UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|                                                               |                                                                      
|-------------------------------------------------------------- | ---------------------------------------------------------------------
|(Mark one)                                                    
|X                                                              | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
|                                                               | ACT OF 1934                                                          
|For the quarterly period ended: March 31, 2009                
|                                                               |                                                                      
|                                                               | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT      
|For the transition period from: _____________ to _____________



XenaCare Holdings, Inc.

(Exact name of small business issuer as specified in its charter)



|                             |              |                    
|---------------------------- | ------------ | -------------------
|Florida                      | 333-139595   | 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

(Issuers telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)



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|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --- | - | ------------------------- | - |  |  | 
|                                                                                                                                                                                                                                              |   |     |   |                           |   |  |  | 
|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.                                                                                                                                    | X | Yes |   | No                       
|                                                                                                                                                                                                                                             
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.                                                                                   
|                                                                                                                                                                                                                                              |  
|Large accelerated filer                                                                                                                                                                                                                       |   |     |   | Accelerated filer         |   | 
|Non-accelerated filer                                                                                                                                                                                                                         |   |     |   | Smaller reporting company | X | 
|(Do not check if a smaller reporting company)                                                                                                                                                                                                 |   |     |   |                           |   | 
|                                                                                                                                                                                                                                              |  
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                                                                                                                                       |   | Yes | X | No                       
|                                                                                                                                                                                                                                              |  
|Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.                                                                                                                
|53,741,742 shares of $0.001 par value common stock at March 31, 2009.                                                                                                                                                                        









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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

INDEX



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I  FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
1
ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 
AND RESULTS OF OPERATIONS
17
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
25
ITEM 4T.  CONTROLS AND PROCEDURES
25
PART II  OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
27
ITEM 1A.  RISK FACTORS
27
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
27
ITEM 3.    DEFAULTS ON SENIOR DEBT
27
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES HOLDERS
27
ITEM 5.    OTHER INFORMATION
27
ITEM 6.    EXHIBIT
27
SIGNATURES
28









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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XenaCare Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                                                              |  |                |            |                   |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ----------------- | - | ---------- | -
|                                                                                                                                                                              |  | March 31,
2009 |            | December 31,
2008 |  
|                                                                                                                                                                              |  | (Unaudited)    |            |                   |   |           
|ASSETS                                                                                                                                                                        |  |                |            |                   |   |            |  
|                                                                                                                                                                              |  |                |            |                   |   |            |  
|Current Assets                                                                                                                                                                |  |                |            |                   |   |            |  
|Cash                                                                                                                                                                          |  | $              |           |                   | $ | 362        |  
|Accounts receivable                                                                                                                                                           |  |                | 379,382    |                   |   | 331,027    |  
|Inventory                                                                                                                                                                     |  |                | 313,693    |                   |   | 311,103    |  
|Prepaid expenses and other current assets                                                                                                                                     |  |                | 302,453    |                   |   | 302,453    |  
|Total Current Assets                                                                                                                                                          |  |                | 995,528    |                   |   | 944,945    |  
|Office Furniture and Equipment, net                                                                                                                                           |  |                | 1,165      |                   |   | 1,482      |  
|Other Assets                                                                                                                                                                  |  |                | 273,000    |                   |   | 273,000    |  
|TOTAL ASSETS                                                                                                                                                                  |  | $              | 1,269,693  |                   | $ | 1,219,427  |  
|                                                                                                                                                                              |  |                |            |                   |   |            |  
|LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                         |  |                |            |                   |   |            |  
|                                                                                                                                                                              |  |                |            |                   |   |            |  
|Current Liabilities                                                                                                                                                           |  |                |            |                   |   |            |  
|Accounts payable and accrued expenses                                                                                                                                         |  | $              | 1,170,239  |                   | $ | 857,603    |  
|Notes payable - current                                                                                                                                                       |  |                | 1,290,742  |                   |   | 1,154,392  |  
|Total Current Liabilities                                                                                                                                                     |  |                | 2,460,982  |                   |   | 2,011,995  |  
|Notes payable - non-current                                                                                                                                                   |  |                |           |                   |   |           |  
|Other liabilities                                                                                                                                                             |  |                | 257,290    |                   |   | 257,290    |  
|TOTAL LIABILITIES                                                                                                                                                             |  |                | 2,718,272  |                   |   | 2,269,285  |  
|                                                                                                                                                                              |  |                |            |                   |   |            |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                 |  |                |            |                   |   |            |  
|                                                                                                                                                                              |  |                |            |                   |   |            |  
|Shareholder's Equity Deficit                                                                                                                                                  |  |                |            |                   |   |            |  
|Preferred stock, blank check, 5,000,000 shares authorized: Series A, $0.001 par value, 0 and 500,000 shares issued and outstanding at March 31, 2009 and December 31, 2008    |  |                |           |                   |   | 500        |  
|Common stock, $0.001 par value, 200,000,000 shares authorized: 53,741,742 and 43,026,695 shares issued and outstanding at  March 31, 2009 and December 31, 2008, respectively |  |                | 53,741     |                   |   | 43,026     |  
|Additional paid-in-capital                                                                                                                                                    |  |                | 5,974,181  |                   |   | 5,984,396  |  
|Stock subscription receivable                                                                                                                                                 |  |                |           |                   |   |           |  
|Accumulated deficit                                                                                                                                                           |  |                | (7,476,501 | )                 |   | (7,077,780 | )
|Total Shareholders' Deficit                                                                                                                                                   |  |                | (1,448,579 | )                 |   | (1,049,858 | )
|TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                   |  | $              | 1,269,693  |                   | $ | 1,219,427  |  



See accompanying notes to consolidated financial statements

1



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XenaCare Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                            |  |                              |            |      |   |            |  
|------------------------------------------- |  | ---------------------------- | ---------- | ---- | - | ---------- | -
|                                            |  | Three Months Ended
March 31, |           
|                                            |  | 2009                         |            | 2008 |  
|Revenue:                                    |  |                              |            |      |   |            |  
|Product sales                               |  | $                            | 58,224     |      | $ | 43,993     |  
|Other fee revenue                           |  |                              |           |      |   |           |  
|                                            |  |                              |            |      |   |            |  
|Total revenue                               |  |                              | 58,224     |      |   | 43,993     |  
|                                            |  |                              |            |      |   |            |  
|Cost of revenue                             |  |                              | 18,940     |      |   | 14,379     |  
|                                            |  |                              |            |      |   |            |  
|Gross profit                                |  |                              | 39,284     |      |   | 29,614     |  
|                                            |  |                              | 67.5       | %    |   | 67.3       | %
|Operating costs and expenses:               |  |                              |            |      |   |            |  
|Selling and marketing                       |  |                              | 40,980     |      |   | 100,702    |  
|General and administrative                  |  |                              | 369,093    |      |   | 282,923    |  
|Write downs                                 |  |                              | 10,000     |      |   |           |  
|                                            |  |                              |            |      |   |            |  
|Total operating costs and expenses          |  |                              | 420,073    |      |   | 383,625    |  
|                                            |  |                              |            |      |   |            |  
|Other income (expense)                      |  |                              |            |      |   |            |  
|Interest expense                            |  |                              | (32,583    | )    |   | (42,938    | )
|Other income                                |  |                              | 15,038     |      |   | 86,995     |  
|Other expenses                              |  |                              | (387       | )    |   | 6,752      |  
|                                            |  |                              |            |      |   |            |  
|Total other income (expense)                |  |                              | (17,932    | )    |   | 50,809     |  
|                                            |  |                              |            |      |   |            |  
|Net Income (Loss)                           |  | $                            | (398,721   | )    | $ | (303,202   | )
|                                            |  |                              |            |      |   |            |  
|                                            |  |                              |            |      |   |            |  
|Weighted average shares - basic and diluted |  |                              | 48,384,199 |      |   | 24,272,838 |  
|Basic and diluted loss per share            |  | $                            | (0.01      | )    | $ | (0.01      | )



See accompanying notes to consolidated financial statements

2



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XenaCare Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                             |  |                              |          |      |   |          |  
|---------------------------------------------------------------------------- |  | ---------------------------- | -------- | ---- | - | -------- | -
|                                                                             |  | Three Months Ended
March 31, |         
|                                                                             |  | 2009                         |          | 2008 |  
|Cash Flows from Operating Activities:                                        |  |                              |          |      |   |          |  
|Net loss                                                                     |  | $                            | (398,721 | )    | $ | (303,202 | )
|Adjustments to reconcile net loss to net cash 
used in operating activities: |  |                              |          |      |   |          |  
|Depreciation and amortization                                                |  |                              | 317      |      |   | 317      |  
|Stock issued for services                                                    |  |                              |         |      |   |         |  
|Changes in operating assets and liabilities:                                 |  |                              |          |      |   |          |  
|Accounts receivable                                                          |  |                              | (48,355  | )    |   | (2,926   | )
|Inventory                                                                    |  |                              | (2,590   | )    |   | 14,524   |  
|Prepaid expenses and other current assets                                    |  |                              |         |      |   | (18,984  | )
|Accounts payable and accrued expenses                                        |  |                              | 312,637  |      |   | 108,165  |  
|                                                                             |  |                              |          |      |   |          |  
|Net cash used in operating activities                                        |  |                              | (136,712 | )    |   | (202,106 | )
|                                                                             |  |                              |          |      |   |          |  
|Cash Flows from Investing Activities:                                        |  |                              |          |      |   |          |  
|Purchase of office furniture and equipment                                   |  |                              |         |      |   | (213     | )
|                                                                             |  |                              |          |      |   |          |  
|Net cash used in investing activities                                        |  |                              |         |      |   | (213     | )
|                                                                             |  |                              |          |      |   |          |  
|Cash Flows from Financing Activities:                                        |  |                              |          |      |   |          |  
|Proceeds from notes payable                                                  |  |                              |         |      |   |         |  
|Advances from (Payments to) related parties                                  |  |                              | 136,350  |      |   | 135,512  |  
|Proceeds from sale of stock                                                  |  |                              |         |      |   | 70,000   |  
|                                                                             |  |                              |          |      |   |          |  
|Net cash provided by financing activities                                    |  |                              | 136,350  |      |   | 205,512  |  
|                                                                             |  |                              |          |      |   |          |  
|                                                                             |  |                              |          |      |   |          |  
|Increase (Decrease) in Cash                                                  |  |                              | (362     | )    |   | 3,193    |  
|Cash, Beginning of Period                                                    |  |                              | 362      |      |   | 1,607    |  
|                                                                             |  |                              |          |      |   |          |  
|Cash, End of Period                                                          |  | $                            |         |      | $ | 4,800    |  
|                                                                             |  |                              |          |      |   |          |  
|Supplemental Information:                                                    |  |                              |          |      |   |          |  
|Cash paid for interest                                                       |  | $                            |         |      | $ |         |  
|Cash paid for taxes                                                          |  | $                            |         |      | $ |         |  
|NonCash Transactions:                                                        |  |                              |          |      |   |          |  
|Conversion of preferred series A                                             |  | $                            | 10,215   |      | $ |         |  
|Shares issued under antidilutive clauses                                     |  | $                            |         |      | $ | 1,251    |  





See accompanying notes to consolidated financial statements

3



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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 second 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.

October 30, 2007 XenaCare completed an asset purchase covering certain assets of 2B Healthy, a division of Beta Pharmaceutical Corporation. Beta Pharmaceutical Corporation is a $190 million pharmaceutical company with home offices in the US and distribution in 14 South American countries. As part of the asset purchase, XenaCare took ownership of several product lines in the 2B Healthy portfolio, of which B-Alert already has slotting fees and UPC codes registered with McLane Company, Weis Markets, Bashas, Kinray and Hannaford. This relationship will allow XenaCare immediate distribution in 14 South American countries and increased distribution in the US.



4



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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

NSP

Nutrition Supplement Product

SAB

Staff Accounting Bulletin

SEC

Securities Exchange Commission

SFAS or FAS

Statement of Financial Accounting Standards

Q108

Three Months Ended March 31, 2008

Q109

Three Months Ended March 31, 2009

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.

Interim Financial Statements

The interim financial statements presented herein have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The interim financial statements should be read in conjunction with the Companys annual financial statements, notes and accounting policies included in the Companys Annual Report. In the opinion of management, all adjustments which are necessary to provide a fair presentation of financial position as of March 31, 2009and the related operating results and cash flows for the interim period presented have been made. All adjustments are of a normal recurring nature. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year ended December 31, 2009.

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.



5



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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

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.

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 March r 31, 2009 and December 31, 2008, the allowance for doubtful accounts was $0 for both periods.

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 three months ended March 31, 2009 and 2008 was $317 and $317, 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.



6



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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

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.

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.





7



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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.

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.



8



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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.



9



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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.



10



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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.



11



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly

On April 9, 2009, FASB issued FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. In addition, FSP 157-4 includes guidance on identifying circumstances that indicate a transaction is not orderly. Further, this FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. FSP 157-4 will be effective for interim and annual reporting periods ending after June 15, 2009, and will be applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact, if any, of the adoption of this FSP on its consolidated financial statements.

Interim Disclosures about Fair Value of Financial Instruments

On April 9, 2009, FASB issued FSP 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP 107-1 amends SFAS 107, Disclosures about Fair Value of Financial Instruments to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 will be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company is currently evaluating the potential impact, if any, of the adoption of FSP 107-1 on its consolidated results of operations and financial condition

Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies

In April 2009 the FASB issued FSP 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP 141(R)-1 amends the provisions in Statement 141(R) for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This FASB Staff Position eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in Statement 141(R) and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141(R)-1 is effective for contingent assets and contingent liabilities acquired in 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. FSP 141(R)-1 had no impact on our financial position or results of operations and financial condition, since we have not had any business combinations closing on or after the January 1, 2009 effective date.



12



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 4.  INVENTORY

Significant components of inventory at March 31, 2009 and December 31, 2008 consist primarily of:

|                          |  |      |         |      |   |         |  
|------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                          |  | 2009 |         | 2008 |  
|                          |  |      |         |      |   |         |  
|Bulk product              |  | $    | 112,062 |      | $ | 112,061 |  
|Merchandise inventory     |  |      | 241,753 |      |   | 239,164 |  
|                          |  |      | 353,815 |      |   | 351,225 |  
|Allowances for expiration |  |      | (40,122 | )    |   | (40,122 | )
|                          |  |      |         |      |   |         |  
|                          |  | $    | 313,693 |      | $ | 311,103 |  



Bulk product  Bulk product consists of completed unpackaged 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 2009 and 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.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Significant components of accounts payable and accrued expenses at March 31, 2009 and December 31, 2008 consist primarily of:

|                                      |  |      |           |      |   |         | 
|------------------------------------- |  | ---- | --------- | ---- | - | ------- | 
|                                      |  | 2009 |           | 2008 |  
|                                      |  |      |           |      |   |         | 
|Trade payables                        |  | $    | 283,161   |      | $ | 245,928 | 
|Accrued accounting and legal fees     |  |      | 47,500    |      |   | 37,500  | 
|Accrued product and description costs |  |      | 1,500     |      |   | 1,500   | 
|Accrued payroll                       |  |      | 459,623   |      |   | 206,018 | 
|Accrued interest                      |  |      | 50,682    |      |   | 18,099  | 
|Expenses reimbursable to officer      |  |      | 64,344    |      |   | 64,344  | 
|Other accrued expenses                |  |      |          |      |   | 25,000  | 
|Unearned revenue                      |  |      | 259,214   |      |   | 259,214 | 
|Bank overdraft                        |  |      | 4,215     |      |   |        | 
|                                      |  |      |           |      |   |         | 
|                                      |  | $    | 1,170,239 |      | $ | 857,603 | 



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.



13



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 6.  NOTES PAYABLE - CURRENT

Significant components of notes payable  current at March 31, 2009 and December 31, 2008 consist primarily of:

|                          |  |      |           |      |   |           | 
|------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                          |  | 2009 |           | 2008 |  
|                          |  |      |           |      |   |           | 
|Related parties           |  | $    | 221,822   |      | $ | 135,072   | 
|Investors                 |  |      | 54,500    |      |   | 5,000     | 
|Wachovia - line of credit |  |      | 37,420    |      |   | 37,320    | 
|Sun Packing, Inc.         |  |      | 977,000   |      |   | 977,000   | 
|                          |  |      |           |      |   |           | 
|                          |  | $    | 1,290,742 |      | $ | 1,154,392 | 



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 related parties to the Company through common executive management as our CFO and President are also officers in the lenders. The terms of the notes have been extended to mature on June 30, 2009.

Investors - Notes payable to investors were issued in various traunches commencing in January 2009, each mature one year from issuance and bear interest at 15%.

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 7.  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 his services in the areas of mergers and acquisitions. The agreement covers 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.



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 7.  COMMITMENTS AND CONTINGENCIES (Continued)

·

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 8.  COMMON AND PREFERRED STOCK

Common Stock

The Companys shares commenced quotation on the Over the Counter Bulletin Board on March 5, 2008. The Companys quotation symbol is XCHO:OTC.

During the quarter, the Company retired 33,000 shares and issued 10,748,340 shares to retire Preferred A shares.

Preferred Stock

During the quarter, the Company converted 500,000 shares of Preferred A to 10,748,340 shares of restricted common stock.

NOTE 9.  INCOME TAXES

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



|                                           |  |                               |          |      |   |          |  
|------------------------------------------ |  | ----------------------------- | -------- | ---- | - | -------- | -
|                                           |  | Three Months Ended 
March 31, |         
|                                           |  | 2009                          |          | 2008 |  
|Current:                                   |  |                               |          |      |   |          |  
|Federal                                    |  | $                             |         |      | $ |         |  
|State                                      |  |                               |         |      |   |         |  
|                                           |  |                               |          |      |   |          |  
|Deferred:                                  |  |                               |          |      |   |          |  
|Federal                                    |  |                               | 139,552  |      |   | 106,121  |  
|State                                      |  |                               | 17,942   |      |   | 13,644   |  
|                                           |  |                               |          |      |   |          |  
|Increase in Valuation allowance            |  |                               | (157,494 | )    |   | (119,765 | )
|                                           |  |                               |          |      |   |          |  
|Total provision (benefit) for income taxes |  | $                             |         |      | $ |         |  







15



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 9 - INCOME TAXES (Continued)

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:

|                                              |  |                               |       |      |  |       |  
|--------------------------------------------- |  | ----------------------------- | ----- | ---- |  | ----- | -
|                                              |  | Three Months Ended 
March 31, |      
|                                              |  | 2009                          |       | 2008 | 
|                                              |  |                               |       |      |  |       |  
|Expected provision(benefit) at statutory rate |  |                               | 35.0  | %    |  | 35.0  | %
|State taxes                                   |  |                               | 4.5   | %    |  | 4.5   | %
|Valuation allowance for Net Loss              |  |                               | -39.5 | %    |  | -39.5 | %
|                                              |  |                               |       |      |  |       |  
|Total provision (benefit) for income taxes    |  |                               | 0.0   | %    |  | 0.0   | %



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:

|                                  |  |                |            |                   |   |            |  
|--------------------------------- |  | -------------- | ---------- | ----------------- | - | ---------- | -
|                                  |  | March 31,
2009 |            | December 31,
2008 |  
|                                  |  |                |           
|Deferred tax assets:              |  |                |            |                   |   |            |  
|Net operating loss carry-forwards |  | $              | 2,824,416  |                   | $ | 2,666,924  |  
|                                  |  |                |           |                   |   |           |  
|Total deferred tax assets         |  |                | 2,824,416  |                   |   | 2,666,924  |  
|Valuation allowance               |  |                | (2,824,416 | )                 |   | (2,666,924 | )
|Net deferred tax assets           |  | $              |           |                   | $ |           |  



As of March 31, 2009 and December 31, 2008 the Company had a valuation allowance on its deferred tax assets of $2,824,416 and $2,666,924, respectively, which relates to net operating losses. The valuation allowance increased $157,495 and $711,964 in the three months ended March 31, 2009 and the year ended December 31, 2008 respectively. The increase in 2009 and 2008 were attributable to accumulated net operating losses.

As of March 31, 2009 and 2008, the Company had net operating loss carry-forwards of $7,150,425 and $5,252,464, respectively. Unused net operating loss carry-forwards will expire at various dates beginning 2020.

As of March 31, 2009 and December 31, 2008, 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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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Introduction

Managements discussion and analysis of financial condition and results of operations is provided as a supplement to our condensed consolidated financial statements and accompanying notes to help provide an understanding of our financial condition, changes in financial condition and results of operations. The discussion and analysis is organized as follows:

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

Q108

Three Months Ended March 31, 2008

Q109

Three Months Ended March 31, 2009

Overview and Operations.This section provides a general description of our business, trends in our industry, as well as significant transactions that have occurred that we believe are important in understanding our financial condition and results of operations.

·

Caution concerning forward-looking statements. This section discusses how certain forward-looking statements made by us throughout this discussion and analysis are based on managements present expectations about future events and are inherently susceptible to uncertainty and changes in circumstance.

·

Recent accounting pronouncements. This section provides an analysis of relevant recent accounting pronouncements issued by the FASB and the effect of those pronouncements.

·

Critical accounting policies. This section discusses those accounting policies that are both considered important to our financial condition and results of operations, and require significant judgment and estimates on the part of management in their application.

·

Results of operations. This section provides an analysis of our results of operations for Q109 relative to the comparative prior year period presented in the accompanying consolidated statements of operations.

·

Liquidity and capital resources. This section provides an analysis of our cash flows, capital resources and off-balance sheet arrangements and our contractual obligations as of March 31, 2009.

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

The Company currently operates or is in the process of developing the following lines of NSPs and performance products:

·

Our line of Clinical NSPs includes XenaCor, XenaZyme Plus and XenaTri. These products are poly-formulas designed to address key multi-factors in disease processes such as atherosclerosis and diabetes. The Company has expanded its historical clinical line by



17



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formulating a line of body replenishment NSPs, which are designed to combat the nutrient depletion effects of commonly prescribed drugs.

·

Our line of Lifestyle Performance NSPs is currently under development. We are developing formulations for the Lifestyle Performance market, which consists of a sports line for athletes and increased performance for the over 50 generation. As of the date of this filing we have not completed any of the formulations.

·

Our line of Protective NSPs currently consists of SunPillTM and AlGal. SunPillTM is a revolutionary nutritional supplement that defends your skin from photo-aging and sun-damage. AlGal is a pure uncontaminated algae based Omega 3 fatty acid.

Since mid 2005, we expanded our focus and began to formulate NSPs for personal and lifestyle performance products. We also developed new distribution channels for our historical Clinical NSPs. We have also acquired exclusive worldwide rights, patents and technology developed by Pure Laboratories, LLC , through which we will showcase and market , the SunPillTM. Additionally, we have entered into an exclusive worldwide proprietary sales agreement for Algae BioSciences, an algae based Omega 3 fatty acid that can be ingested as a food additive or through other nutraceutical and medicinal applications.

Substantially all revenues to date have been generated from sales of historical Clinical NSPs, XenaCor, XenaTri and XenaZymePlus. Since our inception, we have never been profitable.

We purchase all of our products and supplies from third-party sources. We have no long-term contracts, as purchases are made on an order-by-order basis. 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.

Clinical NSPs

Our line of Clinical NSPs seek to shift a portion of current consumer out-of-pocket spending on ineffective and/or incomplete self-care and healing products, obtained through a myriad of retail and Internet distribution systems. Our Clinical NSPs provide consumers with access to proprietary nutritional supplements and supplement nutrient depletion resulting from the use of certain prescription pharmaceuticals. We also plan to sell 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 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 Nutritional supplement and Health Education Act. However, while the FDA regulates the nutritional supplement industry, no approvals by the FDA are required for our products.

We believe our Clinical NSPs listed 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 and herbal product manufacturers and distributors. These NSPs are formulated to support the delivery of measurable subjective (improved medical history) and/or objective (laboratory results) effects



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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.

Body Replenishment Systems (BRS) formulations provide patients access to NSPs that combat prescription drug 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. BRS formulations focus on replacing prescription drug depleted nutrients and position themselves as extensions to the primary Clinical NSPs. We believe that BRS formulations will not compete with our historical Clinical NSPs as our historical Clinical NSPs specifically support disease treatment. We also believe that BRS formulations will meet a high revenue opportunity without affecting current revenue generating Clinical NSPs. The BRS formulations will be marketed and sold through the same outlets as our other Clinical NSPs. This strategy has no effect on the current and future operations of our other Clinical NSPs.

Presently twelve new formulations have been designed and manufactured for consumers being treated with prescription drugs for high blood pressure, heart disease, diabetes, ulcers, depression, infection, arthritis, aids and weight loss. BRS intends to utilize toll free telephone and virtual computer linkups, using the same marketing and sales practices as our current Clinical NSPs operations. We believe BRS is a natural supplementation for prescription induced nutrition depletion and is necessary and important for positive patient health outcomes. As part of our marketing program, Dr. Xenakis, our CEO and chairman, 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 the use of prescription drugs.

Lifestyle Performance NSPs

We are developing formulations for the Lifestyle Performance market, which consists of a sports line for athletes and increased performance for the over 50 generation. As of the date of this filing we have not completed any of the formulations.

Protective NSPs

SunPillTM,a nutritional supplement that defends your skin from photo-aging and sun-damage, was developed by the founder of Banana Boat, Sea and Ski, an inventor at the forefront of protecting skin from the damaging effects of the sun. We have acquired the worldwide rights to produce and distribute the SunPillTM. The composition of the SunPillTM, when taken daily, protects the skin against the effects of ultraviolet (UV) radiation from the sun or other sources which include sunburn, skin redness, swelling, immune suppression, photo-damage.

AlGal is a pure uncontaminated algae based Omega 3 fatty acid commonly found in cold water fish such as salmon. Omega 3 promotes heart health, and has been linked to increased brain function. It contributes to lowering blood pressure and strengthening artery walls. The algae based Omega 3 has no fishy smell or taste and is produced naturally in only one place on earth. The production process is patented. We have entered into an exclusive worldwide Sales Agreement with AlgaeBioSciences, Corp. and intend to distribute the raw material as an additive to food products such as cereal, and also as a nutritional supplement.

Spokesperson Agreement

We have entered into an agreement with Dr. Bob Arnot, a nationally known medical news correspondent who will serve as our Spokesperson for the SunPillTM and Algal nutritional supplements.

Formulation of NSPs

The Company’s NSPs are currently formulated by Dr. Xenakis and are proprietary to the Company. The Company has no patent protection for any of its products or services, except the SunPillTM but has



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multiple trademark protection on certain service marks currently in commerce. We have historically expensed 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 and should the manufacturers discontinue their relationship with us, 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 needed 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.

New Material Agreements

Negotiations for several material agreements were conducted during the first quarter of 2009 and completed prior to filing this quarterly report:

Competition

The nutritional supplement industry is 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. 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 for any of its products or



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services, except the SunPillTM but has multiple trademark protection on certain service marks currently in commerce.

Governmental Regulation

The Federal Drug Administration (FDA) oversees product safety, manufacturing, and product information, such as statements 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 statements about nutrients, health statements, and statements of nutritional support;

·

labeling requirements for dietary or nutritional supplements for which high potency, antioxidant, and trans-fatty acids statements 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 statements and notify the FDA of certain types of performance statements made in connection with our products.

In certain markets, including the United States, specific statements made by us with respect to our products may change the regulatory status of a product. For example, a product sold as a nutritional 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 asked to be removed from the market. To maintain the products status as a nutritional supplement, the labeling and marketing must comply with the provisions in the Dietary Supplement Health and Education Act of 1994 (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.

Nutritional supplements are also subject to the Nutrition, Labeling and Education Act and various other acts that regulate health statements, ingredient labeling, and nutrient content statements that characterize the level of nutrients in a product. These acts prohibit the use of any specific health statement for nutritional supplements unless the health statement is supported by significant scientific research and is pre-approved by the FDA.

Regulators such as the Federal Trade Commission (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 nutritional 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 statements clearly and accurately, and further require marketers to maintain adequate substantiation for their statements. 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 statement before it disseminates an advertisement. A reasonable basis is determined based on the statements made, how the statements are



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presented in the context of the entire advertisement, and how the statements are qualified. The FTCs standard for evaluating substantiation is designed to ensure that consumers are protected from false and/or misleading statements by requiring scientific substantiation of product statements at the time such statements are first made. The failure to have this substantiation violates the Federal Trade Commission Act.

Caution Concerning Forward-Looking Statements

The SEC encourages companies to disclose forward-looking information so that investors can better understand a companys future prospects and make informed investment decisions. This document contains such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues, operating income and cash flow. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as expects, anticipates, intends, plans, believes, will, estimates, and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, history of operating losses and accumulated deficit; possible need for additional financing; competition; dependence on management; risks related to proprietary rights; government regulation; and other factors discussed in this report and our other filings with the SEC.

Recent Accounting Pronouncements

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly

On April 9, 2009, FASB issued FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. In addition, FSP 157-4 includes guidance on identifying circumstances that indicate a transaction is not orderly. Further, this FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. FSP 157-4 will be effective for interim and annual reporting periods ending after June 15, 2009, and will be applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact, if any, of the adoption of this FSP on its consolidated financial statements.

Interim Disclosures about Fair Value of Financial Instruments

On April 9, 2009, FASB issued FSP 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. FSP 107-1 amends SFAS 107, Disclosures about Fair Value of Financial Instruments to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP 107-1 will be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company is currently evaluating the potential impact, if any, of the adoption of FSP 107-1 on its consolidated results of operations and financial condition

Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies

In April 2009 the FASB issued FSP 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP 141(R)-1 amends the provisions in Statement 141(R) for the initial recognition and measurement, subsequent measurement and accounting, and



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disclosures for assets and liabilities arising from contingencies in business combinations. This FASB Staff Position eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in Statement 141(R) and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141(R)-1 is effective for contingent assets and contingent liabilities acquired in 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. FSP 141(R)-1 had no impact on our financial position or results of operations and financial condition, since we have not had any business combinations closing on or after the January 1, 2009 effective date.

Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing our financial statements, we make estimates and judgments that affect the reported amounts on our balance sheets and income statements, and our related disclosure about contingent assets and liabilities. We continually evaluate our estimates, including those related to revenue, allowance for doubtful accounts, reserves for income taxes, and litigation. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable in order to form the basis for making judgments about the carrying values of assets and liabilities that are not readily ascertained from other sources. Actual results may deviate from these estimates if alternative assumptions or condition are used.

Results of Operations

Comparison of the three months ended March 31, 2009 (Q109) to the three months ended March 31, 2008 (Q108)

Net Revenues Total net revenues increased $14,231 or 32.3%, to $58,224 (Q109) from $43,993 (Q108). Our efforts redirecting and allocating available resources to concentrate on the distribution of the SunPillTM, 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 has began to yield results. No sales from AlGal products were generated in Q109 however the bulk of our increase in revenue was generated by sales of the SunPillTM. We will continue to market our proprietary Clinical NSPs - XenaCor, XenaTri and XenaZymePlus distributed through the mail to our existing customer base.

The Company has approximately $300,000 of product placed with customers, however sales of SunPill remained suppressed during Q109 as a result of the Companys inability to raise sufficient cash to effect the marketing promotions necessary to generate significant sell thru.

Cost of Revenues Total cost of revenues increased $4,561 or 31.7%, to $18,940 (Q109) from $14,379 (Q108). The increase is directly related to our increase in SunPillTM sales as a result of our redirection of business focus from Clinical NSPs to the commercialization of our new product lines.

Selling and Marketing Costs Selling and marketing costs decreased $59,722 or 59.3%, to $40,980 (Q109) from $100,702 (Q108). The decrease in selling and marketing expenses is primarily due to the Companys lack of sufficient funding to adequately promote SunPill sales.. AlGal products are still being commercialized.

General and Administrative Costs General and administrative costs increased $86,170 or 30.5%, to $369,093 (Q109) from $282,293 (Q108). The increase in general and administrative expenses is related primarily accrued salaries.

Other Income(Expense) Other income(expense) decreased $68,741 or 135.3% to $17,932 expense (Q109) from $50,809 income (Q108). The increase in other expense is related to a gain on the write off of excess accruals in Q108 that did not repeat in Q109.



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Liquidity and Capital Resources

Overview

We incurred a net loss for the three months ended March 31, 2009 of $398,721 and had a $1,465,454 deficit in working capital at March 31, 2009. 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 decline in working capital for Q109. 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 SunPillTM and AlGal 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.

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 third 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 March 31, 2009 there were no commitments for long-term capital expenditures other than those discussed in Note 7 to the quarterly financial statements.

Cash Flows for the Three Months Ended March 31, 2009.

Our cash and cash equivalents decreased $361 to $0 as of March 31, 2009 from $4,800 as of December 31, 2008.

Cash Flows from Operating Activities

Operating activities used net cash for the three months ended March 31, 2009 of $136,711. Net cash used resulted from a net loss of approximately $398,404, after adjustment for various items which impact net income but do not impact cash during the period, such as depreciation and stock issued for services. The net loss was partially offset by net cash provided from a net change in working capital components of $269,961. The most significant working capital component change was an increase in accounts payable and accrued expenses of $312,638, resulting from the Company securing more services related to its commercialization of the SunPillTM and correspondingly increasing vendor credit utilized.

Cash Flows used in Investing Activities

Our investing activities used $0 in net cash during the three months ended March 31, 2009.

Cash Flows from Financing Activities

Our financing activities provided net cash of $136,350 for the three months ended March 31, 2009. We raised approximately $136,350 in advances from officers and related parties.

Financial Position

Our total assets increased $50,266 to $1,269,693 as of March 31, 2008 from $1,219,427 as of December 31, 2008.



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Our accounts receivable increased $48,355; our inventory decreased $2,590; and our prepaid expenses and other current assets were unchanged as only limited transactions occurred during Q109 as a result of insufficient funds to complete promotion of our launching the SunPillTM. Our cash were exhausted as a result.

Borrowings Outstanding

As of March 31, 2009, we had borrowings of $1,290,742, which was composed of $276,322 from investors, shareholders, officers and related parties, $37,420 drawn against a $40,000 line of credit from Wachovia, secured by the personal guarantee of an officer of the Company and $977,000 from Sun Packing, Inc.

Material Commitments, Expenditures and Contingencies

We had no outstanding purchase commitments to purchase raw materials as of March 31, 2009. We believe that a minimum of an additional $1,500,000 will be needed over the next 6 months to successfully launch the SunPillTM product based on purchase orders and commitments received.

Dividends

We have not paid any dividends.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The rules applicable to a smaller reporting company do not require further disclosure in this item.

ITEM 4T. 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 March 31, 2009, 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.



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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 March 31, 20089 the Company did not have a deficiency or material weakness in our internal control over financial reporting.

This quarterly 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.

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 March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes during the period ended March 31, 2009 in our risk factors as set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Common Stock

During the quarter, the Company issued 10,748,340 common shares to 7 shareholders in consideration of the conversion of all previously issued and outstanding shares of Series A preferred shares to common stock.

The company cancelled 33,333 shares of common stock from a former consultant as non-vested.

These shares were offered without registration under the Securities Act of 1933, as amended, in reliance upon the exemption from registration afforded by Section 4(2) and Rule 504 of the act and Regulation D promulgated there under, and in compliance with the exemption and legend placed upon the shares.

ITEM 3. DEFAULTS ON SENIOR DEBT

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITIES HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBIT

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

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

Date: May 19, 2009



| |                         |                                                                                   
| | ----------------------- | ----------------------------------------------------------------------------------
| |                         |                                                                                   
| | XenaCare Holdings, Inc.
| |                         |                                                                                   
| |                         |                                                                                   
| | By:                     | /s/ Frank Rizzo                                                                   
| |                         | Frank Rizzo                                                                       
| |                         | President (principal executive officer)
and Director                              
| |                         |                                                                                   
| |                         |                                                                                   
| | By:                     | /s/ Bobby Story                                                                   
| |                         | Bobby Story                                                                       
| |                         | Chief Financial Officer and
Treasurer (principal financial
and accounting officer)
| |                         |                                                                                   
| |                         |                                                                                   







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