performance market. Sun Pill is formulated to protect the skin when exposed to damaging ultraviolet rays. We entered into a license agreement with Pure Laboratories LLC in February 2007 for the distribution rights to the SunPill. In August 2008, we amended the April 2008 sales agreement with Pure Laboratories LLC, superseding our February 2007 license agreement. XenaCare has purchased all rights to the SunPill for 5% of gross sales capped at $2,500,000, payable quarterly at 5% of gross sales subject to an annual minimum payment of $75,000.

We have entered into agreements for manufacturing, packaging and distribution and fulfillment of our products. We have also engaged consultants to assist us in marketing, web hosting and the development and production of infomercials. In April, 2008, we completed the final formulation of the Sun Pill.and began marketing the Sun Pill in the third quarter of 2008.

Most of our revenues to date have been generated from our proprietary Clinical NSP through doctors offices. Following our acquisition of XenaCare LLC in 2005, a determination was made to reduce our resources committed to the sale of NSPs through doctors offices because of the high costs of providing nursing services on site. However, we have continued these services by locating a nurse at our executive offices. The nurse interacts with patients at multiple doctors offices via telephone. Since our inception we have never been profitable.

References throughout this document to XenaCare Holdings, XenaCare, the Company, we, us and our refer to XenaCare Holdings, Inc., a Florida corporation and our subsidiaries.

History

While the Company was organized in 2005, its predecessor, XenaCare LLC was organized in 2001 following the formulate of its concept and alpha testing by its founder, Dr. Alan Xenakis for the limited purpose of the education, sale and distribution of Clinical NSPs at doctors offices. In June 2005 the Company was incorporated to formulate personal performance and life style performance products. Thereafter, the Company entered into an exchange agreement with certain members of XenaCare LLC and such members exchanged their interest in XenaCare LLC for an aggregate of 800,000 shares of XenaCare Holdings, Inc. common stock, which represented a value of $1,600,000. All remaining shares of XenaCare LLC that were not exchanged for shares of XenaCare Holdings, Inc. were retired. For accounting purposes, the consummation of these actions resulted in an exchange of equity interests between entities under common control with XenaCare LLC as the accounting survivor and surviving business entity and the Company as the surviving legal entity. Our operations have traditionally focused on providing a small but targeted platform of poly-formulas to the patient that address key multi-factors in disease processes such as atherosclerosis and diabetes (as opposed to the single target restrictions placed on prescription drugs that must focus on one disease factor at a time such as an HMG reductase inhibitor (Statin) that does not



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address the multi factors of atherosclerosis. Our historical line of Clinical NSPs are: XenaCor, XenaZymePlus and XenaTri.

Commencing in mid 2005 we expanded our focus and began to formulate NSPs for personal performance and lifestyle performance products. We also developed new distribution channels for our historical NSPs, including web site and infomercials. We have also formulated a line of body replenishment NSPs, which are designed to eliminate prescription induced nutrient depletion. To replace these nutrients, we have formulated NSPs, which we believe will combat the depletion effects of commonly prescribed drugs.

In August 2008, XenaCare entered into a Share Exchange Agreement and Plan of Reorganization with Sun Packing, Inc. (Sun) Wallisville Partners, Ltd and Jon Grossman and Peter Elston, shareholders of Sun, in which XenaCare would have received 100% of the outstanding shares of Sun in exchange for 33.8% of XenaCares outstanding common shares on a fully diluted basis. XenaCare borrowed approximately $977,000 from Sun Packing, Inc. On December 22, 2008, XenaCare received notice from Jon Grossman, Chairman of Sun, to terminate the Share Exchange Agreement and Plan of Reorganization. Sun claimed a right to terminate due to Suns inability to receive consent from its lender, Frost Bank of Houston, Texas, to complete the business combination. XenaCare, after careful consideration of its options, has elected to accept the termination from Sun.

On January 5, 2009, XenaCare amended its Articles of Incorporation to increase the number of authorized shares of common stock from 45 million to 200 million.

Operations

The SunPill®

The present focus of the Company is the sale of the SunPill®.In April 2008, XenaCare acquired through a sales agreement with Pure Laboratories, LLC, (Pure) all rights in and to the US Trademark SUN PILL having a US Serial Number 78564955, all the rights in the domain name www.sunpill.com, and all rights with the ownership of the SunPill®. The aggregate purchase price is 5% of gross sales capped at $2,500,000, payable quarterly at 5% of gross sales subject to an annual minimum payment of $75,000. The purchase price is secured by the SunPill® US Trademark and all other ownership rights. In the event that we fail to comply with the payment terms, Pure may foreclose on the assets. The SunPill® is a supplement designed to support the bodys natural defenses in neutralizing and counteracting the damaging effects of harmful free radicals formed on the skin by sun rays. Other features beneficial to consumers who use the SunPill®are its unique ability to help support and promote beautiful and healthy skin, while providing a boost to the bodys essential vitamin D levels. Positive feedback has been coming in from families that have had the opportunity to use SunPill® during all activities when they are exposed to the suns UVA and UVB Rays. Sales of the SunPill® commenced in July 2008.

XenaCares exclusive world-wide marketing agreement has already received the attention of various marketers from several foreign countries, included but not limited to, countries such as China, Canada, Australia and South Africa. We have also received interest from several countries in Europe, South America and the Caribbean. The cruise and travel industry are also likely candidates and have shown interest.

The SunPill ® is a supplement that helps the skin protect itself from the harmful rays of the sun. It contains scientifically proven ingredients that have been clinically tested by major universities. The SunPill ®is a proprietary combination of powerful antioxidants that help the bodys own natural defense when it comes to exposure to the sun.

The Company has entered into a sales agreement with RiteAid for the SunPill® and has received SunPill® purchase orders from RiteAid, Walgreens, CVS and others. The sales agreement and purchase orders contain provisions providing for returns and chargebacks and the sales agreement is terminable at the option of RiteAid. The Company has also paid slotting fees to certain retailers.

Clinical Products

XenaCares Clinical products seek to shift a portion of current consumer out-of-pocket spending on non-effective and/or incomplete self-care performance and healing products obtained through myriad retail and Internet distribution systems Our Clinical NSPs provide consumers with access to proprietary nutritional supplements that supplement nutrient depletion resulting from the use of certain prescription pharmaceuticals. We plan to also sell



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and distribute these products through pharmacies and other distribution outlets as well as through infomercials and a book authored by Dr. Xenakis, Chairman of the Board, to promote our Clinical NSPs.

XenaCor, XenaTri and XenaZymePlus are specifically formulated to support and help maintain the doctor directed patient healthcare for many risk factors, including those related to homocysteine levels, lipid control, blood flow and blood pressure. These NSPs are formulated under the guidelines of the Food and Drug Administration (FDA) and its regulation of the Dietary Supplement and Health Education Act. However, while the FDA regulates the dietary supplement industry, no approvals by the FDA are required for our products. As discussed below under Government Regulation, the FDA oversees product safety, manufacturing, and product information, such as claims on the products label, package inserts, and accompanying literature.

We believe our XenaCare Clinical NSPs below support and maintain the following:

·

XenaCor: the lowering of serum cholesterol, C-reactive protein and homocysteine levels. This product was designed to support cardiovascular health.

·

XenaTri: the lowering of triglycerides and raising of HDL. This product was designed to support cardiovascular health.

·

XenaZyme Plus: increases the bodys oxygen carrying capacities. This product was designed to support digestion.

We believe these NSPs significantly differentiate themselves from our competition including self-help vitamin, herbal and purported performance enhancing product manufacturers and distributors. These NSPs are formulated to support the delivery of measurable subjective (improved medical history) and/or objective (laboratory results) effects regardless of what other medications or supplements the patient is taking. We believe that these NSPs support significant positive health actions and outcomes without deleterious adverse side effects. The Company does not diagnose nor treat diseases. Our products are only formulated to support and maintain an individuals health and well being.

Our Body Replenishment products (B.R.S.) provide patient access to NSPs that resolve prescription induced nutrient depletion problems widely recognized by both consumer and clinician. As stated in The Drug-induced Nutrient Depletion Handbook, second edition (2003) by Ross Pelton et al., 16 of the top 20 drugs are associated with drug/nutrient interaction. Since B.R.S. focuses on replacing drug depleted nutrients and does not position itself as a primary line, it will not compete with our XenaCare Clinical products. Our XenaCare Clinical products specifically support disease treatment. We believe that the B.R.S. will meet a high revenue opportunity without affecting current revenue generating XenaCare Clinical products. The B.R.S. line will be marketed and sold through the same outlets as the XenaCare Clinical products. This strategy has no effect on the current and future operations of our XenaCare Clinical products.

Presently twelve new formulations have been designed and manufactured for patients treated with prescription drugs for high blood pressure, heart disease, diabetes, ulcers, depression, infection, arthritis, aids and weight loss. B.R.S. intends to utilize healthcare professionals to execute enrollment and education of patients via toll free telephone and virtual computer linkups, using the same marketing and sales practices as our current XenaCare Clinical operations. We believe B.R.S. is a natural extension of the way doctors conduct their practice. We believe doctors will accept these products because they are aware that supplementation for prescription induced nutrition depletion is necessary and important for patient health outcomes.

As part of our marketing program, Dr. Xenakis, our chairman and founder, wrote a book titled, When Good Medicines do Bad Things to Healthy Bodies in 2006. In addition, an infomercial featuring Dr. Xenakis is being produced to educate the consumer on the depletion of nutrients by use of prescription drugs. We commenced the marketing of these products in late 2006 in independent pharmacies in Florida and New York as well as in doctors offices. We also intend to distribute these body replenishment NSPs through traditional healthcare facilities, as well as direct market consumer sales via Internet marketing, and radio/television advertising. There is no FDA regulation or approval with respect to the replenishment formulations.



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Performance Products

Following our incorporation and reorganization in June 2005, it was determined that we would develop additional products for markets not previously targeted by us. The first such market was the Personal Performance market.

We are also developing formulations for the Lifestyle Performance market, which consists of a sports line for athletes and increased performance for the over 50 generation.

The Companys NSPs are currently formulated by Dr. Xenakis and Bill Downs and are proprietary to the Company. The Company has no trademark or patent protection for any of its products or services. We have historically expensed in selling, general and administrative our formulation costs and do not have any separately itemized research and development expenses.

Manufacturing and Supplies

The Company uses contracted third parties to manufacture its products and to provide raw materials. The third party manufacturers are responsible for receipt and storage of raw material, production and packaging, and labeling of finished goods. At present, the Company is dependent upon manufacturers for the production of all of its products. To the extent the manufacturers should discontinue their relationship with the Company, the Companys sales could be adversely impacted. The Company believes at the present time it will be able to obtain the quantity of products and supplies it will need to meet orders.

We purchase all of our products from third-party suppliers and manufacturers pursuant to purchase orders without any long-term agreements. In the event that a current manufacturer is unable to meet our manufacturing and delivery requirements at some time in the future, we may suffer short-term interruptions of delivery of certain products while we establish an alternative source. While we believe alternative sources are in most cases readily available and we have also established working relationships with several third-party suppliers and manufacturers, none of these agreements are long term. We also rely on third-party carriers for product shipments, including shipments to and from our distribution facilities. We are therefore subject to the risks, including employee strikes and inclement weather, associated with our carriers ability to provide delivery services to meet our fulfillment and shipping needs. Failure to deliver products to our customers in a timely and accurate manner would harm our reputation, our business and results of operations.

Material Agreements

On March 1, 2006, we entered into a marketing agreement with Sierra Mountain Minerals Inc. under which we agreed to provide Sierra Mountain Minerals with marketing services and other promotions by our chief executive officer, Dr. Alan Xenakis. In consideration for providing such services, Sierra Mountain Minerals has agreed to pay us a fee equal to approximately 5% of its net bulk sales of its SierraSil product through the United States. SierraSil is a joint supplement and anti-inflammatory mineral compound. For the twelve-month period ended December 31, 2008, we received no revenue pursuant to this agreement.

On February 24, 2006, we entered into a license agreement with Scientific Sports and Nutrition Plan, a wholly owned subsidiary of Manhattan Drug Company, under which we licensed our XenaZyme formula to Scientific Sports Nutrition. Pursuant to the license, Scientific Sports Nutrition received their license to use the XenaZymePlus formula for its privately labeled mass oxygen volumizer product on a worldwide basis. In consideration for the license, we receive a fee of $0.65 per bottle sold by Scientific Sports Nutrition. For the twelve months ending December 31, 2008 we have received no royalty fees from Scientific Sports Nutrition. This agreement may be terminated with a 30 day written notice from either party.

XenaCares agreement with Algale Technologies Inc. effective January 30, 2007 gives XenaCares Raw Materials Inc. division, the exclusive worldwide rights to market, package, and distribute, vitamins, nutritionals, cosmetics, animal care products and food additives using their exclusive algae oil.

Management believes the overall size of these markets is very large. Algae Biosciences, the parent company of Algale Technologies, Inc., has patented the manufacturing process and its raw materials. We believe to



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date they are the only source for this kind of algae in the world. For complete review of the agreement please see Exhibit 10.12 Form 10-QSB filed on 9/25/ 2007.

In February 2007, XenaCare entered into a contract with Dr. Bob Arnot, respected physician, renowned TV reporter and also known for his medical sponsorship for underdeveloped countries, especially AIDS victims to be the companys public educator and spokesperson. Dr Arnots contract will expire on May 31, 2009. It is anticipated that his contract will be renewed a for another two year period when the current one expires. Dr. Bob Arnot continues to be a public figure in the media educating the consumer and medical community.

Competition

The nutritional supplement and personal intimacy industries are highly competitive. Many of the Companys competitors are large, well-known companies that have considerably greater financial, sales, marketing and technical resources than the Company. Additionally, these competitors have formulary capabilities that may allow them to formulate new or improved products that may compete with product lines the Company markets and distributes. In addition, competitors may elect to devote substantial resources to marketing their products to similar outlets and may choose to develop educational and information programs like those formulated by the Company to support their marketing efforts. The Companys business, financial condition and results of operations could be materially and adversely affected by any one or more of such developments.

Our nutritional products, in general, compete against similar products distributed by national chain stores, such as GNC and Vitamin Shoppe. Our personal performance products compete against a number of well-known brands. We are unaware of any competitors for our replenishment products, as these products are in their infancy. As the Companys sales grow, competitors may attempt to introduce products that compete directly against our products. Our failure to adequately respond to the competitive challenges faced by the products it offers could have a material adverse effect on its business, financial condition and results of operations.

Proprietary Rights

The Company regards the protection of copyrights, trademarks and other proprietary rights that it may own or license as material to its future success and competitive position. The Company intends to rely on a combination of laws and contractual restrictions such as confidentiality agreements to establish and protect its proprietary rights. Laws and contractual restrictions, however, may not be sufficient to prevent misappropriation of proprietary rights or deter others from independently formulating products that are substantially equivalent or superior. The Company has no patent protection.

Trademarks Owned by XenaCare

1.

METALLOSACCHARIDE

Pending with USPTO, Serial Number 77/096,946

2.

METALLOGLYCOSIDE

Pending with USPTO, Serial Number 77/096,982

3.

B-ALERT

Registered with USPTO, Registration # 3,251,557

4.

SUN PILL

Registered with USPTO on 10/31/2006,

Registration # 3,166,408

5.

SUN PILL

Registered under Madrid Protocol on 3/2/2006,

Registration # 888,076

6.

UV DEFENSE

Pending with USPTO, Serial Number 78/564,974

7.

SUN DEFENSE

Pending with USPTO, Serial Number 78/564,985

8.

UV ORGANICS

Pending with USPTO, Serial Number 78/865,855



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Governmental Regulation

The FDA regulates the formulation, manufacturing, packaging, storage, labeling, promotion, distribution and sale of foods, dietary supplements, over-the-counter drugs, and pharmaceuticals. In January 2000, the FDA issued a final rule called Statements Made for Dietary Supplements Concerning the Effect of the Product on the Structure or Function of the Body; in the regulation and its preamble, the FDA distinguished between permitted claims under the Federal Food, Drug and Cosmetic Act relating to the effect of dietary supplements on the structure or functions of the body, and impermissible direct or implied claims of the effect of dietary supplements on any disease.

The Dietary Supplement Health and Education Act of 1994, referred to as DSHEA, revised the provisions of the Federal Food, Drug and Cosmetic Act concerning the composition and labeling of dietary supplements, and statutorily created a new class entitled dietary supplements. Dietary supplements include vitamins, minerals, herbs, amino acids, and other dietary substances used to supplement diets. A majority of our products are considered dietary supplements as outlined in the Federal Food, Drug and Cosmetic Act. This act requires us to maintain evidence that a dietary supplement is reasonably safe.

A manufacturer of dietary supplements may make statements concerning the effect of a supplement or a dietary ingredient on the structure or any function of the body, in accordance with the regulations described above. As a result, we make such statements with respect to our products. In some cases, such statements must be accompanied by a statutory statement that the claim has not been evaluated by FDA, and the product is not intended to treat, cure, mitigate or prevent any disease, and FDA must be notified of the claim within 30 days of first use.

The FDA oversees product safety, manufacturing, and product information, such as claims on the products label, package inserts, and accompanying literature. The FDA has promulgated regulations governing the labeling and marketing of dietary and nutritional supplement products. The regulations include:

·

The identification of dietary or nutritional supplements and their nutrition and ingredient labeling;

·

requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support;

·

labeling requirements for dietary or nutritional supplements for which high potency, antioxidant, and trans-fatty acids claims are made;

·

notification procedures for statements on dietary and nutritional supplements; and

·

pre-market notification procedures for new dietary ingredients in nutritional supplements.

We utilize a substantiation program that involves the compilation and review of scientific literature pertinent to the ingredients contained in each of our products. We continuously update our substantiation program to expand evidence for each of our product claims and notify the FDA of certain types of performance claims made in connection with our products.

In certain markets, including the United States, specific claims made by us with respect to our products may change the regulatory status of a product. For example, a product sold as a dietary supplement but marketed as a treatment, prevention, or cure for a specific disease or condition would likely be considered by the FDA or other regulatory bodies as unapproved and thus an illegal drug. To maintain the products status as a dietary supplement, the labeling and marketing must comply with the provisions in DSHEA and the FDAs extensive regulations. As a result, we have procedures in place to promote and enforce compliance by our employees related to the requirements of DSHEA, the Food, Drug and Cosmetic Act, and various other regulations. Because of the diverse scope of regulations applicable to our products, and the varied regulators enforcing these regulatory requirements, determining how to conform to all requirements is often open to interpretation and debate. As a result, we can make no assurances that regulators will not question any of our actions in the future, even though we have put continuing effort into complying with all applicable regulations.

Dietary supplements are also subject to the Nutrition, Labeling and Education Act and various other acts that regulate health claims, ingredient labeling, and nutrient content claims that characterize the level of nutrients in



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a product. These acts prohibit the use of any specific health claim for dietary supplements unless the health claim is supported by significant scientific research and is pre-approved by the FDA.

Regulators such as the FTC regulate marketing practices and advertising of a company and its products. In the past several years, regulators have instituted various enforcement actions against numerous dietary supplement companies for false and/or misleading marketing practices, as well as misleading advertising of certain products. These enforcement actions have resulted in consent decrees and significant monetary judgments against the companies and/or individuals involved. Regulators require a company to convey product claims clearly and accurately, and further require marketers to maintain adequate substantiation for their claims. The FTC requires such substantiation to be competent and reliable scientific evidence.

Specifically, the FTC requires a company to have a reasonable basis for the expressed and implied product claim before it disseminates an advertisement. A reasonable basis is determined based on the claims made, how the claims are presented in the context of the entire advertisement, and how the claims are qualified. The FTCs standard for evaluating substantiation is designed to ensure that consumers are protected from false and/or misleading claims by requiring scientific substantiation of product claims at the time such claims are first made. The failure to have this substantiation violates the Federal Trade Commission Act.

We do not believe that Stark laws are applicable to our business because all of our products are sold for cash and there are no third party payor Medicare/Medicaid reimbursements.

Labor Force

XenaCare employs three people on a full time basis. In addition, the Company utilizes the services of several consultants on a regular basis. XenaCare projects that during the next 12 months, its workforce is likely to increase to approximately seven employees and several additional consultants.

Item 1A.

Risk Factors

Risks Relating to Our Business Generally

We have a history of losses and if these losses continue you may lose your entire investment in our Company.

We have a history of operating losses in our business and have incurred significant net losses since our inception. Our net losses for the periods ended December 31, 2008 and 2007 were $1,802,441 and $2,730,275, respectively. Accumulated deficit at December 31, 2008 totals $7,158,071. Our ability to generate and sustain significant revenues or achieve profitability will depend upon the factors discussed elsewhere in this Risk Factors section.

Our continued operating losses have contributed to the deterioration of our cash position. Further, we have used a significant amount of our cash for consulting services, web hosting, infomercials, new product inventory and marketing materials including the publication of a book about our products. If we are unable to generate revenues or secure financing on a timely basis, we will not have sufficient cash to fund our working capital and capital expenditure requirements and we may be forced to cease operations. In such event, the shares of our common stock may cease to have any value.

We depend on the services of Frank Rizzo, and a loss of this individual may harm our business.

Our performance is substantially dependent upon the performance of Frank Rizzo and to a less extent, certain other employees. The familiarity of this key employee to his respective industry makes this employee especially critical to our success. We currently have an employment agreement with Mr. Rizzo. The loss of the services of any of our executive officers or key employees may harm our business and the cost to replace such individuals may put a strain on our limited resources.

The nutrition supplement industry and personal intimacy product market are intensely competitive and the strengthening of any of our competitors could harm our business.

The nutrition supplement industry is intensely competitive. Many competitors have greater name recognition and financial resources, which may give them a competitive advantage. Our competitors may also be able to devote greater resources to marketing, promotional, and pricing campaigns that may influence our continuing



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and potential independent associates and members to buy products from competitors rather than from us. Such competition could adversely affect our business and current market share.

XenaCare may be subject to additional laws or regulations by the Food and Drug Administration or other federal, state or foreign regulatory authorities, subject to the repeal of laws or regulations which we consider favorable, such as the Dietary Supplement Health and Education Act of 1994 (DSHEA), or subject to more stringent interpretations of current laws or regulations, from time to time in the future which may adversely impact our business and operations.

We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. We also cannot predict what effect these regulations, and the related publicity from promulgation of such regulations, could have on consumer perceptions related to the nutrition supplement market in which we will operate. The Company depends on positive publicity as it relates to the efficacy and overall health benefits derived from such products. This could have a materially adverse affect on our business, financial condition, results of operations and cash flows. The Food and Drug Administration has also announced that it is considering promulgating new Good Manufacturing Practices regulations, specific to nutrition supplements. Such regulations, if promulgated, may be significantly more rigorous than currently applicable regulations and contain quality assurance requirements similar to Good Manufacturing Practices regulations for drug products. Therefore, we may be required to expend additional capital resources on upgrading manufacturing processes and/or equipment in the future in order to comply with the law. The Food and Drug Administration or other governmental regulatory bodies could require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, imposition of additional record keeping requirements, expanded documentation of the properties of certain products and expanded or different labeling and scientific substantiation. Any or all of such requirements could have a materially adverse affect on our business, financial condition, results of operations and cash flows. The Companys failure to comply with applicable Food and Drug Administration regulatory requirements could result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines, and possible criminal prosecutions. Because of the broad language of certain sections of DSHEA and the regulations that implement it, it is difficult for any company manufacturing or making nutrition supplements to remain in strict compliance. If we do not comply we may be subject to penalties.

If our insurance coverage is not sufficient to cover all risk exposure, we may be subject to losses.

XenaCare continues its efforts to maintain applicable insurance coverage for its officers, general liability insurance, and product liability insurance at levels deemed adequate by the Companys Board of Directors. XenaCare cannot guarantee that these same levels of insurance, at premiums acceptable to the Company, will be available in the future. As related to product liability insurance, a reduction in coverage or exclusion for one or more key raw materials, may adversely affect our ability to continue our business as currently conducted. In addition, a loss of one or more of any of these insurance policies, or a claim-related loss in excess of insured limits might adversely affect our ability to continue our business as it is currently structured. Although we currently maintain $1,000,000 liability and medical expenses and $2,000,000 general aggregate ($5,000 deductible per occurrence) in the event that we become liable, there can be no assurance that our current insurance policy will be adequate to cover any such liabilities.

Like other retailers, distributors and manufacturers of nutrition supplements, we face an inherent risk of exposure to product liability claims in the event that the use of the products that we sell results in injury.

While management believes we are fully compliant with DSHEA, we may be subjected to various product liability claims, including claims that the NSPs we sell contain contaminants, are improperly labeled or include inadequate instructions as to use or inadequate warnings concerning side effects and interactions with other substances. In addition, we may be forced to defend lawsuits. While to date we have never been subject to any product liability claim, we cannot predict whether product liability claims will be brought against us in the future or the effect of any resulting adverse publicity on our business. Moreover, we may not have adequate resources in the event of a successful claim against us. Although we select our third party vendors, in part, on the fact that they themselves carry insurance against liability claims, we do not have formal indemnification arrangements with the third-party vendors from which we source our NSPs. If our insurance protection is inadequate and our third-party vendors do not indemnify us, the successful assertion of product liability claims against us could result in potentially significant monetary damages. In addition, interactions of our NSPs with other similar products, prescription



8



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medicines and over-the-counter drugs have not been fully explored. While XenaCare makes no labeling claims with its NSPs, because we will be dealing with large numbers of end users and will have a significant level of legal exposure due to this volume of customer relationships. The most serious area of exposure will be in relation to product advertising claims and the product quality. People may purchase NSPs from us expecting certain physical results, unique to nutrition products. If they do not perceive expected results to occur, certain individuals or groups of individuals may seek monetary retribution. We have no assurance that our insurance company will comply with coverage in all instances or that such coverage will be adequate to cover all potential losses.

Our business may be adversely affected by unfavorable publicity within the nutrition supplement market.

We believe that the nutrition supplement market is significantly affected by national media attention. As with any retail provider, future scientific research or publicity may not be favorable to the nutrition supplement industry or to any particular product, and may not be consistent with earlier favorable research or publicity. Because of our dependence on consumers perceptions, adverse publicity associated with illness or other adverse effects resulting from the consumption of our NSPs, personal performance or any similar products distributed by other companies and future reports of research that are perceived as less favorable or that question earlier research, could have a material adverse effect on our business, financial condition and results of operations. We are highly dependent upon consumers perceptions of the safety and quality of our products as well as similar products distributed by other companies. Thus, the mere publication of reports asserting that nutrition supplements or personal performance products may be harmful or questioning their efficacy could have a material adverse effect on our business, financial condition and results of operations, regardless of whether such reports are scientifically supported or whether the claimed harmful effects would be present at the dosages recommended for such products.

We are reliant on a limited number of products to generate revenues.

We currently offer a limited number of products. If we are unable to increase the number of products we offer, the risks associated with our business will increase since a decline in market demand for one or more products, for any reason, could have a significant adverse impact on the results of our operations.

Our success is dependent upon the successful introduction of our new products and success in expanding the demand for existing brands.

We believe the growth of our net sales is substantially dependent upon our ability to introduce our products to the public. At present, we have limited resources to spend on advertising and marketing therefore we will rely, to a large extent, on our agreements with strategic partners to assist in our development of distribution channels. Our ability to meet future obligations is dependent in large measure on the success of our product sales. We expect to introduce additional products. The success of new products is dependent upon a number of factors, including our ability to formulate products that will appeal to consumers and respond to market trends in a timely manner. There can be no assurance that our efforts to formulate new products will be successful or that consumers will accept our new products. In addition, products experiencing strong popularity and rapid growth may not maintain their sales volumes over time.

If our outside suppliers and manufacturers fail to supply products in sufficient quantities and in a timely fashion, our business could suffer.

Outside manufacturers and suppliers make and supply all of our products. We do not have long-term agreements with our manufacturers or suppliers. Our profit margins and timely product delivery are dependent upon the ability of our outside suppliers and manufacturers to supply us with products in a timely and cost-efficient manner. Our ability to enter new markets and sustain satisfactory levels of sales in each market depends upon the ability of our outside suppliers and manufacturers to produce the ingredients and products and to comply with all applicable regulations. As a precaution, we have approved alternate suppliers and manufacturers for our products. We believe we have dependable suppliers for all of our ingredients. If our suppliers are unable to perform, any delay in replacing or substituting such ingredients could affect our business. However, the failure of our primary suppliers or manufacturers to supply ingredients or produce our products could adversely affect our business operations.



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We do not have long-term contracts with suppliers, manufacturers and distributors are limited and we are dependent on the services of these third parties.

We purchase all of our products from third-party suppliers and manufacturers pursuant to purchase orders, but without any long-term agreements. In the event that a current supplier or manufacturer is unable to meet our manufacturing and delivery requirements at some time in the future, we may suffer short-term interruptions of delivery of certain products while we establish an alternative source. While we believe alternative sources are in most cases readily available and we have also established working relationships with several third-party suppliers and manufacturers, none of these agreements are long term. We also rely on third-party carriers for product shipments, including shipments to and from our distribution facilities. We are therefore subject to the risks, including employee strikes and inclement weather, associated with our carriers ability to provide delivery services to meet our fulfillment and shipping needs. Failure to deliver products to our customers in a timely and accurate manner would harm our reputation and our business and results of operations.

Many of our competitors have substantially greater financial, technical and human resources than we do.

We do not engage in research and development. Our competitors may succeed in formulating products that are more effective than those currently marketed or proposed for formulation by us. Progress by other researchers in areas similar to those being explored by us may result in further competitive challenges. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products. They may also establish exclusive collaborative or licensing relationships with our competitors.

In addition, large pharmaceutical companies have begun to compete with others and with us in the supplement industry. Packaged food and beverage companies compete with us on a limited basis in the supplement market. Increased competition from such companies could have a material adverse effect on us because such companies have greater financial and other resources available to them and possess manufacturing, distribution and marketing capabilities far greater than ours. We also face competition in both the health food store and mass market distribution channels from private label nutrition supplements and multivitamins offered by health and natural food store chains, drugstore chains, mass merchandisers and supermarket chains.

Risks Relating to our Securities

Our shares of common stock have recently begun trading and it may take some time for an orderly market to develop, which could cause you to lose all or a portion of your investment in our Company.

We have recently begun trading for our common shares. In the absence of an orderly public market, our common shares may be sold short or speculated on by third parties. No trading in shares of common stock may develop. As a result, you may find it difficult to dispose of shares of our common stock and you may suffer a loss of all or a substantial portion of your investment in our common stock.

Our common stock may be covered by SEC penny stock rules which may make it more difficult for you to sell or dispose of our common stock, which could cause you to lose all or a portion of your investment in our Company.

Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). If the price of our common stock falls below $5.00, our common stock will be covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, which are generally institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities, and also may affect the ability of purchasers of our stock to sell their shares in the secondary market. It may also diminish the number of broker-dealers that may be willing to make a market in our common stock, and it may affect the level of news coverage we receive.



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We may issue additional shares of preferred stock that could defer a change of control or dilute the interests of our common shareholders and our charter documents could defer a takeover effort, which could inhibit your ability to receive an acquisition premium for your shares or your ability to sell your shares of common stock.

Our articles of incorporation permit our board of directors to issue up to 5,000,000 shares of preferred stock without shareholder approval. Shares of preferred stock, if issued, could contain dividend, liquidation, conversion, voting or other rights which could adversely affect the rights of our common shareholders and which could also be utilized, under some circumstances, as a method of discouraging, delaying or preventing our change in control. Provisions of our articles of incorporation, bylaws and Florida law could make it more difficult for a third party to acquire us, even if many of our shareholders believe it is in their best interest. These provisions may decrease your ability to sell your shares of our common stock.

Future sales of our common stock in the public market may depress our stock price.

In the event that a market for our common stock develops, the market price of our common stock could drop due to the sales of shares or the perception that such sales could occur. If such stockholders purchased or receive shares at values less than the offering price, these shareholders may be more likely to sell their shares at a lower market price. In addition to negatively affecting the development of a market for our common stock and decreasing the price of our common stock if such a market develops, these factors could also make it more difficult for our Company to raise financing through future offerings of common stock.

Item 2.

Properties.

We currently rent approximately 3,000 square feet of executive office space located at 14000 Military Trail, Suite 104 Delray Beach, Florida 33484. We rent this space for approximately $4,000 per month. The lease term is on a month-to-month basis under an oral agreement. This space is adequate to maintain and expand our business operations.

Item 3.

Legal Proceedings.

There are currently no material legal proceedings, nor pending legal proceedings involving our Company.

Item 4.

Submission of Matters to a Vote of Security Holders.

On November 22, 2008, our shareholders holding 51.4% of our outstanding common stock approved by written consent the 2008 XCHO Stock and Incentive Plan (the 2008 Plan) for directors, officers, employees, and consultants and an amendment to increase our authorized common stock from 45,000,000 to 200,000,000. At this time the Board of Directors has not implemented the 2008 Plan nor have they authorized any securities to be reserved for the 2008 Plan.



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PART II

Item 5.

Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

The Companys common stock has been quoted on the Over-the-Counter Bulletin Board under the symbol XCHO since April 8, 200

8




.. The Companys high and low bid prices by quarter during 2008, as provided by the Over the Counter Bulletin Board are provided below. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. On March 31, 2009, the closing price of our common stock, as reported on the Over-the-Counter Bulletin Board, was $0.25 per share.

| |                |                    |         | 
| | -------------- | ------------------ | ------- | 
| |                | Calendar Year 2008 |        
| |                | High Bid           | Low Bid | 
| | First Quarter  |                   |        | 
| | Second Quarter | $3.00              | $0.51   | 
| | Third Quarter  | $1.15              | $0.10   | 
| | Fourth Quarter | $0.42              | $0.05   | 
| |                |                    |         | 



Transfer Agent and Registrar

The transfer agent for our common stock is Florida Atlantic Stock Transfer, Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.

Number of Stockholders

As of December 31, 2008, there were approximately 145 shareholders.

Stock Options

As of December 31, 2008, there were no stock options or shares of restricted common stock issued and outstanding.

|                                                           |                                                                                                 |                                                                                 |                                                                                                                                                
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------
|                                                           |                                                                                                 |                                                                                 |                                                                                                                                                
|Plan Category                                              | Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a) | Weighted-average exercise price of outstanding options, warrants and rights
(b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|Equity compensation plans approved by security holders     | None                                                                                            | -0-                                                                             | None                                                                                                                                           
|Equity compensation plans not approved by security holders | None                                                                                            | -0-                                                                             | None                                                                                                                                           
|                                                           |                                                                                                 |                                                                                 |                                                                                                                                                
|TOTAL                                                      | None                                                                                            | -0-                                                                             | None                                                                                                                                           



Dividend Policy

We have not paid a dividend since incorporation and we do not anticipate paying any dividends in the future. We intend to retain earnings to finance the expansion of our business and for general working capital purposes. The Board of Directors may, however, determine whether we will pay dividends, depending on our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends and other relevant factors. No assurance is given as to our ability or willingness to pay dividends in the future.



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Recent Sales of Unregistered Securities

None, except as previously disclosed on Form 8-K.

Item 6.

Selected Financial Data.

Information not required by smaller reporting company.

Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

Our financial statements are consolidated to include the accountsof:XenaCare Holdings, Inc., and our active subsidiaries,XenaCare LLC, BRS, Inc. ,XenaStaffing, LLC ,XenaCeutical, LLC , andRaw Materials, Inc. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the Risk Factors section of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Significant Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 2 of the Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Going Concern -- As shown in the accompanying financial statements, the Companys operating and capital requirements in connection with operations have been and will continue to be significant. The recurring losses from operations and increased contractual agreements raise doubt about the Companys ability to continue as a going concern. Based on current plans, the Company anticipates that revenues earned from SunPill product sales will be the primary source of funds for operating activities. In addition to existing cash, the Company may rely on bank borrowing, if available, or sales of securities to meet the basic capital and liquidity needs for the next 12 months. Additional capital may be sought to fund the expansion of product lines and marketing efforts, which may also include bank borrowing, or a private placement of securities. Our ability to continue as a going concern is dependent upon our ability to generate sales from our new products and our obtaining adequate capital to fund losses until we become profitable. There can be no assurance that managements plans will be successful.



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The financial statements have been prepared on a going concern basis and accordingly do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates -- These financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, our management has estimated the expected shelf life of our inventory, the future economic benefit of prepaid slotting allowances and trade credits, our marketing initiatives ability to generate sufficient business to support expand production capacity, potential inventory and distribution requirements as well as obsolescence and our net operating loss for tax purposes. Actual results could differ from those estimates.

Cash and Equivalents -- We maintain our cash in bank deposit accounts, which are federally insured limits.

Accounts Receivables -- Accounts receivable are reported at net realizable value. The Company has established an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. In estimating credit risk, management considers the customers specific performance history with other vendors, credit bureau reports and industry reputation. During the period ended December 31, 2008 no losses have been incurred from un-collectable accounts.

Inventory  Inventories are reported on the lower of cost (FIFO) or market value basis. We periodically perform an evaluation of inventory for excess and obsolete items. Such evaluations include evaluating the anticipated sell through in conjunction with the products expiration date. During the period ended December 31, 2008 we have incurred a write down of obsolete inventory and have recorded both impairment and write downs of $451,292 based on project sell-through.

Revenue Recognition -- Our revenue, to date, has been derived from the sales of Clinical NSPs. Revenue is recognized in accordance with the provisions of Staff Accounting Bulletin (SAB) No. 104 Revenue Recognition in Financial Statements, which states that revenue is realized or realizable and earned when all of the following criteria are met:

·

persuasive evidence of an arrangement exists,

·

delivery has occurred or services have been rendered,

·

the sellers price to the buyer is fixed or determinable, and

·

collectability is reasonably assured.

These conditions are typically met upon shipment of finished products to our customers.

Intangible Assets -- We review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate. We assess the recoverability of the intangible assets by determining whether the unamortized balances can be recovered through undiscounted future net cash flows of the related assets. As we had no assure that sales of newly acquired product lines would be sufficient to justify the cost of customer list, we fully reserved the customer list value in 2008 by recording a loss of $61,796.

RESULTS OF OPERATIONS

The following discussion and analysis addresses the major factors that affected our operations and financial condition reflected in our consolidated audited financial statements for the years ended December 31, 2008 and December 31, 2007. This discussion is intended to supplement and highlight information contained in, and should be read in conjunction with, our financial statements and related notes and the selected financial data presented elsewhere in this report.



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Results of Operations for the year ended December 31, 2008 as compared to the year ended December 31, 2007

Year Ended December 31, 2008 (YTD-2008) to the Year Ended December 31, 2007 (YTD-2007)

Revenues - Total revenues increased $4,941 or 4.3%, to $121,090 for YTD-2008 from $116,149 for 2008. Most of our revenues to date have been generated by our proprietary Clinical NSPs - XenaCor, XenaTri and XenaZymePlus. We reduced the resources committed to these types of sales, which has had a direct impact on our revenues over the last 30 months. Although we will continue to market our NSPs, we are redirecting our efforts and allocating available resources to concentrate on the distribution of the SunPill, a defense system that protects the skin from the damaging effects of the sun, and the distribution of Algal, a tasteless, odorless form of Omega 3 fatty acid, which is used as a food additive.

Cost of Revenue - Total cost of revenues increased $1,655 or 5.4%, to $88,680 for YTD-2008 from $85,394 for YTD-2007. The increase in costs of revenue is related to our slight increase in Clinical NSPs sales.

Selling and Marketing Costs - Selling and marketing costs decreased $75,992 or 11.3%, to $595,722 YTD-2008 from $671,714 YTD-2007. The decrease in selling and marketing expenses is primarily due to our reduction of Nurses and redirection of resources away from Clinical NSPs to our new products, the SunPill and Algal.

General and Administrative Costs - General and administrative costs decreased $605,175 or 39.2%, to $938,862 YTD-2008 from $544,037 YTD-2007. The decrease is due to costs associated with accrued executive compensation and professional fees during YTD 2007.

Impairment and Write Down - At December 31, 2008, management determined that their use of certain inventory and intangibles had significantly changed and were no longer being utilized, were obsolete or had no future benefit. The assets were determined to be impaired and the net carrying value of $59,181 was charged to earnings.

Other Income (Expense) - Other expenses increased $147,099 or 156.5% to $241,086 expense for YTD-2008 from $93,987 expense for YTD-2007. The increase was primarily a result of $180,979 net increase in other expenses which is attributed to the issue of restricted common stock for our national spokeperson, and advistory services for the company's FINRA representative.

Liquidity and Capital Resources

We incurred a net loss for the year ended December 31, 2008 and 2007 of $1,802,441 and $2,730,274, respectively resulting in accumulated deficits of $7,077,780 and $5,275,339, respectively. We had a $1,067,050 deficit in working capital at December 31, 2008 compared to a $1,177,223 deficit at December 31, 2007. We have not yet established an ongoing source of revenues sufficient to cover our operating costs and we have not raised sufficient capital to implement our business model resulting in a lack of significant improvement in our working capital deficit for YTD-2008. Our ability to continue as a going concern is dependent upon our ability to generate sales from our new products and our obtaining adequate capital to fund losses until we become profitable.

Our operating and capital requirements in connection with operations have been and will continue to be significant. Our recurring losses from operations and increased contractual agreements raise doubt about our ability to continue as a going concern. Based on our current plans, we anticipate that revenues earned from SunPill product sales will be the primary source of funds for operating activities.

In addition to existing cash and cash equivalents, we may rely on bank borrowing, if available, or sales of securities to meet the basic capital and liquidity needs for the next 12 months. Additional capital may be sought to fund the expansion of our product line and marketing efforts, which may also include bank borrowing, or a private placement of securities.

Through December 31, 2008, our executives made loans to support company operations.  Advances from executives in YTD-2008 totaled $349,808.



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Also in 2008, in conjunction with the attempted merger with Sun Packing, Inc., the Company obtained $977,000 in financing in the form of a demand note. The note is personally guaranteed by our officers. To date, no repayments have been made and the note has not been called.

We plan to continue utilizing our current resources to further develop our business, establish our sales and marketing network, operations, customer support and administrative organizations. We believe, based upon indications from our sales agents and others that sufficient revenues will be generated from product sales by the end of the second quarter of 2009 to cover our expenses. These revenues from product sales together with proceeds from private placements should be sufficient to meet presently anticipated working capital and capital expenditure requirements over the next 12 months. To the extent that we do not generate sufficient revenues we will reduce our expenses and/or seek additional financing. As of December 31, 2008 there were no commitments for long-term capital expenditures.

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk.

Disclosure not required by small reporting company.

Item 8.

Financial Statements.

See the consolidated financial statements commencing on page F-1

Recent Accounting Pronouncements

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.

Taxes collected from customer and remitted to governmental authorities

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06−3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). EITF 06−3 applies to any tax assessed by a governmental authority that is directly imposed on a revenue producing transaction between a seller and a customer. EITF 06−3 allows companies to present taxes either gross within revenue and expense or net. If taxes subject to this issue are significant, a company is required to disclose its accounting policy for presenting taxes and the amount of such taxes that are recognized on a gross basis. EITF 06−3 is required to be adopted during the first quarter of fiscal year 2008. The Company currently presents such taxes net. EITF 06−3 is required to be adopted during the first quarter of fiscal year 2008. These taxes are currently not material to the Companys consolidated financial statements.

Accounting for uncertainty in income taxes

In July 2006, the FASB issued FASB Interpretation No. 48,"Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The cumulative effects, if any, of applying FIN 48 will be recorded as an adjustment to retained earnings as of the beginning of the period of adoption. FIN 48 is effective for fiscal years beginning after December 15, 2006, and the Company is required to adopt it in the first quarter of fiscal year 2008. The Company is currently evaluation the effect that the adoption of FIN 48 will have on its consolidated results of operations and financial condition and is not currently in a position to determine such effects, if any.

Fair value measurements

In September 2006, the FASB issued SFAS No. 157,"Fair Value Measurements" (SFAS 157). SFAS 157 provides guidance for using fair value to measure assets and liabilities. SFAS 157 addresses the requests from investors for expanded disclosure about the extent to which Companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2009. The



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Company is unable at this time to determine the effect that its adoption of SFAS 157 will have on its consolidated results of operations and financial condition.

Accounting for rental costs incurred during a construction period

In September 2006, the FASB issued FASB Staff Position No. FAS 13-1 (As Amended),Accounting for Rental Costs Incurred during a Construction Period (FAS 13-1). This position requires a company to recognize as rental expense the rental costs associated with a ground or building operating lease during a construction period, except for costs associated with projects accounted for under SFAS No. 67,Accounting for Costs and Initial Rental Operations of Real Estate Projects. FAS 13-1 is effective for reporting periods beginning after December 15, 2005 and was adopted by the Company in the first quarter of fiscal year 2007. The Companys adoption of FAS 13-1 will not materially affect its consolidated results of operations and financial position.

Effects of prior year misstatements when quantifying misstatements in the current year financial statements

In September 2006, the Security Exchange Commission issued SAB No. 108,"Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 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 on a company's balance sheet and statement of operations and the related financial statement disclosures. Early application of the guidance in SAB 108 is encouraged in any report for an interim period of the first fiscal year ending after November 15, 2006, and will be adopted by the Company in the first quarter of fiscal year 2007. The Company does not expect the adoption of SAB 108 to have a material impact on its consolidated results of operations and financial condition

Accounting for Defined Benefit Plan

In September 2006, the FASB issued FAS No. 158, EmployersAccounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R) (FAS 158). FAS 158 requires an employer to recognize the funded status of a benefit plan, measured as the difference between plan assets at fair value and the projected benefit obligation, in its statement of financial position. FAS 158 also requires an employer to measure defined benefit plan assets and obligations as of the date of the employers fiscal year-end. FAS 158 is effective for the Company for its fiscal year ended September 30, 2007. The Company is currently evaluating the impact of FAS 158 on its consolidated financial statements.

FSP FAS 123(R)-5

FSP SFAS 123(R)-5 was issued on October 10, 2006. The FSP SFAS 123(R)-5 provides that instruments that were originally issued as employee compensation and then modified for which modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP SFAS 123(R)-5 shall be applied in the first reporting period beginning after the date the FSP SFAS 123(R)-5 is posted to the FASB website. The Company does not expect the adoption of FSP FAS 123(R)-5 to have a material impact on its consolidated results of operations and financial condition.

Fair Value Option for Financial Assets and Liabilities

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159), which provides companies with an option to report selected financial assets and liabilities at fair value with the changes in fair value recognized in earnings at each subsequent reporting date. SFAS 159 provides an opportunity to mitigate potential volatility in earnings caused by measuring related assets and liabilities differently, and it may reduce the need for applying complex hedge accounting provisions. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact that this statement may have on the Company results of operations and financial position, and has yet to make a decision on the elective adoption of SFAS 159.



17



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Share-Based Payments

On December 21, 2007 the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 110 (SAB 110), which, effective January 1, 2008, amends and replaces SAB 107, Share-Based Payment. SAB 110 expresses the views of the SEC staff regarding the use of a "simplified" method in developing an estimate of expected term of "plain vanilla" share options in accordance with FASB Statement No. 123(R), Share-Based Payment. Under the "simplified" method, the expected term is calculated as the midpoint between the vesting date and the end of the contractual term of the option. The use of the "simplified" method, which was first described in Staff Accounting Bulletin No. 107, was scheduled to expire on December 31, 2007. SAB 110 extends the use of the "simplified" method for "plain vanilla" awards in certain situations. The SEC staff does not expect the "simplified" method to be used when sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external sources, becomes available. The Company is currently evaluating the potential impact that the adoption of SAB 110 could have on its financial statements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations (SFAS 141(R). This Statement replaces SFAS 141, Business Combinations, and requires an acquirer to recognize the assets acquired, the liabilities assumed, including those arising from contractual contingencies, any contingent consideration, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure the noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer.

Accounting for Income Taxes

SFAS 141(R) amends SFAS 109,Accounting for Income Taxes, to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142,Goodwill and Other Intangible Assets , to, among other things; provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 141(R) could have on its financial statements.

Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements (SFAS 160), which amends Accounting Research Bulletin 51, Consolidated Financial Statements , to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS No. 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its financial statements.

Off Balance Sheet Arrangements

None.



18



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Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T)

Controls and Procedures.

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us is made known to the officers who certify our financial reports, as well as to other members of senior management and the Board of Directors.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer concluded that, as of December 31, 2008, our disclosure controls and procedures were effective. In making this assessment, we used the criteria set forth in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The controls that management sought to identify and evaluate were those processes designed by, or under the supervision of, the Companys principal financial officers, or persons performing similar functions, and implemented by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1)  pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and

(3)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuers assets that could have a material effect on the financial statements.

A deficiency in the design of internal control over financial reporting exists when (a) necessary controls are missing or (b) existing controls are not properly designed so that, even if the control operates as designed, the financial reporting risks would not be addressed.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that, as of December 31, 2008, the Company did not have a deficiency or material weakness in our internal control over financial reporting.

This annual report does not, and is not required to; include an attestation report of the Companys registered accounting firm regarding internal control over financial reporting.

Limitations in Control Systems

Our controls and procedures were designed at the reasonable assurance level. However, because of inherent limitations, any system of controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired objectives of the control system. In addition, the design of a control system must reflect the fact that there are resource constraints, and management must apply its judgment in evaluating the benefits of controls relative to their costs. Further, no evaluation of controls and procedures can provide absolute assurance that all errors, control issues and instances of fraud will be prevented or detected. The design of any system of controls and procedures is also based in part on certain assumptions regarding the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. ]



19



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Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information.

On March 24, 2009, Steve Markley the Chief Operating Officer resigned as an Officer and Director of the company to seek none related and noncompetitive business interests. The resignation was not the result of any disagreement with the Company on any matter relating to the Companys operations, policies or practices.





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PART III

Item 10.

Directors, Executive Officers, and Corporate Governance

Our articles of incorporation permit our board of directors to fix the number of directors at not less than one nor more than seven. Directors serve until our next annual meeting of shareholders and until his successor is duly elected and qualified. Vacancies on the Board due to resignation or removal may be filled by the remaining director or directors, even though less than a quorum, for the unexpired term of such vacant position.

|                 |  |     |  |                                     
|---------------- |  | --- |  | ------------------------------------
|Name             |  | Age |  | Current Position                    
|Dr. Alan Xenakis |  | 59  |  | Chairman and Director               
|Bobby Story      |  | 67  |  | Chief Financial officer and Director
|Frank Rizzo      |  | 54  |  | President/CEO and Director          
|Rik Deitsch      |  | 41  |  | Director                            



Dr. Alan Xenakis has served as an officer and director of the Company since its inception and has served as an officer and director of XenaCare LLC since its inception. Since the founding of XenaCare LLC in 2001, Dr. Xenakis has acted as its chief operating officer and medical director. In addition, from 1999 to 2000, Dr. Xenakis served as vice president of Global Health Sciences, a company principally engaged in the manufacture of Nutraceuticals, which was acquired by Natures Bounty in 2001. Dr. Xenakis was involved in a bankruptcy associated with his divorce in 1999. The bankruptcy was discharged without prejudice in August of 1999. Dr. Xenakis has been a member of Leadership Broward since 2002. He holds a B.S. in chemistry from the University of New Hampshire, a M.S. in health dynamics from Boston University and received his medical degree from Boston University School of Medicine. Dr. Xenakis also holds a Doctor of Science from Boston University and a Master of Public Health from Harvard University.

Bobby Story has served as our chief financial officer and director since April 2006. From 1970 through 1972 Mr. Story practiced as a certified public accountant. He was employed by Arthur Young & Company, CPA (now known as Ernst & Young, LLP) from 1970 through 1972. He served as treasurer for Condev Corporation, an international developer based in Winter Park, Florida from 1972 to 1975. From 1975 to 1981 he served as Director of Real Estate Operations for Drexel Burnham Lambert and Company. From 1982 to 1987 Mr. Story was self employed, providing financial advisory services to several companies. From April 1987 to March 1996 he served as controller and vice president of finance for NACEX, Inc. From October 1996 to October 2000 he served as CFO of American Access Technologies, Inc. From February 2001 through October 2001 he served as chief financial officer for iBid America, Inc., which was acquired by Interactive Brand Development, Inc. (OTCBB: IBDI). Since October 2001 Mr. Story has provided financial consulting services to several companies including but not limited to Interactive Brand Development, Inc.

Frank Rizzo has served as an officer and director and Vice President of the Company from its inception through February 1, 2006. In February he was promoted to President. From 1993 through 2005, Mr. Rizzo served as president of Momentum Marketing, Inc., a financial and marketing company based in Tampa, Florida. Mr. Rizzo owned a private building materials company from September 1984 through December 1990. He worked from 1977 through 1983 in Regional and National Marketing with a Fortune 500 Company. Mr. Rizzo attended Adelphi University and New York Institute of Technology. He holds a B.S. in management and marketing from the New York Institute of Technology.

Rik J. Deitsch has served as a director since March 6, 2009. Mr. Deitsch is a biochemist and serves as the Chief Executive Officer for Nutra Pharma Corp, a biotechnology company developing drugs for HIV and Multiple Sclerosis. Nutra Pharma is quoted on the Over the Counter Bulletin Board. Prior to joining Nutra Pharma, Mr. Deitsch served as the President of NDA Consulting Inc., a biotechnology research group that provided consulting services to the pharmaceutical industry. Mr. Deitsch holds both a BS in Chemistry and an MS in Biochemistry from Florida Atlantic University and has 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. He has written a number of published research papers and has compiled a book called Invisible Killers with Stewart Lonky MD. It exposes the burden of toxins in our environment and how they impact health and longevity. He has appeared on numerous radio & TV shows as an expert commentator and educator.



21



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Committees of the Board of Directors

The board of directors met 12 times during 2008. All directors serve until the next annual shareholders meeting and until the election and qualification of their successors, Directors do not receive any compensation for serving on the board or any committees of the board.

Committees of the Board of Directors

We plan to establish an Audit Committee, Compensation Committee and a Nominating and Governance Committee. Until such committees are established, matters otherwise addressed by such committees will be acted upon by the majority of the current Board of Directors. The entire board of directors acts as our audit committee as permitted under Section 3(a)(58)(B) of the Exchange Act. We do not have any independent directors who would qualify as an audit committee financial expert. We believe that it has been, and may continue to be, impractical to recruit independent directors unless and until we are significantly larger. Mr. Deitsch qualifies as an independent director. Mr. Deitsch is not a financial expert as defined under item 407 of Regulation S-K.

Code of Ethics

The Company has not adopted a formal code of ethics.

Item 11.

Executive Compensation.

Executive Compensation

The following table shows, for the years ended December 31, 2008 and December 31, 2007, the cash and other compensation paid to our Chief Executive Officer, President and Chief Financial Officer whose annual compensation was $100,000 or more. The information includes compensation paid by XenaCare, LLC and as consulting fees.

|                   |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|------------------ |  | --------- |  | --------- |  | ------ |  | ------------ | ------- | - |  | ---------------------- |  | ---------
|                   |  |           |  |           |  |        |  | Stock
Awards |         |   |  | All Other
Compensation |  |          
|Name and Principal |  | Year      |  | Salary    |  | Awards |  |              | Options |   |  | Total                 
|                   |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|Dr. Alan Xenakis   |  | 2008(1,5) |  | $144,000  |  |       |  |             |         |  |  | $12,295                |  | $156,295 
|Chief Executive    |  | 2007      |  | $  18,000 |  |       |  |             |         |  |  |                       |  | $  18,000
|Officer            |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|                   |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|Frank Rizzo        |  | 2008(2)   |  | $144,000  |  |       |  |             |         |  |  | $10,000                |  | $154,000 
|President          |  | 2007      |  |          |  |       |  |             |         |  |  |                       |  |          
|                   |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|Bobby Story        |  | 2008(3)   |  | $144,000  |  |       |  |             |         |  |  | $10,000                |  | $154,000 
|CFO                |  | 2007      |  |          |  |       |  |             |         |  |  |                       |  |         
|                   |  |           |  |           |  |        |  |              |         |   |  |                        |  |          
|Steve Markley      |  | 2008      |  | $  36,000 |  |       |  |             |         |  |  | $  2,500               |  | $  38,500
|COO (4)            |  | 2007      |  |          |  |       |  |             |         |  |  |                       |  |         



(1)

Dr. Xenakis was paid $18,000 during the fiscal year ending 2007 and accrued $138,295 in unpaid compensation for 2007.

(2)

Mr. Rizzo has accrued all of his compensation including salary and medical insurance allowance for 2008.

(3)

Mr. Story reached a settlement with the company for restricted common stock in lieu of 2008 salary and medical insurance allowance.

(4)

Mr. Markley resigned on March 24, 2009.

(5)

Dr. Xenakis accrued $138,295 in unpaid compensation for 2008.

Outstanding Equity Awards at Fiscal Year End

We have not granted any options to purchase shares of common stock since inception.



22



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Director Compensation

None of our directors receive an annual fee for services. We do not pay fees to directors for their attendance at meetings; however, we may adopt a policy of making such payments in the future. We will reimburse out-of-pocket expenses incurred by directors in attending Board and committee meetings.

Employment and Consulting Agreements

While the Company currently has employment agreements approved by the Board of Directors with its Chief Executive Officer/President and CFO and they are currently compensated at a rate of approximately $225,000 per year. Mr. Rizzo and Mr. Story are eligible to receive and participate in all other benefit, bonus, retirement, insurance and long-term incentive programs provided by the Company for its senior executive personnel. In the event of Mr. Rizzos or Mr. Storys termination (other than without cause by the Company) they have agreed to a 12-month non-compete provision. Mr. Gary Spaniak and Interactive Business Development, LLC have consulting agreements with similar terms as Mr. Rizzo and Mr. Story. All compensation arising from these consulting agreements were accrued and unpaid for 2008.

Item 12.

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

PRINCIPAL SHAREHOLDERS

As of March 31, 2009, there were 53,741,702 shares of our common stock issued and outstanding. The following table sets forth, as of the close of business on March 31, 2009, (1) the name and number of shares of each person known by us to be the beneficial owner of more than 5% of the class of stock; and (2) the number of shares of these securities owned by each director and all officers and directors as a group, together with their respective percentage holdings of such shares. Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting or investment power with respect to securities, and includes any securities, which the person has the right to acquire within 60 days of the date of this table. Unless otherwise indicated, the address for each person is 14000 N Military Trail, Suite 104, Delray Beach, Florida 33442.

|                                      |  |                           |  |        
|------------------------------------- |  | ------------------------- |  | -------
|                                      |  | Shares Beneficially Owned
|Name and Position of Beneficial Owner |  | Number                    |  | Percent
|Dr. Alan Xenakis                      |  | 6,832,686                 |  | 12.7   
|Frank Rizzo(1)                        |  | 3,656,361                 |  | 6.8    
|Bobby Story(2)                        |  | 100,000                   |  | *      
|                                      |  |                           |  |        
|Rik Deitsch                           |  |                          |  |       
|Directors & Officers as a group       |  | 10,689,047                |  | 19.9   



*

Less than 1%

(1)

Does not include 3,158,207 shares of stock owned by adult family members or trusts for the benefit of minor family children as to which beneficial ownership is disclaimed.

(2)

Does not include 1,000,000 shares of stock owned by adult family members or trusts for the benefit of minor family children as to which beneficial ownership is disclaimed.

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

As of March 31, 2009, approximately $450,000 is owed to affiliates of the Company, relating to advances made by such affiliates.



23



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Item 14.

Principal Accounting Fees and Services.

Fees to Auditors Fiscal Year ended December 31, 2008

Audit Fees: The aggregate fees, including expenses, billed by the Company's principal accountants for professional services rendered for the audit of the Companys consolidated financial statements during the fiscal year ending December 31, 2008 and for the review of the Companys financial information included in its quarterly reports on Form 10-Q during the fiscal year ending December 31, 2008 or services that are normally provided in connection with statutory and regulatory filings or engagements during the fiscal year ending December 31, 2008 was $53,000

Audit Related Fees: The aggregate fees, including expenses, billed by principal accountants for assurance and related services reasonably related to the performance of the Companys audit or review of the Companys financial statements were $-0-.

Tax Fees: The aggregate fees, including expenses, billed by principal accountants for tax compliance, tax advice and tax planning during year 2008 was $6,500.

All Other Fees: The aggregate fees, including expenses, billed for all other services rendered to the Company by principal accountants during year 2008 was $-0-.

Fees to Auditors Fiscal Year ended December 31, 2007

Audit Fees: The aggregate fees, including expenses, billed by principal accountants for professional services rendered for the audit of the Companys consolidated financial statements during fiscal year ending December 31, 2007 and for the review of the Companys financial information included in its quarterly reports on Form 10-QSB during the fiscal year ending December 31, 2007 or services that are normally provided in connection with statutory and regulatory filings or engagements during the fiscal year ending December 31, 2007 was $69,000

Audit Related Fees: The aggregate fees, including expenses, billed by principal accountants for assurance and related services reasonably related to the performance of the Companys audit or review of the Companys financial statements during the year ended December 31, 2007 were $-0-.

Tax Fees: The aggregate fees, including expenses, billed by principal accountants for tax compliance, tax advice and tax planning during year 2007 was $-0-.

All Other Fees: The aggregate fees, including expenses, billed for all other services rendered to the Company by principal accountants during year 2007 was $-0-.

The Company has no audit committee. The Company's board of directors has considered whether the provisions of the services covered above under the captions is compatible with maintaining the auditors independence. All services were approved by the board of directors prior to the completion of the respective audit.



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PART IV

Item 15.

Exhibits

No.

Description

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.





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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 15, 2009

| |                         |               
| | ----------------------- | --------------
| |                         |               
| | Xenacare Holdings, Inc.
| |                         |               
| |                         |               
| | By:                     | /s/Frank Rizzo
| |                         | Frank Rizzo   
| |                         | President/CEO 



In accordance with the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|                |  |                                     |  |               
|--------------- |  | ----------------------------------- |  | --------------
|                |  |                                     |  |               
|Signature       |  | Title                               |  | Date          
|/s/ Frank Rizzo |  | President/CEO, Director             |  | April 15, 2009
|Frank Rizzo     |  |                                     |  |               
|                |  |                                     |  |               
|/s/Alan Xenakis |  | Chairman, Director                  |  | April 15, 2009
|Alan Xenakis    |  |                                     |  |               
|                |  |                                     |  |               
|/s/ Bobby Story |  | Secretary, Chief Financial Officer, |  | April 15, 2009
|Bobby Story     |  | and Director                        |  |               
|                |  |                                     |  |               
|/s/Rik Deitsch  |  | Director                            |  | April 15, 2009
|Rik Deitsch     |  |                                     |  |               





26



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XENACARE HOLDINGS, INC.

INDEX TO FINANCIAL STATEMENTS



|                                                                                            |    
|------------------------------------------------------------------------------------------- | ---
|                                                                                            |    
|Report of Independent Registered Public Accounting Firm                                     | F-2
|Consolidated Balance Sheets as of December 31, 2008 and 2007                                | F-3
|Consolidated Statements of Operations for the years ended December 31, 2008 and 2007        | F-4
|Consolidated Statements in Changes in Equity for the years ended December 31, 2008 and 2007 | F-5
|Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007        | F-6
|Notes to Consolidated Financial Statements                                                  | F-7







F-1



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To the Board of Directors and Stockholders of

XenaCare Holdings, Inc. and Subsidiaries



We have audited the accompanying balance sheets of XenaCare Holdings, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the related statements of operations, changes in stockholders' deficit and cash flows for the years ended December 31, 2008 and 2007. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of XenaCare Holdings, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the results of its operations and its cash flows for the years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.



These accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Companys need to seek new sources or methods of financing or revenue to pursue its business strategy, raise substantial doubt about the Companys ability to continue as a going concern. Managements plans as to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.











/s/ Jewett, Schwartz, Wolfe & Associates





Hollywood, Florida

April 14, 2009





F-2



---

XenaCare Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                            |                                                               |   |            |                   |         |                   |            |         | 
|------------------------------------------- | ------------------------------------------------------------- | - | ---------- | ----------------- | ------- | ----------------- | ---------- | ------- | 
|                                            |                                                               |   |            | December 31,
2008 |         | December 31,
2007 |           
|                                            |                                                               |   |            |                   |        
|ASSETS                                      |                                                               |   |            |                   |         |                   |            |        
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Current Assets                              |                                                               |   |            |                   |         |                   |            |        
|                                            | Cash                                                          |   |            | $                 | 362     |                   | $          | 1,607   | 
|                                            | Accounts receivable                                           |   |            | 331,027           |         |                   | 4,048      |        
|                                            | Inventory                                                     |   |            |                   | 311,103 |                   |            | 114,981 | 
|                                            | Prepaid expenses and other current assets                     |   |            | 302,453           |         |                   | 146,000    |        
|Total Current Assets                        |                                                               |   | 944,945    |                   |         | 266,636           |           
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Office Furniture and Equipment, net         |                                                               |   | 1,482      |                   |         | 2,537             |           
|Other Assets                                |                                                               |   |            | 273,000           |         |                   | 310,000    |        
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|TOTAL ASSETS                                |                                                               |   | $          | 1,219,427         |         | $                 | 579,173    |        
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|LIABILITIES AND SHAREHOLDERS' DEFICIT       |                                                               |   |            |                   |         |                   |           
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Current Liabilities                         |                                                               |   |            |                   |         |                   |            |        
|                                            | Accounts payable and accrued expenses                         |   | $          | 857,603           |         | $                 | 972,111    |        
|                                            | Notes payable - current                                       |   |            | 1,154,392         |         |                   | 471,748    |        
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Total Current Liabilities                   |                                                               |   | 2,011,995  |                   |         | 1,443,859         |           
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Notes payable - non-current                 |                                                               |   | -          |                   |         | -                 |           
|Other liabilities                           |                                                               |   |            | 257,290           |         |                   | 859,815    |        
|TOTAL LIABILITIES                           |                                                               |   | 2,269,285  |                   |         | 2,303,674         |           
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|COMMITMENTS AND CONTINGENCIES               |                                                               |   |            |                   |         |                   |           
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|Shareholder's Equity Deficit                |                                                               |   |            |                   |         |                   |           
|                                            | Preferred stock, blank check, 5,000,000 shares authorized:    |   |            |                   |         |                   |            |        
|                                            | Series A, $0.001 par value, 500,000 shares issued             |   |            | 500               |         |                   | 500        |        
|                                            | Series B, $0.001 par value, 206,600 shares issued             |   |            | -                 |         |                   | -          |        
|                                            | Series C, $0.001 par value, 50,000 shares issued              |   |            | -                 |         |                   |            |        
|                                            | Common stock, $0.001 par value, 45,000,000 shares authorized: |   |            |                   |         |                   |           
|                                            | 43,026,695 and 23,647,338 shares issued and outstanding at    |   |            |                   |         |                   |           
|                                            | December 31, 2008 and December 31, 2007, respectively         |   |            | 43,026            |         |                   | 23,647     |        
|                                            | Additional paid-in-capital                                    |   |            | 5,984,396         |         |                   | 3,526,691  |        
|                                            | Stock subscription receivable                                 |   |            | -                 |         |                   | -          |        
|                                            | Accumulated deficit                                           |   |            | (7,077,780        | )       |                   | (5,275,339 | )      
|Total Shareholders' Deficit                 |                                                               |   | (1,049,858 | )                 |         | (1,724,501        | )         
|                                            |                                                               |   |            |                   |         |                   |            |         | 
|TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT |                                                               | $ | 1,219,427  |                   | $       | 579,173           |           





See accompanying notes to consolidated financial statements

F-3



---

XenaCare Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations





|                                            |                            |                                    |            |                         |            |            |           |   | 
|------------------------------------------- | -------------------------- | ---------------------------------- | ---------- | ----------------------- | ---------- | ---------- | --------- | - | 
|                                            |                            |                                    |            | Year Ended
December 31, |           
|                                            |                            |                                    |            |                        
|                                            |                            |                                    |            | 2008                    |            | 2007       |          
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Revenue:                                    |                            |                                    |            |                         |            |            |           |  
|                                            | Product sales              | $                                  | 121,090    |                         | $          | 110,101    |          
|                                            | Other fee revenue          |                                    | -          |                         |            | 6,048      |          
|                                            |                            | Total revenue                      |            | 121,090                 |            |            | 116,149   |  
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Cost of revenue                             |                            |                                    | 88,680     |                         |            | 85,394     |          
|Gross profit                                |                            |                                    |            | 32,410                  |            |            | 30,755    |  
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Operating costs and expenses:               |                            |                                    |            |                         |            |           
|                                            | Selling and marketing      |                                    | 595,722    |                         |            | 671,714    |          
|                                            | General and administrative |                                    | 938,862    |                         |            | 1,544,037  |          
|                                            | Write downs                |                                    | 59,181     |                         |            | 451,292    |          
|                                            |                            | Total operating costs and expenses |            | 1,593,765               |            |            | 2,667,043 |  
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Other income (expense)                      |                            |                                    |            |                         |            |           
|                                            | Interest expense           |                                    | (31,985    | )                       |            | (65,865    | )        
|                                            | Other income               |                                    | 87,101     |                         |            | 6,538      |          
|                                            | Other expenses             |                                    | (296,202   | )                       |            | (34,659    | )        
|                                            |                            | Total other income (expense)       |            | (241,086                | )          |            | (93,986   | )
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Net Income (Loss)                           |                            | $                                  | (1,802,441 | )                       | $          | (2,730,274 | )        
|                                            |                            |                                    |            |                         |            |            |           |   | 
|                                            |                            |                                    |            |                         |            |            |           |   | 
|Weighted average shares - basic and diluted |                            | 28,671,809                         |            |                         | 22,914,508 |           
|Basic and diluted loss per share            | $                          | (0.06                              | )          | $                       | (0.12      | )         





See accompanying notes to consolidated financial statements

F-4



---

XenaCare Holdings, Inc. and Subsidiaries

Consolidated Statement of Changes in Equity

For the Year Ended December 31, 2008 and the Year Ended December 31, 2007



|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |               |             |  |   |             |  | 
|----------------- | ------------------------------- | ------------------------------------ |  | --------------- | --- | ------------ | ---------- | ----------- | ----- | ------------ | --------- | ----------- | --------- | ---------- | - | ----------- | --------- | ------------- | ----------- |  | - | ----------- |  | 
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           | Total        
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           | Stock      |   |             |           | Shareholders'
|                  |                                 |                                      |  | Preferred Stock |     | Common Stock |            |             |       | Subscription |           | Accumulated |           | Members'  
|                  |                                 |                                      |  | Shares          |     | Amount       |            | Shares      |       | Amount       |           | APIC        |           | Receivable |   | Deficit     |           | Equity       
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|December 31, 2007 |                                 | 500,000                              |  | $               | 500 |              | 23,647,338 |             | $     | 23,647       |           | $           | 3,526,691 |            | $ | -           |           | $             | (5,275,339) |  | $ | (1,724,501)
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|                  | Shares issued                   |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |          
|                  |                                 | To existing shareholders pursuant to |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |          
|                  |                                 | anti-dilutive agreements             |  |                 |     |              |            | 1,251,000   |       | 1,251        |           | (1,251)     |           |            |   |             |           | -            
|                  |                                 | For services                         |  |                 |     |              |            | 980,000     |       | 980          |           | 430,520     |           |            |   |             |           | 431,500      
|                  |                                 | Loan collateral                      |  |                 |     |              |            | 300,000     |       | 300          |           | 149,700     |           |            |   |             |           | 150,000      
|                  |                                 | Consulting services                  |  |                 |     |              |            | 1,150,000   |       | 1,150        |           | (1,150)     |           |            |   |             |           | -            
|                  |                                 | Existing shareholders -              |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|                  |                                 | consulting agreements                |  |                 |     |              |            | 5,867,783   |       | 5,868        |           | 668,927     |           |            |   |             |           | 674,795      
|                  |                                 | repayment of debt                    |  |                 |     |              |            | 10,840,774  |       | 10,841       |           | 1,235,848   |           |            |   |             |           | 1,246,689    
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|                  |                                 | Series B                             |  | 206,600         |     | 207          |            |             |       |              |           | 206,393     |           |            |   |             |           | 206,600      
|                  |                                 | Series C                             |  | 50,000          |     | 50           |            |             |       |              |           | 49,950      |           |            |   |             |           | 50,000       
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           | -            
|                  | Shares converted                |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |          
|                  |                                 | Series A                             |  |                 |     |              |            |             |       | -            |           | -           |           |            |   |             |           | -            
|                  |                                 | Series B                             |  | (206,600)       |     | (207)        |            | 619,800     |       | 620          |           | (413)       |           |            |   |             |           | -            
|                  |                                 | Series C                             |  | (50,000)        |     | (50)         |            | 70,000      |       | 70           |           | (20)        |           |            |   |             |           | -            
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|                  | Shares cancelled                |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |          
|                  |                                 | Non-vested former employee shares    |  |                 |     |              | (245,000)  |             | (245) |              | (122,255) |             |           |            |   |             | (122,500)
|                  |                                 | Former investor                      |  |                 |     |              |            | (5,000)     |       | (5)          |           | (9,995)     |           |            |   |             |           | (10,000)     
|                  |                                 | Consulting services                  |  |                 |     |              |            | (1,150,000) |       | (1,150)      |           | 1,150       |           |            |   |             |           | -            
|                  |                                 | Loan collateral                      |  |                 |     |              |            | (300,000)   |       | (300)        |           | (149,700)   |           |            |   |             |           | (150,000)    
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|                  | Net loss and comprehensive loss |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |          
|                  |                                 | 2008 Net Loss                        |  |                 |     |              |            |             |       |              |           |             |           |            |   | (1,802,441) |           | (1,802,441)  
|                  |                                 |                                      |  |                 |     |              |            |             |       |              |           |             |           |            |   |             |           |              
|December 31, 2008 |                                 | 500,000                              |  | $               | 500 |              | 43,026,695 |             | $     | 43,027       |           | $           | 5,984,395 |            | $ | -           |           | $             | (7,077,780) |  | $ | (1,049,858)





See accompanying notes to consolidated financial statements

F-5



---

XenaCare Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|------------------------------------- | --------------------------------------------- | ----------------------------------------- | ----------------------------------------- | --------- | ----------------------- | ---------- | --------- | ---------- | ---------- | -
|                                      |                                               |                                           |                                           |           | Year Ended
December 31, |           
|                                      |                                               |                                           |                                           |           |                        
|                                      |                                               |                                           |                                           |           | 2008                    |            | 2007      |           
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Cash Flows from Operating Activities: |                                               |                                           |                                           |           |                         |            |          
|                                      | Net Loss                                      |                                           |                                           | $         | (1,802,441              | )          | $         | (2,730,274 | )         
|                                      | Adjustments to reconcile net loss to net      |                                           |                                           |           |                         |            |           |           
|                                      | cash used in operating activities:            |                                           |                                           |           |                         |            |           |           
|                                      |                                               | Depreciation and amortization             |                                           |           | 1,268                   |            |           | 27,581     |           
|                                      |                                               | Loss on disposal of fixed assets          |                                           |           | -                       |            |           | 148,090    |           
|                                      |                                               | Write down and impairment                 |                                           |           | -                       |            |           | 180,558    |           
|                                      |                                               | Stock issued for services                 |                                           |           | 431,500                 |            |           | 114,999    |           
|                                      |                                               | Forfeited shares                          |                                           |           | (122,500                | )          |           |            |           
|                                      | Changes in operating assets and liabilities:  |                                           |                                           |           |                         |            |           |           
|                                      |                                               | Accounts receivable                       |                                           |           | (326,979                | )          |           | (4,048     | )         
|                                      |                                               | Inventory                                 |                                           |           | (196,122                | )          |           | 213,864    |           
|                                      |                                               | Prepaid expenses and other current assets |                                           |           | (119,453                | )          |           | -          |           
|                                      |                                               | Accounts payable and accrued expenses     |                                           |           | 560,287                 |            |           | 930,907    |           
|                                      |                                               |                                           | Net cash used in operating activities     |           |                         | (1,574,440 | )         |            | (1,118,323 | )
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Cash Flows from Investing Activities: |                                               |                                           |                                           |           |                         |            |          
|                                      | Purchase of office furniture and equipment    |                                           |                                           | (213      | )                       |            | (5,812    | )         
|                                      |                                               |                                           | Net cash used in investing activities     |           |                         | (213       | )         |            | (5,812     | )
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Cash Flows from Financing Activities: |                                               |                                           |                                           |           |                         |            |          
|                                      | Proceeds from notes payable                   |                                           |                                           | 977,000   |                         |            | -         |           
|                                      | Advances from (Payments to) related parties   |                                           |                                           | 349,808   |                         |            | 1,081,563 |           
|                                      | Proceeds from sale of stock                   |                                           |                                           | 256,600   |                         |            | -         |           
|                                      | Repurchase common shares                      |                                           |                                           | (10,000   | )                       |            | -         |           
|                                      |                                               |                                           | Net cash provided by financing activities |           |                         | 1,573,408  |           |            | 1,081,563  |  
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Increase (Decrease) in Cash           |                                               |                                           | (1,245                                    | )         |                         | (42,572    | )        
|Cash, Beginning of Period             |                                               |                                           | 1,607                                     |           |                         | 44,179     |          
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Cash, End of Period                   |                                               | $                                         | 362                                       |           | $                       | 1,607      |          
|                                      |                                               |                                           |                                           |           |                         |            |           |            |            |  
|Supplemental Information:             |                                               |                                           |                                           |           |                         |            |          
|                                      | Cash paid for interest                        |                                           | $                                         | -         |                         | $          | -         |           
|                                      | Cash paid for taxes                           |                                           | $                                         | -         |                         | $          | -         |           
|NonCash Transactions:                 |                                               |                                           |                                           |           |                         |            |          
|                                      | Asset Acquisition 2BHealthy                   |                                           | $                                         | -         |                         | $          | 505,000   |           
|                                      | SunPill inventory and prepaid royalties       |                                           | $                                         | -         |                         | $          | 200,000   |           
|                                      | Repay consulting agreements with common stock |                                           | $                                         | 674,795   |                         | $          | -         |           
|                                      | Repay debt with common stock                  |                                           | $                                         | 1,246,689 |                         | $          | -         |           





See accompanying notes to consolidated financial statements

F-6



---

XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.  ORGANIZATION AND NATURE OF BUSINESS

Organization and Nature of Business

XenaCare Holdings, Inc. (the Company, XenaCare, XC Holdings, we, us or our) was organized under the laws of Florida in June 2005 to formulate, market and distribute a line of clinical, life style performance and protective nutrition supplement products (NSPs).

Our Clinical NSP product group has commenced the formulation and brand building of a line of NSPs for the replenishment of nutrients lost due to pharmaceutical medications, which will be sold through mass media buys (radio and television advertising), web sales and other channels of distribution.

Our Lifestyles Performance NSP product group is involved in the formulation of a line of NSPs for the energy/lifestyle performance market to be sold through mass media buys (radio and television advertising), web sales and other channels of distribution.

Our Protective NSP product group is directed to the energy/lifestyle performance market. Our initial product, Sun Pill, is formulated to protect the skin when exposed to damaging ultraviolet rays. We have entered into agreements for manufacturing, packaging and distribution and fulfillment of our products. We have also engaged consultants to assist us in marketing, web hosting and the development and production of infomercials.

In March 2008, we completed the final formulation of the product. We also have established relationships with several major retail chains and have begun pilot programs to introduce our SunPill product. We will begin full programs once we have secured sufficient capital support advertising campaigns and product production, which we expect to occur in the first quarter of 2009.

History of the Company

Initial operations have traditionally focused on providing a small but targeted platform of poly-formulas to the patient that address key multi-factors in disease processes such as atherosclerosis and diabetes (as opposed to the single target restrictions placed on prescription drugs that must focus on one disease factor at a time such as an HMG reductase inhibitor (Statin) that does not address the multi factors of atherosclerosis). The Companys historical lines of NSPs are: XenaCor, XenaZymePlus and XenaTri.

In mid 2005 the Company began to formulate NSPs for personal performance and lifestyle performance products. The Company also developed new distribution channels for the historical NSPs, including web site and infomercials. The Company has also formulated a line of body replenishment NSPs, which are designed to eliminate prescription induced nutrient depletion. To replace these nutrients, NSPs have been formulated, which the Company believes will combat the depletion effects of commonly prescribed drugs. Additionally, the Company has added a nutritional supplement (world wide patent pending) that defends the skin from the damaging effects of the sun, and a patented process for an algae-based Omega 3 fatty acid food additive that is tasteless and odorless. The Company has the worldwide rights to both proprietary items.







F-7



---

XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Terms and Definitions

Company

XenaCare, XC Holdings, we, us or our

APB

Accounting Principles Board

ARB

Accounting Review Board

EITF

Emerging Issues Task Force

FASB

Financial Accounting Standards Board

FSP

FASB Staff Position

FIFO

First-in, First-out

SAB

Staff Accounting Bulletin

SEC

Securities Exchange Commission

SFAS or FAS

Statement of Financial Accounting Standards

NSP

Nutrition Supplement Product

Basis of Accounting

The financial statements are prepared using the accrual basis of accounting where revenues and expenses are recognized in the period in which they were incurred. The basis of accounting conforms to accounting principles generally accepted in the United States of America.

Principles of Consolidation and Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: BRS, Inc.; XenaCare, LLC; XenaStaff, LLC; and XenaCeutical, LLC and Raw Material Ingredients, Inc. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on managements knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Risks and Uncertainties

The Companys business could be impacted by continuing price pressure on its product manufacturing, acceptance of its products in the market place, new competitors, changes in federal and/or state legislation and other factors. Adverse changes in these areas could negatively impact the Companys financial position, results of operations and cash flows.

Going Concern

As shown in the accompanying financial statements, the Companys operating and capital requirements in connection with operations have been and will continue to be significant. The recurring losses from operations and increased contractual agreements raise doubt about the Companys ability to continue as a going concern. Based on current plans, the Company anticipates that revenues earned from SunPillTM and AlGal product sales will be the primary source of funds for operating activities. In addition to existing cash, the Company may rely on bank borrowing, if available, or sales of securities to meet the basic capital and liquidity needs for the next 12 months. Additional capital may be sought to fund the expansion of product lines and marketing efforts, which may also include bank borrowing, or a private placement of securities. Our ability to continue as a going concern is dependent upon our ability to generate sales from our new products and our obtaining adequate capital to fund losses until we become profitable. There can be no assurance that managements plans will be successful.

The financial statements have been prepared on a going concern basis and accordingly do not include any adjustments that might result from the outcome of this uncertainty.



F-8



---

XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable

Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At December 31, 2008 and 2007, the provision for doubtful accounts was $0 for both years. The Company has recorded $259,214 as unearned revenue based on anticipated returns.

Inventory

Inventory is reported at the lower end of cost or market on the first-in, first-out (FIFO) method. Our inventory is subject to expiration and accordingly quantities purchased and sell through rates are periodically monitored for potential overstocking or pending expiration as a basis for establishing the appropriate reserve for any estimated expiration or obsolescence. The Company’s principal brands are XenaCor, XenaTri, XenaZyme, Body Replenishment Line and its newest product lines, B-Alert and SunPillTM.

Office Furniture and Equipment

Office furniture and equipment are recorded at cost and depreciation is provided using the straight-line method over the estimated useful lives of the assets.Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the assets.

Office furniture and equipment is depreciated over various lives ranging from 5 to 10 years. Depreciation expense for the years ended December 31, 2008 and 2007 was $1,268 and $27,581, respectively.

Revenue Recognition

The Company’s product revenues represent primarily sales of SunPillTM, XenaCor, XenaTri, XenaZyme and the Body Replenishment Line. The B-Alert or 2BHealthy product lines have generated nominal revenue. Revenue is recognized when a product is shipped. Product is not shipped until check or credit card payment is received from the customer. The Company manages the collection process for transactions processed on its website, but it outsources its fulfillment (delivery) process to a third party for certain products.

The Companys revenue recognition policies are in compliance with SAB 104, Revenue Recognition, which establishes criteria that must be satisfied before revenue is realized or realizable and earned. The Company recognizes revenue when all of the following four criteria are met:

·

persuasive evidence of a sales arrangement exists,

·

delivery has occurred,

·

the sales price is fixed or determinable and

·

collectability is probable.

Shipping and handling charges related to sales transactions are recorded as sales revenues when billed to customers or included in the sales price in accordance with EITF 00-10, Accounting for Shipping and Handling Fees and Costs. Shipping and handling costs are included in cost of revenue.

The Company accepts product returns and will issue a credit, refund or product exchange. To date, product returns have occurred but are not considered material. The Company does not have a product return reserve established.

Research and Development

The Company does not engage in research and development as defined in SFAS 2, Accounting for Research and Development Costs. However, the Company does incur formulation costs that include salaries, materials and consultant fees. These costs are classified as selling, general and administrative expenses in the consolidated statements of operations.



F-9



---

XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be recovered. We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.

Earnings per share

The Company computes basic and diluted earnings per share amounts in accordance with SFAS 128, Earnings per ShareBasic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

Segment Information

SFAS 131, Disclosures about Segments of an Enterprise and Related Information, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. The Company operates in one segment for management reporting purposes.

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.

Fair Value Measurements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 provides guidance for using fair value to measure assets and liabilities. SFAS 157 addresses the requests from investors for expanded disclosure about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and was adopted by the Company in the first quarter of fiscal year 2008. The adoption of SFAS 157 did not have a material impact on the consolidated results of operations and financial condition.

Accounting for Income Taxes

SFAS 141(R) amends SFAS 109, Accounting for Income Taxes, to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142,Goodwill and Other Intangible Assets, to, among other things; provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 141(R) could have on its financial statements.



F-10



---

XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of SFAS No. 115 , which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a material effect on its consolidated financial condition, results of operations, cash flows or disclosures.

Business Combinations

In December 2007, the FASB issued SFAS 141(R) Business Combinations. This Statement replaces the original FASB 141. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of this SFAS 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS 141(R) establishes principles and requirements for how the acquirer:

a. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree.

b. Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.

c. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect that its adoption of SFAS 141(R) will have on its consolidated results of operations and financial condition.

Non-controlling Interests in Consolidated Financial Statementsan amendment of ARB No. 51

In December 2007, the FASB issued SFAS 160 Non-controlling Interests in Consolidated Financial Statements  an amendment of ARB No. 51. This Statement amends the original ARB 51 Consolidated Financial Statements to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect that its adoption of SFAS 160 will have on its consolidated results of operations and financial condition.

Share-Based Payments

On December 21, 2007 the SEC staff issued SAB 110, which, effective January 1, 2008, amends and replaces SAB 107, Share-Based Payment. SAB 110 expresses the views of the SEC staff regarding the use of a simplified method in developing an estimate of expected term of plain vanilla share options in accordance with FASB Statement No. 123(R), Share-Based Payment. Under the simplified method, the expected term is calculated as the midpoint between the vesting date and the end of the contractual term of the option. The use of the simplified method, which was first described in Staff Accounting Bulletin No. 107, was scheduled to expire on December 31, 2007. SAB 110 extends the use of the simplified method for plain vanilla awards in certain situations. The SEC staff does not expect the simplified method to be used when sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external sources, becomes available. The Company is currently evaluating the potential impact that the adoption of SAB 110 could have on its financial statements.



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Delay in Effective Date

In February 2008, the FASB issued FSP FAS No. 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Companys consolidated financial condition or results of operations.

Disclosure about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS 161, Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS 161 on the Companys consolidated financial statements.

Determination of the Useful Life of Intangible Assets

In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets,, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under FASB 142 Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of the expected cash flows used to measure the fair value of the asset under FASB 141 (revised 2007) Business Combinations and other U.S. generally accepted accounting principles. The adoption of FSP FAS 142-3 is not expected to have a material effect on its financial position, results of operations or cash flows.

Accounting for Income Taxes

SFAS 141(R) amends SFAS 109, Accounting for Income Taxes, to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142, Goodwill and Other Intangible Assets, to, among other things; provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 141(R) could have on its financial statements.

The Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The implementation of this standard will not have a material impact on the Company's consolidated financial position and results of operations.



F-12



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion ( Including Partial Cash Settlement)

In May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The FSP is effective for us as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements.

Accounting for Financial Guarantee Insurance Contractsan interpretation of FASB Statement No. 60

In May 2008, the FASB issued SFAS 163, Accounting for Financial Guarantee Insurance Contracts  an interpretation of FASB Statement No. 60. This statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS 163 also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities to increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. SFAS 163 is effective fro financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprises risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuance of SFAS 163. Except for those disclosures, earlier application is not permitted.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations.

Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own Stock

In June 2008, the FASB ratified EITF Issue 07-5, Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock. EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its consolidated financial position and results of operations.



F-13



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of SFAS 133 and FIN 45; and Clarification of the Effective Date of SFAS 161

In September 2008, the FASB issued FSP FAS 133-1, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument. The FSP also amends SFAS 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to require and additional disclosure about the current status of the payment/performance risk of a guarantee. Finally, this FSP clarifies the Boards intent about the effective date of SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. FSP FAS 133-1 is effective for fiscal years ending after November 15, 2008. The Company is currently assessing the impact of FSP FAS 133-1 on its consolidated financial position and results of operations.

Issuers Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement

In September 2008, the FASB issued EITF 08-5 Issuers Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement. This FSP determines an issuers unit of accounting for a liability issued with an inseparable third-party credit enhancement when it is measured or disclosed at fair value on a recurring basis. FSP EITF 08-5 is effective on a prospective basis in the first reporting period beginning on or after December 15, 2008. The Company is currently assessing the impact of FSP EITF 08-5 on its consolidated financial position and results of operations.

Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. This FSP clarifies the application of SFAS 157, Fair Value Measurements, in a market that is not active. The FSP also provides examples for determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The impact of adoption was not material to the Companys consolidated financial condition or results of operations.

Equity Method Investment Accounting Considerations

In November 2008, the FASB issued EITF 08-6 Equity Method Investment Accounting Considerations. EITF 08-6 clarifies accounting for certain transactions and impairment considerations involving the equity method. Transactions and impairment dealt with are initial measurement, decrease in investment value, and change in level of ownership or degree of influence. EITF 08-6 is effective on a prospective basis for fiscal years beginning on or after December 15, 2008. The Company is currently assessing the impact of EITF 08-6 on its consolidated financial position and results of operations.

Accounting for Defensive Intangible Assets

In November 2008, the FASB issued EITF 08-7, Accounting for Defensive Intangible Assets. EITF 08-7 clarifies how to account for defensive intangible assets subsequent to initial measurement. EITF 08-7 applies to all defensive intangible assets except for intangible assets that are used in research and development activities. EITF 08-7 is effective for intangible assets acquired on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently assessing the impact of EITF 08-7 on its consolidated financial position and results of operations.



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That is Based on the Stock of an Entitys Consolidated Subsidiary

In November 2008, the FASB issued FSP EITF 08-8, Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That is Based on the Stock of an Entitys Consolidated Subsidiary. EITF 08-8 clarifies whether a financial instrument for which the payoff to the counterparty is based, in whole or in part, on the stock of an entitys consolidated subsidiary is indexed to the reporting entitys own stock. EITF 08-8 also clarifies whether or not stock should be precluded from qualifying for the scope exception of SFAS 133, Accounting for Derivative Instruments and Hedging Activities,or from being within the scope of EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock. EITF 08-8 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company is currently assessing the impact of EITF 08-8 on its consolidated financial position and results of operations.

Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities

In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R) -8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. This FSP amends SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financials assets. FSP FAS 140-4 also amends FIN 46(R)-8, Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest entity, to provide additional disclosures about their involvement with a variable interest entity. FSP FAS 140-4 also requires certain additional disclosures, in regards to variable interest entities, to provide greater transparency to financial statement users. FSP FAS 140-4 is effective for the first reporting period (interim or annual) ending after December 15, 2008, with early application encouraged. The Company is currently assessing the impact of FSP FAS 140-4 on its consolidated financial position and results of operations.

Effective Date of FASB Interpretation 48 for Certain Nonpublic Enterprises

In December 2008, the FASB issued FSP FIN 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises. FSP FIN 48-3 defers the effective date of FIN 48, Accounting for Uncertainty in Income Taxes, for certain nonpublic enterprises as defined in SFAS 109, Accounting for Income Taxes. However, nonpublic consolidated entities of public enterprises that apply U.S. GAAP are not eligible for the deferral.FSP FIN 48-3 was effective upon issuance. The impact of adoption was not material to the Companys consolidated financial condition or results of operations.

Employers Disclosures about Postretirement Benefit Plan Assets

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets. This FSP amends SFAS 132(R), Employers Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 also includes a technical amendment to SFAS 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each annual period for which a statement of income is presented. The required disclosures about plan assets are effective for fiscal years ending after December 15, 2009. The technical amendment was effective upon issuance of FSP FAS 132(R)-1. The Company is currently assessing the impact of FSP FAS 132(R)-1 on its consolidated financial position and results of operations.





F-15



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 4.  INVENTORY

Significant components of inventory at December 31, 2008 and 2007 consist primarily of:

|                          |      |          |      |   |          | 
|------------------------- | ---- | -------- | ---- | - | -------- | 
|                          | 2008 |          | 2007 |  
|Bulk product              | $    | 112,061  |      | $ | -        | 
|Merchandise inventory     |      | 239,164  |      |   | 187,641  | 
|                          |      | 351,225  |      |   | 187,641  | 
|Allowances for expiration |      | (40,122) |      |   | (72,660) | 
|                          | $    | 311,103  |      | $ | 114,981  | 



Bulk product  Bulk product consists of completed loose SunPill product that has been stored in barrels awaiting commercial packaging to make it market ready for distribution.

Merchandise inventory - Merchandise inventory consists primarily of the SunPill product along with lesser quantities of XenaCore and BRS product. Our formulations are batch controlled and carry an expiration date in accordance with applicable government regulations. Any product approaching their expiration date have been destroyed and removed from the inventory. Continued delays in fully implementing our marketing and distribution programs have resulted in significantly slower than anticipated sales in 2008. Consequently, we have established an allowance on the remaining inventory, based on the estimated sell through rate for each product, before their expiration.



NOTE 5.  PREPAID EXPENSES AND OTHER CURRENT ASSETS

Significant components of prepaid expenses and other current assets at December 31, 2008 and 2007 consist primarily of:

|                                          |      |         |      |   |         | 
|----------------------------------------- | ---- | ------- | ---- | - | ------- | 
|                                          | 2008 |         | 2007 |  
|Royalty advances                          | $    | -       |      | $ | 125,000 | 
|Slotting allowances                       |      | 124,080 |      |   | 21,000  | 
|InfoMercial Production                    |      | 98,082  |      |   | -       | 
|Deferred costs - RiteAid unearned revenue |      | 80,291  |      |   |         | 
|                                          | $    | 302,453 |      | $ | 146,000 | 



Royalty advances - Royalty advances represent an advance on future royalty payments based on future product sales.  SunPill is expected to begin commercial distribution, once the Company has secured adequate capital to support required advertising and to produce sufficient inventory, which is expected to occur in the second quarter of 2009.

Slotting allowances - Slotting allowances represent fees paid to retailers to secure appropriate shelf space primarily for our SunPill product line.





F-16



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 6.  OTHER ASSETS

Significant components of other assets at December 31, 2008 and 2007 consist primarily of:

|                          |      |         |      |   |         |  
|------------------------- | ---- | ------- | ---- | - | ------- | -
|                          | 2008 |         | 2007 |  
|Customer list - 2BHealthy | $    | -       |      | $ | 61,796  |  
|Trade credits             |      | 310,000 |      |   | 310,000 |  
|Less: Allowance           |      | (37,000 | )    |   | (61,796 | )
|                          | $    | 273,000 |      | $ | 310,000 |  



Customer lists and trade credits were acquired in connection with the 2BHealthy asset acquisition.

Customer lists - Customer lists were deemed to be fully impaired at December 31, 2007.

Trade credits - Trade credits may be used to offset future advertising costs at a ratio of 25% of each advertising dollar spent. In accordance with the guidance offered in EITF 99-17, management has evaluated the potential utilization of these trade credits based on its projections of planned marketing programs, which are subject to securing adequate funding, and has provided an allowance for estimated forfeited credits. The trade credits will expire on February 28, 2011. No trade credits have been utilized to date.



NOTE 7.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Significant components of accounts payable and accrued expenses at December 31, 2008 and 2007 consist primarily of:

|                                      |      |         |      |   |         | 
|------------------------------------- | ---- | ------- | ---- | - | ------- | 
|                                      | 2008 |         | 2007 |  
|Trade payables                        | $    | 245,928 |      | $ | 1,434   | 
|Accrued accounting and legal fees     |      | 37,500  |      |   | 170,000 | 
|Accrued product and description costs |      | 1,500   |      |   | 31,500  | 
|Accrued payroll                       |      | 206,018 |      |   | 629,720 | 
|Accrued interest                      |      | 18,099  |      |   | 47,700  | 
|Expenses reimbursable to officer      |      | 63,344  |      |   | 64,344  | 
|Other accrued expenses                |      | 25,000  |      |   | 27,413  | 
|Unearned revenue                      |      | 259,214 |      |   | -       | 
|                                      | $    | 857,603 |      | $ | 972,111 | 



Unearned revenue - Unearned revenue represents product shipped and invoiced but subject to return by the retailer. Due to the potential right of return, the Company has recorded the invoicing as unearned revenue and will recognize revenue on these transactions, only when collectability is reasonably assured, in accordance with the guidance offered in SAB 104.  Revenue on these transactions will be recognized when the retailer acknowledges selling the product and commits to payment or when payment is received.



F-17



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8.  NOTES PAYABLE - CURRENT

Significant components of notes payable  current at December 31, 2008 and 2007 consist primarily of:

|                          |      |           |      |   |         | 
|------------------------- | ---- | --------- | ---- | - | ------- | 
|                          | 2008 |           | 2007 |  
|Related parties           | $    | 135,072   |      | $ | 339,847 | 
|Investors                 |      | -         |      |   | 93,000  | 
|Wachovia - line of credit |      | 37,320    |      |   | 38,901  | 
|Sun Packing, Inc.         |      | 977,000   |      |   | -       | 
|                          | $    | 1,149,392 |      | $ | 471,748 | 



Related Parties - Notes payable to related parties were issued in various traunches, each mature one year from issuance and bear interest at 15%.  The lenders are affiliated with the Company through common executive management as our CFO and President are also officers in the lenders.  The notes have been extended until June 1, 2009.

Investors - Notes payable to investors were issued in various traunches commencing in June 2007, each mature one year from issuance and bear interest at 15%. Notes payable to investors were converted to common stock in the fourth quarter of 2008.

Wachovia - The Wachovia line of credit was originated in November 2007 and is personally guaranteed by the Companys President. The line of credit bears interest at 12%.

Sun Packing, Inc. - The Sun Packing, Inc note originated during merger negotiations with the Company during the third and fourth quarters of 2008. The parties were unable to reach an agreement on several key issues and the merger negotiations were discontinued. The note is personally guaranteed by our officers and bears interest at 6%. The note is payable upon demand. To date, the note has not been called.



NOTE 9.  OTHER LIABILITIES

Significant components of other liabilities at December 31, 2008 and 2007 consist primarily of:

|                |      |         |      |   |         | 
|--------------- | ---- | ------- | ---- | - | ------- | 
|                | 2008 |         | 2007 |  
|Related parties | $    | 253,290 |      | $ | 352,126 | 
|Investors       |      | 4,000   |      |   | 507,689 | 
|                | $    | 257,290 |      | $ | 859,815 | 





F-18



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 9.  OTHER LIABILITIES (Continued)

Related Parties  Other liabilities to related parties represent advances made to the Company or payments made on our behalf that were issued in various traunches, and accrue interest at 15%. The creditors are affiliated with the Company through common executive management as our CFO and President are also officers in the creditors. Portions of the outstanding balances have been satisfied by conversion into common stock in the fourth quarter of 2008.

Investors  Other liabilities to investors represent advances made to the Company in various traunches and accrue interest at 15%. Portions of the outstanding balances have been satisfied by conversion into common stock in the fourth quarter of 2008.

NOTE 10.  COMMITMENTS AND CONTINGENCIES

The Company is currently operating under several material agreements as listed below:

·

Employment agreements with three individuals for their services in the areas of sales, operations and mergers and acquisitions. These agreements cover cash as well as stock compensation and health insurance benefits and expire December 31, 2011.

·

Business consulting agreement with one individual for their services in the areas of mergers and acquisitions. These agreements cover cash as well as stock compensation and health insurance benefits and expire December 31, 2011.

·

On August 5, 2008 the Company amended its April 23, 2008 sales agreement with Pure Laboratories, LLC to purchase all rights to SunPillTM. This agreement supersedes the Company’s previous SunPillTM license agreement with Pure Laboratories, LLC dated February 8, 2007. The aggregate purchase price is the greater of 5% of gross sales capped at $2,500,000, payable quarterly at 5% of gross sales subject to an annual minimum payment of $75,000.

·

An Image Marketing and Branding Agreement with Creative Management, Inc. and a companion Spokesperson Agreement with Dr. Bob Arnot, a nationally known medical and news correspondent. The terms of the agreements extend through May 31, 2009 and include various levels of compensation based upon performance.

·

The Company leases office space on a month-to-month basis from a non-related party. The annualized rental expense is approximately $50,000.

NOTE 11.  COMMON AND PREFERRED STOCK

Common Stock

The public began trading in the Companys shares on March 05, 2008. The Companys trading symbol is XCHO:OTC.

In March 2008, the Company cancelled 245,000 shares of common stock previously issued to former employees as the shares were not vested nor earned.

In April 2008, the Company entered into an agreement with Newbridge Securities Corporation (Newbridge), a securities broker and member in good standing with the Financial Industry Regulatory Authority. The contract provides for Newbridge to receive a fee for advisory services of $30,000, payable in installments, along with 500,000 shares of restricted common stock plus an option for 800,000 additional common shares, issued in a series at strike prices ranging from $4.50 to $6.00. In August, 2008 this agreement was canceled by mutual agreement, whereby Newbridge retains any fees already paid and common stock already issued. The options along with all other obligations were cancelled.



F-19



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 11.  COMMON AND PREFERRED STOCK (Continued)

In April 2008, the Company issued an additional 264,000 shares to Bob Arnot, under an existing agreement to provide spokesperson services to the Company. In connection with the Bob Arnot agreement, an additional 66,000 shares was issued to Creative Management, Inc. under an existing agreement to provide marketing consulting services.

In June 2008, the Company issued 300,000 shares to Sun Packing, Inc. as collateral for a loan extended to

XenaCare Holdings, Inc. The stock was issued in error as the loan was collateralized by the personal guarantees of the Companys officers and Directors. The shares were subsequently cancelled in the fourth quarter of 2008.

On August 21, 2008, the Company entered into a consulting agreement with Mr. Martin Hodias for the purpose of mergers and acquisitions. For his service, he was issued 150,000 shares of restricted common stock.

During the fourth quarter of 2008, the Company issued the following shares to retire certain notes, debt obligations and advances due to various investors and related parties.

·

5,867,783 shares valued at $.115 per share or $674,795 were issued to the officers and certain consultants of the Company in satisfaction of amounts accrued and due to them under consulting agreements, which included compensation, health insurance and general office expenses and reported as Accounts Payable and Accrued Expenses.

·

5,601,426 shares valued at $.115 per share or $644,164 were issued to related parties and certain existing investors in satisfaction of various fundings reported as Notes Payable.

·

5,239,348 shares valued at $.115 per share or $602,545 were issued to related parties and certain existing investors in satisfaction of various advances made to or on behalf of the Company. These advances were reported as Other Liabilities.

Preferred Stock

During the year, the Company sold 206,600 shares in aggregate of Series B preferred stock for $1.00 per share. The Series B preferred stock has par value of $0.001 and does not accrue dividends. Each preferred share may be converted at the option of the holder into 3 shares of common stock.

In May 2008, the Company sold 70,000 shares of Series C preferred stock for $1.00 per share. The Series C preferred stock has par value of $0.001 and does not accrue dividends. Each preferred share may be converted at the option of the holder into 1 share of common stock. The preferred shares also include a warrant to purchase an equivalent number of common shares at $2.00 per share, for a term of 3 years.

On August 29, 2008 the Company converted 50,000 shares of Preferred C to 70,000 shares of restricted common stock, and the warrants were cancelled in compliance with the Share Exchange Agreement.

On November 10, 2008 the Company converted 206,600 shares of Preferred B to 619,800 shares of restricted common stock.



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12.  INCOME TAXES

The provision (benefit) for income taxes is summarized as follows:

|                                           |                         |          |      |   |            |  
|------------------------------------------ | ----------------------- | -------- | ---- | - | ---------- | -
|                                           | Year Ended
December 31, |         
|                                           | 2008                    |          | 2007 |  
|Current:                                   |                         |          |      |   |            |  
|Federal                                    | $                       | -        |      | $ | -          |  
|State                                      |                         | -        |      |   | -          |  
|Deferred:                                  |                         |          |      |   |            |  
|Federal                                    |                         | 658,956  |      |   | 928,293    |  
|State                                      |                         | 84,723   |      |   | 150,165    |  
|Increase in Valuation allowance            |                         | (743,679 | )    |   | (1,078,458 | )
|Total provision (benefit) for income taxes | $                       | -        |      | $ | -          |  

The provision for income taxes differs from the amount computed by applying the federal statutory rate to income (loss) before provision (benefit) for income taxes as follows:

|                                               |                         |        |      |  |        | 
|---------------------------------------------- | ----------------------- | ------ | ---- |  | ------ | 
|                                               | Year Ended
December 31, |       
|                                               | 2008                    |        | 2007 | 
|Expected provision (benefit) at statutory rate |                         | 35.0%  |      |  | 34.0%  | 
|State taxes                                    |                         | 4.5%   |      |  | 5.5%   | 
|Valuation allowance for Net Loss               |                         | -39.5% |      |  | -39.5% | 
|Total provision (benefit) for income taxes     |                         | 0.0%   |      |  | 0.0%   | 



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12 - INCOME TAXES (Continued)

Deferred income taxes reflect the net tax effect of tax carry forward items and the temporary differences between the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax assets and liabilities are as follows:

|                                  |      |            |      |   |            |  
|--------------------------------- | ---- | ---------- | ---- | - | ---------- | -
|                                  | 2008 |            | 2007 |  
|Deferred tax assets:              |      |            |      |   |            |  
|Net operating loss carry-forwards | $    | 2,666,924  |      | $ | 1,954,960  |  
|                                  |      | -          |      |   | -          |  
|Total deferred tax assets         |      | 2,666,924  |      |   | 1,954,960  |  
|Valuation allowance               |      | (2,666,924 | )    |   | (1,954,960 | )
|Net deferred tax assets           | $    | -          |      | $ | -          |  

As of December 31, 2008 and 2007 the Company had a valuation allowance on its deferred tax assets of $2,666,924 and $1,954,960, respectively, which relates to net operating losses. The valuation allowance increased $711,964 and $1,078,458 in the years ended December 31, 2008 and 2007 respectively. The increase in 2008 and 2007 were attributable to accumulated net operating losses.

As of December 31, 2008 and 2007, the Company had net operating loss carry-forwards of $6,751,704 and $4,949,263, respectively. Unused net operating loss carry-forwards will expire at various dates beginning 2020.

As of December 31, 2008 and 2007, the Company had no unrecognized tax benefit and accordingly no related accrued interest or penalties. The Company is not under examination by either the US federal or State of Florida tax authorities.



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