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, 2008                
|                                                               |                                                                      
|                                                               | 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                      | 2836         | 20-3075747         
|(State or Other Jurisdiction | (Commission  | (I.R.S. Employer   
|of Incorporation)            | File Number) | Identification No.)



14000 Military Trail, Suite 104

Delray Beach, Florida 33484

(Address of Principal Executive Office) (Zip Code)



(561) 496-6676

(Issuers telephone number, including area code)



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



|                                                                                                                                                                                                                                              |   |     |   |                           |   |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --- | - | ------------------------- | - |  |  | 
|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.                                                                                                                
|24,898,338 shares of $0.0001 par value common stock at May 15, 2008.                                                                                                                                                                         







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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

INDEX



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Page                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|PART I  FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Item 1. Financial Statements
1
Consolidated Balance Sheets
1
Consolidated Statements of Operations
2
Consolidated Statements of Cash Flows
3
Notes to Consolidated Financial Statements (Unaudited)
4
Item 2. Managements Discussion and Analysis of Financial Conditions and Results of Operations
10
Item 3. Quantitative and Qualitative Disclosures about Market Risk
17
Item 4. Controls and Procedures
19
PART II  OTHER INFORMATION
Item 1. Legal Proceedings
21
Item 1A. Risk Factors
21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
21
Item 3. Defaults on Senior Debt
21
Item 4. Submission of Matters to a Vote of the Securities Holders
21
Item 5. Other Information
21
Item 6. Exhibits
21
Signatures
22











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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XenaCare Holdings, Inc.

Consolidated Balance Sheets

|                                                                                                                                                                              |                                       |             |            |              |   |            |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ----------- | ---------- | ------------ | - | ---------- | ------- | 
|                                                                                                                                                                              |                                       | March 31,   |            | December 31, |  
|                                                                                                                                                                              |                                       | 2008        |            | 2007         |  
|                                                                                                                                                                              |                                       | (Unaudited) |            | (Audited)    |  
|ASSETS                                                                                                                                                                        |                                       |             |            |              |   |            |        
|Current Assets                                                                                                                                                                |                                       |             |            |              |   |            |        
|Cash                                                                                                                                                                          |                                       | $           | 4,800      |              | $ | 1,607      |        
|Accounts receivable                                                                                                                                                           |                                       |             | 6,974      |              |   | 4,048      |        
|Inventory                                                                                                                                                                     |                                       |             | 100,457    |              |   | 114,981    |        
|Prepaid expenses and other current assets                                                                                                                                     |                                       |             | 164,984    |              |   | 146,000    |        
|Total Current Assets                                                                                                                                                          |                                       |             | 277,215    |              |   | 266,636    |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|Office Furniture and Equipment, net                                                                                                                                           |                                       |             | 2,433      |              |   | 2,537      |        
|Other assets                                                                                                                                                                  |                                       |             | 310,000    |              |   | 310,000    |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|TOTAL ASSETS                                                                                                                                                                  |                                       | $           | 589,648    |              | $ | 579,173    |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                          |                                       |             |            |              |   |            |        
|Current Liabilities                                                                                                                                                           |                                       |             |            |              |   |            |        
|                                                                                                                                                                              | Accounts payable and accrued expenses |             | $          | 1,080,276    |   | $          | 972,111 | 
|Notes payable - current                                                                                                                                                       |                                       |             | 607,259    |              |   | 471,748    |        
|Total Current Liabilities                                                                                                                                                     |                                       |             | 1,687,535  |              |   | 1,443,859  |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|Notes payable - non-current                                                                                                                                                   |                                       |             |           |              |   |           |        
|Other liabilities                                                                                                                                                             |                                       |             | 859,815    |              |   | 859,815    |        
|TOTAL LIABILITIES                                                                                                                                                             |                                       |             | 2,547,350  |              |   | 2,303,674  |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                 |                                       |             |            |              |   |            |        
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|Shareholder's Equity (Deficit)                                                                                                                                                |                                       |             |            |              |   |            |        
|Preferred stock, 5,000,000 shares authorized,                                                                                                                                 |                                       |             |            |              |   |            |        
|Series A, $0.001 par value, 500,000 shares issued                                                                                                                             |                                       |             | 500        |              |   | 500        |        
|Series B, $0.001 par value, 70,000 shares issued                                                                                                                              |                                       |             | 70         |              |   |            |        
|Common stock, $0.001 par value, 45,000,000 shares authorized, 
24,898,338 and 23,497,537 shares issued and outstanding at 
March 31, 2008 and December 31, 2007, respectively |                                       |             | 24,898     |              |   | 23,647     |        
|Additional paid-in-capital                                                                                                                                                    |                                       |             | 3,595,370  |              |   | 3,526,691  |        
|Stock subscription receivable                                                                                                                                                 |                                       |             |           |              |   |           |        
|Accumulated deficit                                                                                                                                                           |                                       |             | (5,578,540 | )            |   | (5,275,339 | )      
|Total Shareholders' Equity (Deficit)                                                                                                                                          |                                       |             | (1,957,702 | )            |   | (1,724,501 | )      
|                                                                                                                                                                              |                                       |             |            |              |   |            |        
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                    |                                       | $           | 589,648    |              | $ | 579,173    |        





1



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XenaCare Holdings, Inc.

Consolidated Statements of Operations

|                                            |  |                              |             |   |   |             |  
|------------------------------------------- |  | ---------------------------- | ----------- | - | - | ----------- | -
|                                            |  | Three Months Ended
March 31, |            
|                                            |  |                              | 2008        |   |   | 2007        |  
|                                            |  |                              | (Unaudited) |   |   | (Unaudited) |  
|Revenue:                                    |  |                              |             |   |   |             |  
|Product sales                               |  | $                            | 43,993      |   | $ | 34,672      |  
|Service revenue                             |  |                              |            |   |   |            |  
|Other fee revenue                           |  |                              |            |   |   | 2,000       |  
|Total revenue                               |  |                              | 43,993      |   |   | 36,672      |  
|                                            |  |                              |             |   |   |             |  
|Cost of revenue                             |  |                              | 14,379      |   |   | 34,796      |  
|Gross profit                                |  |                              | 29,614      |   |   | 1,876       |  
|                                            |  |                              |             |   |   |             |  
|Operating costs and expenses:               |  |                              |             |   |   |             |  
|Selling and marketing                       |  |                              | 100,702     |   |   | 230,600     |  
|General and administrative                  |  |                              | 282,922     |   |   | 235,689     |  
|Total operating costs and expenses          |  |                              | 383,624     |   |   | 466,289     |  
|                                            |  |                              |             |   |   |             |  
|Other income (expense)                      |  |                              |             |   |   |             |  
|Interest expense                            |  |                              | (42,938)    |   |   |            |  
|Other income                                |  |                              | 87,716      |   |   |            |  
|Other expenses                              |  |                              | 6,031       |   |   | (1,805)     |  
|Total other income (expense)                |  |                              | 50,809      |   |   | (1,805)     |  
|                                            |  |                              |             |   |   |             |  
|Net Loss                                    |  | $                            | (303,201    | ) | $ | (466,218    | )
|                                            |  |                              |             |   |   |             |  
|                                            |  |                              |             |   |   |             |  
|Weighted average shares - basic and diluted |  |                              | 24,272,838  |   |   | 22,180,409  |  
|Basic and diluted loss per share            |  | $                            | (0.01       | ) | $ | (0.02       | )





2



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XenaCare Holdings, Inc.

Consolidated Statements of Cash Flows

|                                                                            |  |                              |          |             |   |          |  
|--------------------------------------------------------------------------- |  | ---------------------------- | -------- | ----------- | - | -------- | -
|                                                                            |  | Three Months Ended
March 31, |         
|                                                                            |  | 2008                         |          | 2007        |  
|                                                                            |  | (Unaudited)                  |          | (Unaudited) |  
|Cash Flows from Operating Activities:                                       |  |                              |          |             |   |          |  
|Net loss                                                                    |  | $                            | (303,201 | )           | $ | (466,218 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                              |          |             |   |          |  
|Depreciation and amortization                                               |  |                              | 317      |             |   | 9,088    |  
|Changes in operating assets and liabilities:                                |  |                              |          |             |   |          |  
|Accounts receivable                                                         |  |                              | (2,926   | )           |   |         |  
|Inventory                                                                   |  |                              | 14,524   |             |   | (80,566  | )
|Prepaid expenses and other current assets                                   |  |                              | (18,984  | )           |   | (145,000 | )
|Accounts payable and accrued expenses                                       |  |                              | 108,164  |             |   | 34,112   |  
|Net cash used in operating activities                                       |  |                              | (202,106 | )           |   | (648,584 | )
|                                                                            |  |                              |          |             |   |          |  
|Cash Flows from Investing Activities:                                       |  |                              |          |             |   |          |  
|Purchase of office furniture and equipment                                  |  |                              | (213     | )           |   | (4,006   | )
|Net cash provided by (used in) investing activities                         |  |                              | (213     | )           |   | (4,006   | )
|                                                                            |  |                              |          |             |   |          |  
|Cash Flows from Financing Activities:                                       |  |                              |          |             |   |          |  
|Proceeds from notes payable                                                 |  |                              |         |             |   | 23,000   |  
|Advances from (Payments to) related parties                                 |  |                              | 135,511  |             |   | 588,815  |  
|Proceeds from issuance of preferred stock                                   |  |                              | 70,000   |             |   |         |  
|Net cash provided by financing activities                                   |  |                              | 0        |             |   | 611,815  |  
|                                                                            |  |                              |          |             |   |          |  
|                                                                            |  |                              |          |             |   |          |  
|Increase (Decrease) in Cash                                                 |  |                              | 3,192    |             |   | (40,775  | )
|Cash, Beginning of Period                                                   |  |                              | 1,607    |             |   | 44,179   |  
|                                                                            |  |                              |          |             |   |          |  
|Cash, End of Period                                                         |  | $                            | 4,799    |             | $ | 3,404    |  
|                                                                            |  |                              |          |             |   |          |  
|Supplemental Information:                                                   |  |                              |          |             |   |          |  
|Cash paid for interest                                                      |  | $                            |         |             | $ |         |  
|Cash paid for taxes                                                         |  | $                            |         |             | $ |         |  
|Non-cash Information:                                                       |  |                              |          |             |   |          |  
|None                                                                        |  | $                            |         |             | $ |         |  





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 and life style performance nutrition supplement products (NSPs).

Our Clinical NSP product group (i) educates doctors and other healthcare professionals about certain of our NSPs and facilitates the sale and distribution of these NSPs from doctors offices and (ii) 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 and anticipate generating sales through our websites and from infomercials in the second quarter of 2008.

History of the Company

While the Company was organized in 2005, its predecessor, XenaCare LLC was organized in 2001, for the limited purpose of the education, sale and distribution of NSPs at doctors offices. In June 2005, the Company was incorporated to formulate personal performance and lifestyle performance products. The Company executed an exchange agreement with certain members of XenaCare LLC to exchange their interest in XenaCare LLC for an aggregate of 800,000 shares of XenaCare Holdings, Inc. common stock, which represented a value of $1,600,000. All remaining shares of XenaCare LLC that were not exchanged for shares of XenaCare Holdings, Inc. were retired. For accounting purposes, the consummation of these actions resulted in an exchange of equity interest between entities under common control with XenaCare LLC as the accounting survivor and surviving business entity and the Company as the surviving legal entity.

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.

Commencing in mid 2005 the Company expanded focus and 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 (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.



4



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 1.  ORGANIZATION AND NATURE OF BUSINESS (continued)

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.



NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Reporting

The interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (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, 2008 and 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, 2008.

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, its wholly-owned subsidiaries: BRS, Inc.; XenaCare, LLC; XenaStaff, LLC; and XenaCeutical, LLC. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

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

Risks and Uncertainties

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



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 SunPill 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.

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, BAlert and SunPill.

Revenue Recognition

The Companys product revenues represent primarily sales of XenaCor, XenaTri, XenaZyme and the Body Replenishment Line. No revenue has been generated by the SunPill, however, B-Alert or 2BHealthy product lines have generated nominal revenue. Revenue is recognized when a product is shipped. Product is not shipped until check or credit card payment is received from the customer. The Company manages the collection process for transactions processed on its website, but it outsources its fulfillment (delivery) process to a third party for certain products.

The Companys revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, which establishes criteria that must be satisfied before revenue is realized or realizable and earned. The Company recognizes revenue when 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 Emerging Issues Task Force (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 not been material. The Company does not have a product return reserve established.



6



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





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

Research and Development

The Company does not engage in research and development as defined in Statement of Financial Accounting Standards (SFAS) No. 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.

Segment Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. The Company operates in one segment for management reporting purposes.



NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

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

Fair Value of Financial Assets and Liabilities

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 allows companies to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will become effective for the Company beginning in fiscal 2009. The Company is currently evaluating what effects the adoption of SFAS 159 will have on the Companys future results of operations and financial condition.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R) Business Combinations (SFAS 141(R)). This Statement replaces the original FASB Statement No. 141. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of this SFAS 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS 141(R) establishes principles and requirements for how the acquirer:

a.

Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.

b.

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

c.

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

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



7



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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Noncontrolling Interests in Consolidated Financial Statements

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

Share-Based Payments

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

Disclosure about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, (SFAS 161) 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 No. 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.





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XENACARE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 4.  PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other current assets consist primarily of $125,000 royalty advances associated with the license of SunPill. In April 2008, the Company completed negotiations to acquire full ownership of the SunPill proprietary formula and patent. The license agreement will be superseded by the purchase agreement and the prepaid royalties will be included in the purchase. Prepaid expenses and other assets also include a $21,000 prepaid slotting allowance acquired in connection with the 2BHealthy acquisition agreement.

NOTE 5.  OTHER LIABILITIES

Other liabilities totaling $859,815 consist exclusively of advances made by the Companies existing shareholders, either in stock or cash, on behalf of the Company in order to facilitate certain transactions. Per the terms of the advances, the Company is obligated to either replace the shares or reimburse the shareholder for the cash value of the transaction.

NOTE 6.  COMMITMENTS AND CONTINGENCIES

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

·

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

·

An Exclusive Licensing and Royalty Agreement with Mr. Robert Bell for the Sunpill. Payments are based upon sales volume with established quarterly minimum guaranteed royalty payments.

·

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

NOTE 7.  COMMON AND PREFERRED STOCK

Common Stock

On July 14, 2007 the Company was notified by the Securities and Exchange Commission that its Form SB-2 was accepted and closed July 14, 2007.  The Company then established a relationship with Newbridge Securities Corporation to act as its market maker and received clearance from the Financial Industry Regulatory Authority (FINRA). The public began trading in the Companys shares on March 05, 2008. The Companys trading symbol is XCHO:OTC.

During the first quarter of 2008, 1,251,000 of common shares were issued to certain founders under anti-dilutive agreements, resulting in a reduction of $1,251 to additional paid in capital equal to the par value of the shares issued.

Preferred Stock

In January 2008, the Company sold 70,000 shares of Series B preferred stock for $1.00 per share. The Series B preferred stock has par value of $0.001 and does not accrue dividends. Each preferred share may be converted at the option of the holder into 3 shares of common stock.

NOTE 8.  SUBSEQUENT EVENTS

On April 1, 2008, the Company entered into an agreement with Newbridge Securities Corporation (Newbridge), a securities broker and member in good standing with the Financial Industry Regulatory Authority. In addition to providing advisory services, as requested, Newbridge will act as Market Maker for the Company. The term of the agreement is for one year and may be extended by mutually agreement. The contract provides for Newbridge to receive a fee for advisory services of $30,000, payable in installments, along with 500,000 shares of restricted common stock plus an option for 800,000 additional common shares, issued in a series at strike prices ranging from $4.50 to $6.00.

On April 23, 2008, the Company entered into a sales agreement with Pure Laboratories, LLC to purchase all rights to SunPill. This agreement supersedes the Companys previous SunPill license agreement with Pure Laboratories, LLC dated February 8, 2007. The aggregate purchase price is the greater of $2,500,000 or 5% of gross sales, payable quarterly at the greater of $62,500 or 5% of gross sales.



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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:

·

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 Financial Accounting Standards Board (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 the three months ended March 31, 2008 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, 2008.

Overview and Operations

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). Its predecessor, XenaCare LLC was organized in 2001 to validate its concept and conduct market tests for the limited purpose of the education, sale and distribution of NSPs at doctors offices.



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 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 Sunpill and AlGal. Sunpill 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 with Robert Bell, the founder of Banana Boat and Sea and Ski sun protection products, through which we will showcase and market his latest invention, the Sunpill. 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.



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Substantially all revenues to date have been generated from sales of historical Clinical NSPs, XenaCor, XenaTri and XenaZymePlus in doctors offices. 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, back into the doctors offices. The doctors offices are where the patients need for our Clinical NSPs is identified. Our Clinical NSPs provide patients with access to proprietary nutritional supplements under a doctors medical supervision. We also plan to sell and distribute these products through chiropractors offices, pharmacies and other distribution outlets. We may also use infomercials and a book authored by Dr. Xenakis, CEO and Chairman to promote our Clinical NSPs.

XenaCor, XenaTri and XenaZymePlus are specifically formulated to support and help maintain the doctor directed patient healthcare for many risk factors, including those related to homocysteine levels, lipid control, blood flow and blood pressure. These NSPs are formulated under the guidelines of the Food and Drug Administration (FDA) and its regulation of the 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. Currently we operate on a limited basis with 22 doctors offices located in New York and Florida. Doctors receive a commission for products sold at their offices, however, we do not have written agreements with any doctors office or doctor.

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 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 patients being treated with prescription drugs for high blood pressure, heart disease, diabetes, ulcers, depression, infection, arthritis, aids and weight loss. BRS intends to utilize healthcare professionals to execute enrollment and education of patients via toll free telephone and virtual computer linkups, using the same marketing and sales practices as our current Clinical NSPs operations. We believe BRS is a natural extension of the way doctors conduct their practice and that doctors will accept these products because they are aware that supplementation for prescription induced nutrition depletion is



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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.

We commenced the marketing of these products in late 2006 in independent pharmacies in Florida and New York as well as in doctors offices. We also intend to distribute these nutrient replenishment NSPs through traditional healthcare facilities, as well as direct market consumer sales via Internet marketing, and radio/television advertising. There is no FDA regulation or approval with respect to the replenishment formulations.

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

Sunpill,a revolutionary nutritional supplement that defends your skin from photo-aging and sun-damage, was developed by Robert Bell, 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 from Bell to produce and distribute the Sunpill. The composition of the Sunpill, 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, and skin cancer.

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

Additionally, we have entered into an agreement with Dr. Bob Arnot, a nationally known medical news correspondent who will serve as our Spokesperson for the Sunpill and Algal nutritional supplements. Dr. Arnot provides such services to General Mills, among others.

Formulation of NSPs

The Companys NSPs are currently formulated by Dr. Xenakis and Bill Downs and are proprietary to the Company. The Company has no trademark or patent protection for any of its products or services, except the SunPill. 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



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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 2008 and completed prior to filing this quarterly report:

·

On April 1, 2008, the Company entered into an agreement with Newbridge Securities Corporation (Newbridge), a securities broker and member in good standing with the Financial Industry Regulatory Authority. In addition to providing advisory services, as requested, Newbridge will act as Market Maker for the Company. The term of the agreement is for one year and may be extended by mutually agreement. The contract provides for Newbridge to receive a fee for advisory services of $30,000, payable in installments, along with 500,000 shares of restricted common stock plus an option for 800,000 additional common shares, issued in a series at strike prices ranging from $4.50 to $6.00.

·

On April 23, 2008, the Company entered into a sales agreement with Pure Laboratories, LLC to purchase all rights to SunPill. This agreement supersedes the Companys previous SunPill license agreement with Pure Laboratories, LLC dated February 8, 2007. The aggregate purchase price is the greater of $2,500,000 or 5% of gross sales, payable quarterly at the greater of $62,500 or 5% of gross sales.

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 or trademark protection on its proprietary products other than SunPill.

Governmental Regulation

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

·

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

·

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



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·

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

·

notification procedures for statements on dietary and nutritional supplements; and

·

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



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

In certain markets, including the United States, specific claims made by us with respect to our products may change the regulatory status of a product. For example, a product sold as a 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 thus an illegal drug. 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 claims, ingredient labeling, and nutrient content claims that characterize the level of nutrients in a product. These acts prohibit the use of any specific health claim for nutritional supplements unless the health claim 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 claims clearly and accurately, and further require marketers to maintain adequate substantiation for their claims. The FTC requires such substantiation to be competent and reliable scientific evidence. Specifically, the FTC requires a company to have a reasonable basis for the expressed and implied product claim before it disseminates an advertisement. A reasonable basis is determined based on the claims made, how the claims are presented in the context of the entire advertisement, and how the claims are qualified. The FTCs standard for evaluating substantiation is designed to ensure that consumers are protected from false and/or misleading claims by requiring scientific substantiation of product claims at the time such claims are first made. The failure to have this substantiation violates the Federal Trade Commission Act.

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

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;



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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

Disclosure about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, (SFAS 161) 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 No. 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

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, 2008 (Q1-2008) to the Three months Ended March 31, 2007 (Q1-2007)

Total revenues increased $9,321 or 26.9%, to $43,993 in Q1-2008 from $34,672 in Q1-2007. Substantially all of our revenues to date have been generated by our proprietary Clinical NSPs - XenaCor, XenaTri and XenaZymePlus distributed through the mail to our existing customer base.  We will continue to market our NSPs, however, we are redirecting our efforts and allocating available resources to concentrate on the distribution of the Sunpill, a defense system that protects the skin from the damaging effects of the sun, and the distribution of AlGal, a tasteless, odorless form of Omega 3 fatty acid, which is used as a food additive. No sales from these new products were generated in Q1-2008.

Total cost of revenues decreased $20,417 or 58.7%, to $14,379 in Q1-2008 from $34,796 in Q1-2007. The decrease is related to our redirection of business focus from Clinical NSPs to the commercialization of our new product lines.

Selling and marketing costs decreased $129,8998 or 56.3%, to $100,702 in Q1-2008 from $230,600 in Q1-2007. The decrease in selling and marketing expenses is primarily due to our switch in emphasis from Clinical NSPs. Our new products, the Sunpill and AlGal, are in currently being commercialized.

General and administrative costs increased $47,233 or 20.0%, to $282,922 in Q1-2008 from $235,689 in Q1-2007. The increase in general and administrative expenses is related to costs associated with accrued executive compensation along with consulting, legal and professional costs incurred with commercializing the SunPill.



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Liquidity and Capital Resources

Overview

We incurred a net loss for the three months ended March 31, 2008 of $303,201. We had a $1,410,320 deficit in working capital at March 31, 2008. 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 Q1-2008. Our ability to continue as a going concern is dependent upon our ability to generate sales from our new products and our obtaining adequate capital to fund losses until we become profitable.

Our operating and capital requirements in connection with operations have been and will continue to be significant. Our recurring losses from operations and increased contractual agreements raise doubt about our ability to continue as a going concern. Based on our current plans, we anticipate that revenues earned from SunPill 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 fourth quarter of 2007 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, 2008 there were no commitments for long-term capital expenditures.

Cash Flows for the Three Months Ended March 31, 2008

Our cash and cash equivalents increased $3,192 to $4,800 as of March 31, 2008 from $1,607 as of December 31, 2007.

Cash Flows from Operating Activities

Operating activities used net cash for the three months ended March 31, 2008 of $202,106. Net cash used resulted from a net loss of approximately $302,884, as adjusted for various items which impact net income but do not impact cash during the period, such as depreciation. The net loss was partially offset by net cash provided from a net change in working capital components of $100,778. The most significant working capital component change was an increase in accounts payable and accrued expenses of $108,164, resulting from the Company securing more services related to its commercialization of the SunPill and correspondingly increasing vendor credit utilized.

Cash Flows used in Investing Activities

Our investing activities used $213 in net cash during the three months ended March 31, 2008. Net cash used is composed entirely of capital expenditures.

Cash Flows from Financing Activities

Our financing activities provided net cash of $205,511 for the three months ended March 31, 2008. We raised approximately $135,511 in advances from officers and related parties and $70,000 through the sales of Series B preferred stock.

Financial Position

Our total assets increased $10,475 to $589,648 as of March 31, 2008 from $579,173 as of December 31, 2007.

Our inventory decreased $14,524 to approximately $100,457 as of March 31, 2008 from $114,981 as of December 31, 2007 as a result of increased utilization of inventory due to increased sales.



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Borrowings Outstanding

As of March 31, 2008, we had borrowings of $1,467,074, which was almost entirely from shareholders, officers and related parties, except for a $38,973 line of credit from Wachovia, secured by the personal guarantee of an officer of the Company.

Material Commitments, Expenditures and Contingencies

We had no outstanding purchase commitments to purchase raw materials as of March 31, 2008.

We believe that a minimum of an additional $500,000 will be needed over the next 6 months to successfully launch the SunPill 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 nutrition supplement industry is intensely competitive and the strengthening of any of our competitors could harm our business.

The nutrition supplement industry is intensely competitive. Many competitors have greater name recognition and financial resources, which may give them a competitive advantage. Our competitors may also be able to devote greater resources to marketing, promotional, and pricing campaigns that may influence our continuing and potential independent associates and members to buy products from competitors rather than from us. Such competition could adversely affect our business and current market share.

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

We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. We also cannot predict what effect these regulations, and the related publicity from promulgation of such regulations, could have on consumer perceptions related to the nutrition supplement market in which we will operate. The Company depends on positive publicity as it relates to the efficacy and overall health benefits derived from such products. This could have a materially adverse affect on our business, financial condition, results of operations and cash flows. The Food and Drug Administration has also announced that it is considering promulgating new Good Manufacturing Practices regulations, specific to nutrition supplements.

Such regulations, if promulgated, may be significantly more rigorous than currently applicable regulations and contain quality assurance requirements similar to Good Manufacturing Practices regulations for drug products. Therefore, we may be required to expend additional capital resources on upgrading manufacturing processes and/or equipment in the future in order to comply with the law. The Food and Drug Administration or other governmental regulatory bodies could require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, imposition of additional record keeping requirements, expanded documentation of the properties of certain products and expanded or different labeling and scientific substantiation. Any or all of such requirements could have a materially adverse affect on our business, financial condition, results of operations and cash flows. The Companys failure to comply with applicable Food and Drug Administration regulatory requirements could result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines, and possible criminal prosecutions. Because of the broad language of certain sections of DSHEA and the regulations that implement it, it is difficult for any company manufacturing or making nutrition supplements to remain in strict compliance. If we do not comply we may be subject to penalties.



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We rely on limited intellectual property protection as an important element of competition.

We currently have no trademark registration for any of our products, except SunPill. We rely on common law trademark rights to protect our unregistered trademarks as well as our trade dress rights. Common law trademark rights generally are limited to the geographic area in which the trademark is actually used, while a United States federal registration of a trademark enables the registrant to stop the unauthorized use of the trademark by any third party anywhere in the United States. We intend to register our trademarks in certain jurisdictions where our products are sold.

Currently, we have no patents on our NSPs. However as we move forward with our branding strategy we plan to file for name trademarks on all our products. We will continue to use the current business strategy of adding proprietary blends to each NSP formula. More than the name trademark the proprietary blend formula makes formula replication challenging for any possible competitor. We believe adding proprietary blends make replication quite difficult and expensive. However, to the extent we do not have patents on our products, another company may replicate one or more of our products. Although we seek to ensure that we do not infringe the intellectual property rights of others, there can be no assurance that third parties will not assert intellectual property infringement claims against us.

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

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

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

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

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

We believe the growth of our net sales is substantially dependent upon our ability to introduce our products to the public. At present, we have limited resources to spend on advertising and marketing therefore we will rely, to a large extent, on our agreements with strategic partners to assist in our development of distribution channels. Our ability to meet future obligations is dependent in large measure on the success of our product sales. We expect to introduce additional products.

The success of new products is dependent upon a number of factors, including our ability to formulate products that will appeal to consumers and respond to market trends in a timely manner. There can be no assurance that our efforts to formulate new products will be successful or that consumers will accept our new products. In addition, products experiencing strong popularity and rapid growth may not maintain their sales volumes over time.



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

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

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

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

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

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

In addition, large pharmaceutical companies have begun to compete with others and with us in the supplement industry. Packaged food and beverage companies compete with us on a limited basis in the supplement market. Increased competition from such companies could have a material adverse effect on us because such companies have greater financial and other resources available to them and possess manufacturing, distribution and marketing capabilities far greater than ours.

We also face competition in both the health food store and mass market distribution channels from private label nutrition supplements and multivitamins offered by health and natural food store chains, drugstore chains, mass merchandisers and supermarket chains.



ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term disclosure controls and procedures is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC.



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In connection with the review of our condensed consolidated financial statements for the Three months ended March 31, 2008, we discovered no significant internal control deficiencies that we consider to be reportable conditions.

A material weakness is a significant deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level of risk that material misstatements in our financial statements will not be prevented or detected on a timely basis.

As required by the SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. This evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our controls and procedures were effective as of the end of the period covered by this report.

We will use our best efforts to maintain necessary policies and procedures within the Company to provide adequate disclosure controls and procedures.

This Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this quarterly Report.

Inherent Limitations on Effectiveness of Controls

We do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goal under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Lack of Segregation of Duties

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.

Changes in Internal Controls

During the fiscal quarter ended March 31, 2008, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls 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, 2008 in our risk factors as set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007.

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

Common Stock

During the first quarter of 2008, 1,251,000 of common shares were issued to certain founders under anti-dilutive agreements, resulting in a reduction of $1,251 to additional paid in capital equal to the par value of the shares issued.

Preferred Stock

In January 2008, the Company sold 70,000 shares of Series B preferred stock for $1.00 per share. The Series B preferred stock has par value of $0.001 and does not accrue dividends. Each preferred share may be converted at the option of the holder into 3 shares of common stock.

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. EXHIBITS

No.

Description

10.5

Consulting Agreement with Gary Spaniak Sr., dated January 1, 2007*

10.6

Consulting Agreement with Bobby Story, dated January 1, 2007*

10.7

Employment Agreement, dated January 1, 2007, between XenaCare Holdings, Inc. and Alan Xenakis*

10.8

Employment Agreement, dated January 1, 2007, between XenaCare Holdings, Inc. and Frank Rizzo*

10.9

Business Advisory Agreement between XenaCare Holdings, Inc. and Newbridge Securities Corporation dated April 1, 2008

10.10

Sales Agreement between XenaCare Holdings, Inc. and Pure Laboratories, LLC dated April 23, 2008

10.11

Preferences and Rights of Series B Convertible Preferred Stock of XenaCare Holdings, Inc.

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.



* Previously filed.



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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 20, 2008



| |                         |                                                                                   
| | ----------------------- | ----------------------------------------------------------------------------------
| | 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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