UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



|                                                               |                                                                                         
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|                                                               |                                                                                         
|þ                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the fiscal year ended:March 31, 2011                      
| ̈                                                              | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from: _____________ to _____________



XenaCare Holdings, Inc.

(Exact name of Registrant as specified in its charter)

|                             |              |                    
|---------------------------- | ------------ | -------------------
|                             |              |                    
|Florida                      | 000-53916    | 20-3075747         
|(State or Other Jurisdiction | (Commission  | (I.R.S. Employer   
|of Incorporation)            | File Number) | Identification No.)



6001 Broken Sound Parkway, Suite 630

Boca Raton, Florida 33487

(Address of Principal Executive Office) (Zip Code)

(561) 496-6676

(Registrants telephone number, including area code)





|                                                                                                                                                                                                                                                       |   |                            |   |                           |   |  |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | -------------------------- | - | ------------------------- | - |  |  | 
|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.                                                                                                                                             | þ | Yes                        |  ̈ | No                       
|                                                                                                                                                                                                                                                      
|Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
|months (or for such shorter period that the registrant was required to submit and post such files).                                                                                                                                                    |  ̈ | 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                                                                                                                                                                                                                                  |  ̈ | (Do not check if a smaller |   | Smaller reporting company | þ | 
|                                                                                                                                                                                                                                                       |   | reporting company)         |   |                           |   | 
|                                                                                                                                                                                                                                                       |  
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                                      
|                                                                                                                                                                                                                                                       |  ̈ | Yes                        | þ | No                       
|                                                                                                                                                                                                                                                       |  
|Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
77,012,772 shares of $0.001 par value common stock atMay 23, 2011                                                       



---



INDEX



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|PART I  FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
1

ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
16

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
24

ITEM 4.
CONTROLS AND PROCEDURES
24

PART II  OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS
26

ITEM 1A.
RISK FACTORS
26

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
26

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
26

ITEM 4.
(REMOVED AND RESERVED)
26

ITEM 5.
OTHER INFORMATION
26

ITEM 6.
EXHIBITS
26

SIGNATURES
27





---



PART I  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

XenaCare Holdings, Inc.

Condensed Balance Sheets



|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | ----------------- | - | ----------- | -
|                                                                                                                                                                                   |  | March 31,
2011 |             | December 31,
2010 |  
|                                                                                                                                                                                   |  | (Unaudited)    |             |                   |   |            
|ASSETS                                                                                                                                                                             |  |                |             |                   |   |             |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|Current Assets                                                                                                                                                                     |  |                |             |                   |   |             |  
|Cash                                                                                                                                                                               |  | $              | 28,263      |                   | $ | 10,515      |  
|Accounts receivable                                                                                                                                                                |  |                | 337,303     |                   |   | 127,253     |  
|Inventory                                                                                                                                                                          |  |                | 782,647     |                   |   | 970,696     |  
|Prepaid expenses and other current assets                                                                                                                                          |  |                | 256,004     |                   |   | 384,158     |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|Total Current Assets                                                                                                                                                               |  |                | 1,404,217   |                   |   | 1,492,622   |  
|Office Furniture and Equipment, net                                                                                                                                                |  |                | 11,250      |                   |   | 12,500      |  
|Other Assets                                                                                                                                                                       |  |                | 6,473       |                   |   | 35,472      |  
|TOTAL ASSETS                                                                                                                                                                       |  | $              | 1,421,940   |                   | $ | 1,540,594   |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                              |  |                |             |                   |   |             |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|Current Liabilities                                                                                                                                                                |  |                |             |                   |   |             |  
|Accounts payable and accrued expenses                                                                                                                                              |  | $              | 760,959     |                   | $ | 1,054,263   |  
|Notes payable - current                                                                                                                                                            |  |                | 3,471,722   |                   |   | 3,097,964   |  
|Revolving credit facility                                                                                                                                                          |  |                | 315,349     |                   |   | 259,174     |  
|Total Current Liabilities                                                                                                                                                          |  |                | 4,548,030   |                   |   | 4,411,401   |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|TOTAL LIABILITIES                                                                                                                                                                  |  |                | 4,548,030   |                   |   | 4,411,401   |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                      |  |                |             |                   |   |             |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|Shareholder's Deficit                                                                                                                                                              |  |                |             |                   |   |             |  
|Preferred stock, 5,000,000 shares authorized: 
Series E, $0.001 par value, 270,435 and 270,436 shares issued
and outstanding at March 31, 2011 and December 31, 2010, respectively |  |                | 270         |                   |   | 270         |  
|Common stock, $0.001 par value, 200,000,000 shares authorized: 
77,012,772 and 76,825,434 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively      |  |                | 77,013      |                   |   | 76,825      |  
|Additional paid-in-capital                                                                                                                                                         |  |                | 9,736,706   |                   |   | 9,810,512   |  
|Accumulated deficit                                                                                                                                                                |  |                | (12,939,679 | )                 |   | (12,758,414 | )
|Stock Subscription                                                                                                                                                                 |  |                | (400        | )                 |   |            |  
|                                                                                                                                                                                   |  |                |             |                   |   |             |  
|Total Shareholders' Deficit                                                                                                                                                        |  |                | (3,126,090  | )                 |   | (2,870,807  | )
|TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                        |  | $              | 1,421,939   |                   | $ | 1,540,594   |  





See accompanying notes to unaudited condensed financial statements



1



---



XenaCare Holdings, Inc.

Condensed Statements of Operations

(Unaudited)



|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|------------------------------------------ | ---------------------------- | -------- | ---- | - | ---------- | - | - | ------- |  | - | ---------- | -
|                                           | Three Months Ended
March 31, |         
|                                           | 2011                         |          | 2010 |  
|Revenue, net:                              |                              |          |      |   |            |   |   |         |  |   |            |  
|Product sales                              | $                            | 614,523  |      |   |            |   | $ | 895,487 |  |   |            |  
|Less: Advertising and marketing allowances |                              | (205,918 | )    |   |            |   |   |        |  |   |            |  
|Less: Returns and other allowances         |                              | (10,732  | )    |   |            |   |   |        |  |   |            |  
|Total revenue, net                         |                              |          |      |   | 397,873    |   |   |         |  |   | 895,487    |  
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|Cost of revenue                            |                              |          |      |   | 188,049    |   |   |         |  |   | 276,408    |  
|Gross profit                               |                              |          |      |   | 209,824    |   |   |         |  |   | 619,079    |  
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|Operating costs and expenses:              |                              |          |      |   |            |   |   |         |  |   |            |  
|Selling and marketing                      |                              |          |      |   | 167,601    |   |   |         |  |   | 370,260    |  
|General and administrative                 |                              |          |      |   | 97,928     |   |   |         |  |   | 99,687     |  
|Write downs and asset impairment           |                              |          |      |   |           |   |   |         |  |   |           |  
|Total operating costs and expenses         |                              |          |      |   | 265,529    |   |   |         |  |   | 469,947    |  
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|(Loss) Income from Operations              |                              |          |      |   | (55,705    | ) |   |         |  |   | 149,132    |  
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|Other income (expense)                     |                              |          |      |   |            |   |   |         |  |   |            |  
|Interest income                            |                              |          |      |   |           |   |   |         |  |   | 196        |  
|Interest expense                           |                              |          |      |   | (125,313   | ) |   |         |  |   | (35,280    | )
|Other income                               |                              |          |      |   | 19         |   |   |         |  |   | 252        |  
|Other expenses                             |                              |          |      |   | (267       | ) |   |         |  |   | (4,815     | )
|Total other (expense)                      |                              |          |      |   | (125,561   | ) |   |         |  |   | (39,647    | )
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|Net  (Loss) Income                         |                              |          |      | $ | (181,266   | ) |   |         |  | $ | 109,485    |  
|                                           |                              |          |      |   |            |   |   |         |  |   |            |  
|Basic and Diluted:                         |                              |          |      |   |            |   |   |         |  |   |            |  
|Weighted average shares                    |                              |          |      |   | 76,919,103 |   |   |         |  |   | 71,742,272 |  
|(Loss) Income per share                    |                              |          |      | $ | (0.00      | ) |   |         |  | $ | 0.00       |  















See accompanying notes to unaudited condensed financial statements



2



---

XenaCare Holdings, Inc.

Condensed Statements of Cash Flows

(Unaudited)



|                                                                                      |  |                              |          |      |   |            |  
|------------------------------------------------------------------------------------- |  | ---------------------------- | -------- | ---- | - | ---------- | -
|                                                                                      |  | Three Months Ended
March 31, |         
|                                                                                      |  | 2011                         |          | 2010 |  
|Cash Flows from Operating Activities:                                                 |  |                              |          |      |   |            |  
|Net income (loss)                                                                     |  | $                            | (181,266 | )    | $ | 109,485    |  
|Adjustments to reconcile net income (loss) to net cash 
used in operating activities: |  |                              |          |      |   |            |  
|Depreciation and amortization                                                         |  |                              | 15,586   |      |   |           |  
|Stock for services cancelled                                                          |  |                              | (4,018   | )    |   |           |  
|Changes in operating assets and liabilities:                                          |  |                              |          |      |   |            |  
|Accounts receivable                                                                   |  |                              | (210,050 | )    |   | (761,757   | )
|Inventory                                                                             |  |                              | 188,049  |      |   | (738,175   | )
|Prepaid expenses and other current assets                                             |  |                              | 37,154   |      |   | (48,396    | )
|Accounts payable and accrued expenses                                                 |  |                              | 76,697   |      |   | 313,800    |  
|Net cash used in operating activities                                                 |  |                              | (77,849  | )    |   | (1,125,044 | )
|                                                                                      |  |                              |          |      |   |            |  
|Cash Flows from Investing Activities:                                                 |  |                              |          |      |   |            |  
|Cost of rent deposits                                                                 |  |                              |         |      |   | (6,472     | )
|Net cash provided by (used in) investing activities                                   |  |                              |         |      |   | (6,472     | )
|                                                                                      |  |                              |          |      |   |            |  
|Cash Flows from Financing Activities:                                                 |  |                              |          |      |   |            |  
|Proceeds from notes payable                                                           |  |                              | 67,875   |      |   | 1,500,000  |  
|Repayments on notes payable                                                           |  |                              | (37,778  | )    |   | (57,000    | )
|Advances from (Payments to) related parties                                           |  |                              | 15,500   |      |   |           |  
|Proceeds from sale of stock                                                           |  |                              | 50,000   |      |   |           |  
|Net cash provided by financing activities                                             |  |                              | 95,597   |      |   | 1,443,000  |  
|                                                                                      |  |                              |          |      |   |            |  
|Increase in Cash                                                                      |  |                              | 17,748   |      |   | 311,484    |  
|Cash, Beginning of Period                                                             |  |                              | 10,515   |      |   | 225,019    |  
|Cash, End of Period                                                                   |  | $                            | 28,263   |      | $ | 536,503    |  
|                                                                                      |  |                              |          |      |   |            |  
|Supplemental Information:                                                             |  |                              |          |      |   |            |  
|Cash paid for interest                                                                |  | $                            |         |      | $ |           |  
|Cash paid for taxes                                                                   |  | $                            |         |      | $ |           |  
|Non Cash Transactions:                                                                |  |                              |          |      |   |            |  
|Capitalization of debt and other accrued expenses                                     |  | $                            |         |      | $ | 1,883,305  |  
|Conversion of preferred shares                                                        |  | $                            |         |      | $ |           |  









See accompanying notes to unaudited condensed financial statements



3



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED 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 protective nutrition supplement products (NSPs) as well as homeopathic medication, detoxification and pet care products.

Our Clinical NSP products group includes our proprietary formulations - XenaCor, XenaTri and XenaZyme Plus, which will be sold through mass media buys (radio and television advertising), web sales and other channels of distribution.

On September 29, 2010, XenaCare Holdings entered into a Private Labeling Agreement with Renaissance Health Publishing, LLC (Renaissance) of Boca Raton, Florida to market our clinical products. These products address major issues concerning prevention of heart disease. XenaCare will provide the finished products to Renaissance who is currently developing the labels, the marketing materials and strategies for these retail products. Because the Renaissance model is to educate the consumer through direct response sales, these unique supplements will necessarily receive greater personal attention by the consumer.

Our Protective NSP product group is directed to the energy/lifestyle performance market. Our initial product, SunPillTM, is formulated to protect the skin when exposed to damaging ultraviolet rays. During the third quarter of 2010, we had the product reevaluated and as a result were able to extend its shelf life for an additional two years. We are currently in negotiations with a distributor in Cypress to assume the entire line for distribution in the European market. Although we believe that we will ultimately recover our product costs, because of certain delays in consummating the Cypress sale, we have fully impaired the inventory in fourth quarter of 2010.

Our Homeopathic Medication product line is lead by Cobroxin. Cobroxin is the first opiate and acetaminophen-free pain reliever available as an over-the-counter formulation clinically proven to treat moderate to severe (Stage 2) pain. Available in a topical gel that relieves pain associated with joints, repetitive stress and arthritis, and in an oral spray that is formulated to relieve lower back pain, migraines, neck aches, shoulder pain, cramps and neuralgia, CobroxinTM is derived from cobra venom.

Our new Pet Care product line is led by EstraPetTM. On September 8, 2010, XenaCare Holdings entered into an exclusive agreement with Dr. Phillip Schoenwetter whereby XenaCare gained all rights to the trademark EstraPetTM; to the domain www.estrapet.com and to the United States Patent Pending under the caption "Treatment for Domestic Animals Having Sex Hormone Deficiencies using Soy Germ Isoflavones". EstraPetTM answers the need for treating the unintended consequences caused by spaying and neutering and is the only known natural hormone modulator available on the market today.

History of the Company

While the Company was organized in 2005, its predecessor, XenaCare LLC was organized in 2001. Thereafter, the Company entered into an exchange agreement with certain members of XenaCare LLC and such members exchanged their interest in XenaCare LLC for an aggregate of 800,000 shares of XenaCare Holdings, Inc. common stock, which represented a value of $1,600,000.

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



4



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





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

In May, 2009, NutraPharma, Inc. awarded to XenaCare the US marketing rights to Cobroxin. NutraPharma is a biotechnology company that is developing treatments for adrenomyeloneuropathy, HIV and multiple sclerosis. Cobroxin is the first opiate and acetaminophen-free pain reliever available as an over-the-counter formulation clinically proven to treat moderate to severe (Stage 2) pain. The Company has sales agreements with many major retailers. There is a dispute with the Nutrapharma which has attempted to terminate the distribution agreement effective April 11, 2011 (See note 15).

In December, 2009, all of the Companys subsidiaries were merged into XenaCare Holdings, Inc.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Terms and Definitions

| |           |                                               
| | --------- | ----------------------------------------------
| | Company   | XenaCare, XC Holdings, we, us or our
| | ASC       | Accounting Standards Codification             
| | ASU       | Accounting Standards Update                   
| | FASB      | Financial Accounting Standards Board          
| | FIFO      | First-in, First-out                           
| | GAAP (US) | Generally Accepted Accounting Principals      
| | NSP       | Nutrition Supplement Product                  
| | SEC       | Securities Exchange Commission                
| | SFAS or   |                                               
| | FAS       | Statement of Financial Accounting Standards   
| | Q110-YTD  | Three months Ended March 31, 2010             
| | Q111-YTD  | Three months Ended March 31, 2011             

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

In 2011 and 2010, the financial statements include the accounts of the Company since in December 2009; the Company merged all of its subsidiaries into the Company (XenaCare Holdings, Inc.).

Interim Financial Statements

The interim unaudited condensed financial statements presented herein have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The interim unaudited condensed 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, 2011 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, 2011.



5



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





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

Use of Estimates

The preparation of unaudited condensed financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the 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 marketplace, new competitors, changes in federal and/or state legislation and other factors. Adverse changes in these areas could negatively impact the Companys financial position, results of operations and cash flows.

Going Concern

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported a net loss from operations of $3,388,189 and $181,266 for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively; a shareholders deficit of $3,126,090 and a working capital deficit of $3,143,813 as of March 31, 2011. As shown in the accompanying unaudited condensed 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 CobroxinTM 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.

Cash

Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.

Accounts Receivable

Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At March 31, 2011 and December 31, 2010, the allowance for doubtful accounts was $505,587 and $315,687, respectively.

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 and its newest product lines, CobroxinTM and EstraPetTM.



6



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





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

At March 31, 2011 and December 31, 2010, the allowance for obsolete or expired inventory was $34,386 and $34,386, respectively. In addition, during the fourth quarter of 2010, the Company impaired the carrying value of the remaining SunPill inventory totaling $380,941 due to delays in consummating a sale.

Office Furniture and Equipment

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

Office furniture and equipment is depreciated over various lives ranging from 5 to 10 years. Depreciation expense for the three months ended March 31, 2011 and the year ended December 31, 2010 was $1,250 and $2,500, respectively.

Revenue Recognition

The Companys product revenues represent primarily sales of SunPillTM, XenaCor, XenaTri, XenaZyme and CobroxinTM. Revenue is recognized when a product is shipped. The Company outsources its fulfillment (delivery) process to a third party for most of its products.

The Company’s revenue recognition policies are in compliance with ASC Topic 605,Revenue Recognition, which establishes criteria that must be satisfied before revenue is realized or realizable and earned. The Company recognizes revenue when all of the following four criteria are met:

| |   |                                                   
| | - | --------------------------------------------------
| | · | persuasive evidence of a sales arrangement exists,
| | · | delivery has occurred,                            
| | · | the sales price is fixed or determinable, and     
| | · | collectability is probable.                       



Shipping and handling charges related to sales transactions are recorded as sales revenues when billed to customers or included in the sales price in accordance with ASC Topic 605, shipping and handling costs are included in cost of revenue.

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

Research and Development

The Company does not engage in research and development as defined in ASC Topic 730 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 statements of operations.

Income Taxes

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

Earnings per share

The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share.Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.



7



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





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

For the three months ended March 31, 2011 and the year ended December 31, 2010, diluted net loss per share does not include potential common shares derived from convertible notes payable, stock options and warrants because as a result of the Company incurring losses, their effect would have been anti-dilutive.

Segment Information

ASC Topic 280, 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.

Fair Value of Financial Instruments

In January 2008, we adopted the provisions under FASB for Fair Value Measurements, which define fair value for accounting purposes, establishes a framework for measuring fair value and expands disclosure requirements regarding fair value measurements. Our adoption of these provisions did not have a material impact on our financial statements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. We currently do not have any financial assets and liabilities that are recurring that would require us to disclosure them at fair value.

Reclassification

Certain reclassifications have been made to conform to prior periods data to the current presentation. These reclassifications had no effect on reported losses.

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

The FASB has codified a single source of U.S. GAAP, the Accounting Standards CodificationTM. Unless needed to clarify a point to readers, we will refrain from citing specific section references when discussing application of accounting principles or addressing new or pending accounting rule changes. There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Companys financial statements.

NOTE 4.  ACCOUNTS RECEIVABLE

Significant components of accounts receivable at March 31, 2011 and December 31, 2010 consist of:

|                         |  |             |          |      |   |          |  
|------------------------ |  | ----------- | -------- | ---- | - | -------- | -
|                         |  | 2011        |          | 2010 |  
|                         |  | (Unaudited) |          |      |   |         
|Receivables non-factored |  | $           | 266,065  |      | $ | 202,154  |  
|Receivables factored     |  |             | 576,826  |      |   | 240,786  |  
|                         |  |             | 842,890  |      |   | 442,940  |  
|Allowances               |  |             | (505,587 | )    |   | (315,686 | )
|                         |  |             |          |      |   |          |  
|                         |  | $           | 337,303  |      | $ | 127,254  |  



8



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 5.  INVENTORY

Significant components of inventory at March 31, 2011 and December 31, 2010 consist of:

|                          |  |             |         |      |   |           |  
|------------------------- |  | ----------- | ------- | ---- | - | --------- | -
|                          |  | 2011        |         | 2010 |  
|                          |  | (Unaudited) |         |      |   |          
|Bulk product              |  | $           | 34,386  |      | $ | 34,386    |  
|Merchandise inventory     |  |             | 782,647 |      |   | 970,696   |  
|                          |  |             | 817,033 |      |   | 1,005,082 |  
|Allowances for expiration |  |             | (34,386 | )    |   | (34,386   | )
|                          |  |             |         |      |   |           |  
|                          |  | $           | 782,647 |      | $ | 970,696   |  



Bulk product  Bulk product consists of completed unpackaged loose SunPill® product that has been stored in barrels awaiting commercial packaging to make it market ready for distribution. As discussed below, the Company has arranged for the disposition of its existing SunPill® inventory and since it no longer considers the SunPill® inventory market ready for distribution, package SunPill® has been reclassified as bulk product. During 2010 the Company has been attempting the liquidation of this merchandize along with any bulk product, however as a result of delays in consummating a final sale, consequently the Company has fully impaired the SunPill® inventory totaling $380,941, even though the SunPill® inventory has been retested and the shelf life has been extended for two years.

Merchandise inventory - Merchandise inventory consists primarily of the Cobroxin® product along with lesser quantities of XenaCor. Our formulations are batch controlled and carry an expiration date in accordance with applicable government regulations. Any product approaching their expiration date have been destroyed and removed from the inventory. The Company establishes an allowance on the remaining inventory, based on the estimated sell through rate for each product, before their expiration.

NOTE 6  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Significant components of accounts payable and accrued expenses at March 31, 2011 and December 31, 2010 consist of:

|                          |  |             |         |      |   |           | 
|------------------------- |  | ----------- | ------- | ---- | - | --------- | 
|                          |  | 2011        |         | 2010 |  
|                          |  | (Unaudited) |         |      |   |          
|Trade payables            |  | $           | 222,505 |      | $ | 256,786   | 
|Accrued professional fees |  |             | -       |      |   | -         | 
|Accrued payroll           |  |             | 155,288 |      |   | 370,000   | 
|Accrued interest          |  |             | 383,166 |      |   | 272,188   | 
|Other accrued expenses    |  |             | -       |      |   | 155,288   | 
|                          |  |             |         |      |   |           | 
|                          |  | $           | 760,959 |      | $ | 1,054,262 | 



NOTE 7  REVOLVING CREDIT FACILITY

On September 1, 2010, the Company entered into a financing agreement with FT Trade Financial Corp (FT Trade) for a maximum borrowing of up to $600,000. The arrangement was based on a recourse factoring of the Companys accounts receivables. Certain accounts receivable of the Company were pledged as collateral for the FT Trade facility. Under the arrangement, FT Trade typically advanced to the Company 85% of the total amount of accounts receivable factored. FT Trade retained 15% of the outstanding factored accounts receivable as a reserve, until the customer paid the factored invoice to FT Trade. As of March 31, 2011 and December 31, 2010 the liability outstanding on the revolving credit facility is $315,349 and $259,174, respectively.





9



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 8  NOTES PAYABLE - CURRENT

Significant components of notes payable  current at March 31, 2011 and December 31, 2010 consist of:

|                       |  |             |           |      |   |           |  
|---------------------- |  | ----------- | --------- | ---- | - | --------- | -
|                       |  | 2011        |           | 2010 |  
|                       |  | (Unaudited) |           |      |   |          
|Related parties        |  | $           | 611,592   |      | $ | 226,092   |  
|Shareholder loans      |  |             | 1,850,000 |      |   | 1,850,000 |  
|Sun Packing, Inc.      |  |             | 977,000   |      |   | 977,000   |  
|Other financing        |  |             | 55,850    |      |   | 75,000    |  
|Financial institutions |  |             | (1,862    | )    |   | 5,066     |  
|Debt discount          |  |             | (20,858   | )    |   | (35,194   | )
|                       |  |             |           |      |   |           |  
|                       |  | $           | 3,471,722 |      | $ | 3,097,964 |  



Related Parties - Notes payable to related parties were issued in various traunches, each mature one year from issuance and bear interest at 15%. The lenders are related parties to the Company through common executive management as our CFO and President are also officers in the lenders. The notes matured on June 30, 2009 however, during the first quarter of 2010, the parties agreed to convert $346,387 of these notes into 34,639 shares of Series E preferred stock. In addition, during the third and fourth quarters of 2010, the Company borrowed approximately $58,000 and $29,342, respectively which provided supplemental working capital. During the first quarter of 2011, the related parties transferred $370,000 of accrued expenses into the outstanding note balances.

Shareholder Loans  Unsecured notes payable to a shareholder were issued in various traunches commencing in January 2009, each mature one year from issuance and bear interest at from 12%-15%. During the first quarter of 2010, the shareholder advanced an additional $1,500,000 and then converted $1,000,000 of outstanding debt into 100,000 shares of Series E preferred shares. During the third quarter of 2010, the shareholder advanced an additional $50,000, the proceeds of which were used to acquire product and promote its brand.

During the third quarter of 2010, the Company borrowed $130,288 from another shareholder, the proceeds of which were used to acquire inventory. Interest accrues at 15% and the note matures in August 2011 however the note was repaid in the fourth quarter of 2010.

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

Other Advances  During the fourth quarter in 2010, the Company received $75,000 in advances to purchase inventory. The advances were informal and are expected to be repaid from collections in first quarter of 2011. The advances are not collateralized and do not accrue interest.



10



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 9  COMMITMENTS AND CONTINGENCIES

The Company, during the year operated under several material agreements as listed below:

Consulting service / employment agreements

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Employment agreements - Employment agreements with two individuals for their services in the areas of sales (our President), operations and mergers and acquisitions (our CFO) were terminated on December 31, 2009 by mutual consent. All accrued and unpaid compensation and benefits totaling $562,500 were converted into 56,250 Series E preferred shares. New verbal employment agreements were entered into with these individuals, which provide for monthly draws of $5,000 and quarterly bonus based on performance. The agreements can be terminated at any time.
| | · | Beauty Development - In December 2009, we entered into a three year agreement with Beauty Development Corporation, to provide distribution management, development and product merchandising services. The Company issued 8,475 shares of Series E preferred shares which calls for performance based vesting over the three year term. This agreement has been fully prepaid.                                                                                                                                                                                              

Marketing agreements

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Creative Management and Arnot – During the third quarter of 2010, the Company entered into a new image marketing and branding agreement with Creative Management, Inc. and a companion spokesperson agreement with Dr. Bob Arnot, a nationally known medical and news correspondent. The terms of the agreements provide for image marketing and branding services for 36 months. The contract was prepaid through the issuance of 500,000 common shares valued at $.12 each, the fair value of the shares at the execution of the agreement. Accordingly, $60,000 has been recorded as a prepaid expense and will be amortized over the next 36 months.
| | · | Nutritional Alliances, Inc - In December 2009, we also entered into a three year agreement with Nutritional Alliances, Inc to provide market penetration and expand our customer base. The Company issued 8,475 shares of Series E preferred shares which calls for performance based vesting over the three year term. This agreement has been fully prepaid.                                                                                                                                                                                                                                                                                          

Lease for office facilities

| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Boca Raton office – In March 2010, the Company entered into a 3 year lease agreement for its new corporate headquarters in Boca Raton, Florida. The Company occupied the new facility in June 2010. The lease provides for the first four months of rent waived.

Distribution agreement

| |   |                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Nutra-Pharma – In March 2010, the Company entered into a 5 year exclusive US marketing and distribution agreement with the manufacturer of Cobroxin. The agreement requires that the Company make minimum product purchases of $180,000 per quarter. There is a dispute with the manufacturer which has attempted to terminate the distribution agreement effective April 11, 2011 (See note 15).



11



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 9  COMMITMENTS AND CONTINGENCIES (Continued)

|                                  |  |  |  |      |   |         |  |      |         |        |   |         |  |   |         |  |   |           | 
|--------------------------------- |  |  |  | ---- | - | ------- |  | ---- | ------- | ------ | - | ------- |  | - | ------- |  | - | --------- | 
|Summary of commitments            |  |  |  | 2011 |   | 2012    |  | 2013 |         | Beyond |   | Total   | 
|                                  |  |  |  |      |   |         |  |      |         |        |   |         |  |   |         |  |   |           | 
|Employment agreements             |  |  |  |      | $ |        |  | $    |        |        | $ |        |  | $ |        |  | $ |          | 
|Beauty Development Corporation    |  |  |  |      |   |        |  |      |        |        |   |        |  |   |        |  |   |          | 
|Creative Management and Arnot     |  |  |  |      |   |        |  |      |        |        |   |        |  |   |        |  |   |          | 
|Nutritional Alliances, Inc        |  |  |  |      |   |        |  |      |        |        |   |        |  |   |        |  |   |          | 
|Boca Raton office lease (current) |  |  |  |      |   | 26,392  |  |      | 38,513  |        |   | 16,610  |  |   |        |  |   | 81,515    | 
|Nutra-Pharma                      |  |  |  |      |   | 540,000 |  |      | 720,000 |        |   | 720,000 |  |   | 720,000 |  |   | 2,700,000 | 
|                                  |  |  |  |      | $ | 566,392 |  | $    | 758,513 |        | $ | 736,610 |  | $ | 720,000 |  | $ | 2,781,515 | 



NOTE 10  ADVERTISING

Advertising within SG&A includes print and other advertising production costs which are expensed the first time the advertising takes place. The costs of promotional displays are expensed in the period in which they are shipped to customers. Advertising expenses were $51,845 and $299,068 for the three months ended March 31, 2011 and 2010, respectively, and were included in SG&A in the Companys Statements of Operations. The Company also has various arrangements with customers pursuant to its trade terms to reimburse them for a portion of their advertising costs, which provide advertising benefits to the Company. Additionally, from time to time the Company may pay fees to customers in order to expand or maintain shelf space for its products. The costs that the Company incurs for cooperative advertising programs, end cap placement, shelf placement costs, slotting fees and marketing development funds, if any, are netted against revenues on the Companys Statements of Operations.

NOTE 11.  COMMON AND PREFERRED STOCK

Common Stock

The Articles of Incorporation of the Corporation authorizes the issuance of two hundred million (200,000,000) shares of common stock, par value $0.001 per share.

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

During the first quarter of 2010, 4,000,000 of outstanding warrants were exercised and exchanged for common shares. The warrants were originally granted in connection with a private stock sale in Q3 2009.

During the third quarter of 2010, we issued 1,600,000 shares of common stock which were recorded at their aggregate fair value totaling $202,400 as follows:

| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | 1,000,000 shares totaling $120,000 were issued to a consultant who provided funding services, which were subsequently canceled and returned to treasury in Q1 2011                                                                  
| | · | 500,000 shares totaling $60,000 were issued to a consultant who provided marketing services. The Company has capitalized this cost at December 31, 2010 and will record a charge to marketing expenses as the services are incurred.
| | · | 100,000 shares totaling $22,400 were issued to a consultant who provided investor relations services.                                                                                                                               

Also during the third quarter of 2010, we also sold 312,500 shares of common stock for $50,000 to an accredited investor.



12



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 11.  COMMON AND PREFERRED STOCK (Continued)

During the first quarter of 2011, we issued 1,233,000 shares of common stock which were recorded at their aggregate fair value totaling $50,000 as follows:

| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | 833,000 shares totaling $50,000 were issued to an investor.                                                                                                                                                                            
| | · | 400,000 shares were issued to a lender in satisfaction of a $25,000 debt. Before the transaction closed, the lender withdrew from the agreement. Consequently we satisfied the debt in cash and cancelled the issued shares in Q2 2011.
| | · | 1,045,662 shares were cancelled due to termination of funding agreements.                                                                                                                                                              

Appropriate expenses or prepaid services for long term agreements have been recorded.

Preferred Stock

The Articles of Incorporation of the Corporation authorizes the issuance of five million (5,000,000) shares of preferred stock, par value $0.001 per share and further authorizes the Board of Directors to divide and establish any or all of the shares of Preferred Stock into one or more series and to fix the designation of each such share, and its preferences, conversion rights, cumulative, relative, participating, optional, or other rights, including voting rights, qualifications, limitations, or restrictions thereof.

During the first quarter of 2009, the Company converted 500,000 shares of Series A Preferred stock to 10,748,340 shares of restricted common stock.

During December of 2009 the board of directors authorized the issue of up to 500,000 shares of Series E preferred stock. The Series E Preferred Stock has a stated value and liquidation preference of $10.00 per share and is convertible into common shares at a conversion rate of $10.00 divided by the value of the Common Stock when the Preferred Shares are issued. The Series E Preferred shares pay dividends at a rate of fifteen (15%) percent per annum and are paid only in common stock when declared by the Board of Directors.  The Series E Preferred shares have voting rights as if converted to common shares.

At any time prior to December 31, 2012, the holder is entitled to subscribe for one share (the Warrant Shares) of the common stock, $ .001 par value, for each Common share converted from Series E Preferred Shares. The Warrant Share may be exercised in a cashless transaction identical to the conversion provisions of the Series E Preferred Shares converted into Common Shares, with the price of the Warrant Shares fixed at the same price as the Converted Preferred Shares.

During the fourth quarter of 2009, the company issued 79,294 shares of Series E Preferred stock. 68,000 shares were issued to corporate executives for accrued salaries and stockholder loans and 10,000 shares were issued as a bonus to one employee and one outside consultant.

During the first quarter of 2010, we issued 188,325 shares of Series E Preferred Stock totaling $1,883,305 as follows:

| |   |                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | 53,686 shares totaling $536,918 were issued to satisfy all accrued and unpaid compensation and benefits for two consultants, one who provided acquisition and financing services and one who provided administration services. There services were terminated in 2009 and no new agreements were entered into with these individuals.
| | · | 100,000 shares totaling $1,000,000 were issued to satisfy $1,000,000 of outstanding debt.                                                                                                                                                                                                                                            
| | · | 34,639 shares totaling $346,387 were issued to two employees (the CFO and the President) who are lenders to the Company to satisfy $346,387 of their outstanding debt.                                                                                                                                                               



13



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 11.  COMMON AND PREFERRED STOCK (Continued)

Warrants

During the fourth quarter of 2010, we issued 229,734 of warrants to purchase common stock. The warrants were issued in connection with obtaining financing from certain related parties. The warrants vest immediately and are valid for 5 years. The warrants are cashless, fully paid and non-assessable. The warrants were recorded as debt discount, at their fair value of $57,342 using the Black-Scholes-Merton pricing model. The debt discount will be amortized over the term of the related debt.

|                               |  |        |           |                                  |  |                                                         |      |                           |  |  |     |  |  |   |         | 
|------------------------------ |  | ------ | --------- | -------------------------------- |  | ------------------------------------------------------- | ---- | ------------------------- |  |  | --- |  |  | - | ------- | 
|                               |  | Shares |           | Weighted-
Average
Exercise
Price |  | Weighted-
Average
Remaining
Contractual
Term (in years) |      | Aggregate
Intrinsic
Value
|Outstanding at January 1, 2011 |  |        | 8,729,734 |                                  |  | $                                                       | 0.04 |                           |  |  | 4.7 |  |  | $ | 523,784 | 
|Issued                         |  |        |          |                                  |  | $                                                       |     |                           |  |  |     |  |  |   |        | 
|Exercised                      |  |        |          |                                  |  | $                                                       |     |                           |  |  |     |  |  |   |        | 
|Forfeited                      |  |        |          |                                  |  | $                                                       |     |                           |  |  |     |  |  |   |         | 
|Outstanding at March 31, 2011  |  |        | 8,729,734 |                                  |  | $                                                       | 0.00 |                           |  |  | 4.7 |  |  | $ | 523,784 | 
|Exercisable at March 31, 2011  |  |        | 8,729,734 |                                  |  | $                                                       | 0.00 |                           |  |  | 4.7 |  |  | $ | 523,784 | 



NOTE 12.  INCOME TAXES

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

|                                           |  |                              |         |      |   |         |  
|------------------------------------------ |  | ---------------------------- | ------- | ---- | - | ------- | -
|                                           |  | Three Months Ended
March 31, |        
|                                           |  | 2011                         |         | 2010 |  
|Current:                                   |  |                              |         |      |   |         |  
|Federal                                    |  | $                            |        |      | $ |        |  
|State                                      |  |                              |        |      |   |        |  
|                                           |  |                              |         |      |   |         |  
|Deferred:                                  |  |                              |         |      |   |         |  
|Federal                                    |  |                              | 63,443  |      |   | (38,320 | )
|State                                      |  |                              | 8,157   |      |   | (4,927  | )
|                                           |  |                              |         |      |   |         |  
|Increase in Valuation allowance            |  |                              | (71,600 | )    |   | 43,247  |  
|                                           |  |                              |         |      |   |         |  
|Total provision (benefit) for income taxes |  | $                            |        |      | $ |        |  





14



---

XENACARE HOLDINGS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 12.  INCOME TAXES (Continued)

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

|                                              |  |                              |       |      |  |       |  
|--------------------------------------------- |  | ---------------------------- | ----- | ---- |  | ----- | -
|                                              |  | Three Months Ended
March 31, |      
|                                              |  | 2011                         |       | 2010 | 
|Expected provision(benefit) at statutory rate |  |                              | 35.0  | %    |  | 35.0  | %
|State taxes                                   |  |                              | 4.5   | %    |  | 4.5   | %
|Valuation allowance for Net Loss              |  |                              | -39.5 | %    |  | -39.5 | %
|                                              |  |                              |       |      |  |       |  
|Total provision (benefit) for income taxes    |  |                              | 0.0   | %    |  | 0.0   | %



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

|                                  |  |                |            |                   |   |            |  
|--------------------------------- |  | -------------- | ---------- | ----------------- | - | ---------- | -
|                                  |  | March 31,
2011 |            | December 31,
2010 |  
|Deferred tax assets:              |  |                |            |                   |   |            |  
|Net operating loss carry-forwards |  | $              | 4,982,374  |                   | $ | 4,910,774  |  
|                                  |  |                |           |                   |   |           |  
|Total deferred tax assets:        |  |                | 4,982,374  |                   |   | 4,910,774  |  
|Valuation allowance               |  |                | (4,982,374 | )                 |   | (4,910,774 | )
|Net deferred tax assets           |  | $              |           |                   | $ |           |  



As of March 31, 2011 and December 31, 2010 the Company had a valuation allowance on its deferred tax assets of $4,982,374 and $4,910,774, respectively.  The increase of $71,600 in 2011 and $1,338,335 in 2010 were attributable to accumulated net operating earnings or losses.

As of March 31, 2011 and December 31, 2010, the Company had net operating loss carry-forwards of $11,723,370 and $11,542,104, respectively. Unused net operating loss carry-forwards will expire at various dates beginning 2020.

As of March 31, 2011 and December 31, 2010, the Company had no unrecognized tax benefit and accordingly no related accrued interest or penalties.

NOTE 13.  SUPPLIER CONCENTRATION

Our CobroxinTM product, are sold under an exclusive long-term marketing and distribution agreement from the manufacturer, however we do not possess rights to the formulation. Should the manufacture fail, for any reason to produce the product in the quantities we require, our business may be adversely affected.

NOTE 14. – CUSTOMER CONCENTRATION

Our CobroxinTM products comprise essentially all of sales in 2010 and are sold both to retail customers directly and to retailers, grocery and pharmacies. Our products are sold to two significant retailers, who account for 72.24% and 15.63, respectively, of our sales during the year ended December 31, 2010. Our sales are made under cancellable agreements. A loss of either of these key customers, for any reason, could adversely affect our business.

NOTE 15.  SUBSEQUENT EVENTS

The Company received a letter from counsel for Nutra Pharma Corp. terminating its distribution agreement for Cobroxin effective April 10, 2011. The Company does not believe that such termination was valid and intends to vigorously pursue its rights in this matter.



15



---





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 unaudited condensed financial statements and accompanying notes to help provide an understanding of our financial condition, changes in financial condition and results of operations. It 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. Managements discussion and analysis of financial condition and results of operations is organized as:

| |   |                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | 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.
| | · | Overview and Operations. This section discusses our product offering, the business environment and the regulatory environment we operate in.                                                                                                                                                                 
| | · | Recent accounting pronouncements. This section provides an analysis of relevant recent accounting pronouncements issued by the FASB and the effect of those pronouncements.                                                                                                                                  
| | · | Critical accounting policies and estimates. 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 relative to the comparative prior year period presented in the accompanying 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.                                                                                                                                  



Caution Concerning Forward-Looking Statements

This quarterly report on Form 10-Q (Report) contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements, including any statements relating to future actions and outcomes including but not limited to prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expense trends, future interest rates, outcome of contingencies and their future impact on financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as "expects," anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," may, will, should, contemplates, predicts, potential, or continue or variations and/or the negative of these similar terms. Forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company, us, our future performance, our beliefs and our Management's assumptions. All forward-looking statements made in this Report, including any future written or oral statements made by us or on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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



16



---





Overview and Operations

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 protective nutrition supplement products (NSPs) as well as homeopathic medication, detoxification and pet care products.

Our Clinical NSP products group includes our proprietary formulations - XenaCor, XenaTri and XenaZyme Plus, which will 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, SunPillTM, is formulated to protect the skin when exposed to damaging ultraviolet rays. However, during the third quarter of 2010, we had the product reevaluated and as a result were able to extend the shelf life for an additional two years. We are currently in negotiations with a distributor in Cypress to assume the entire line for distribution in the European market. We believe that we will able to recover our product costs however because of certain delays in consummating the Cypress sale we have fully impaired the inventory in fourth quarter of 2010.

Our Homeopathic Medication product line is led by Cobroxin. Cobroxin is the first opiate and acetaminophen-free pain reliever available as an over-the-counter formulation clinically proven to treat moderate to severe (Stage 2) pain. Available in a topical gel that relieves pain associated with joints, repetitive stress and arthritis, and in an oral spray that is formulated to relieve lower back pain, migraines, neck aches, shoulder pain, cramps and neuralgia, CobroxinTM is derived from cobra venom.

Our new Pet Care product line is led by EstraPetTM. On September 8, 2010, XenaCare Holdings entered into an exclusive agreement with Dr. Phillip Schoenwetter whereby XenaCare gained all rights to the trademark EstraPetTM; to the domain www.estrapet.com and to the United States Patent Pending under the caption "Treatment for Domestic Animals Having Sex Hormone Deficiencies using Soy Germ Isoflavones". EstraPetTM answers the need for treating the unintended consequences caused by spaying and neutering and is the only known natural hormone modulator available on the market today.

We have existing agreements for manufacturing, packaging and distribution and fulfillment of our products. We have also engaged 205 broker/consultants to assist us in marketing, web hosting and the development and production of infomercials.

Most of our revenues have been generated from the sales of Cobroxin through our established distribution channels, direct response, catalogs, mass food and drug retailers, online and through infomercials.

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

Our Global International us, Inc. We are planning to expand our operations into key real estate initiatives. Through our wholly owned subsidiary, Global International us, Incorporated, we plan to acquire, reposition and resell distressed properties in Central Florida, with a primary focus on acquiring hospitality projects near the Disney World Resort complex. We have assembled a team of experienced real estate and financial professionals with years of experience to manage this division.

History

While the Company was organized in 2005, its predecessor, XenaCare LLC was organized in 2001. Thereafter, the Company entered into an exchange agreement with certain members of XenaCare LLC and such members exchanged their interest in XenaCare LLC for an aggregate of 800,000 shares of XenaCare Holdings, Inc. common stock, which represented a value of $1,600,000.

In August 2008, XenaCare entered into a Share Exchange Agreement and Plan of Reorganization with Sun Packing, Inc. (Sun) Wallisville Partners, Ltd and Jon Grossman and Peter Elston, shareholders of Sun, in which XenaCare would have received 100% of the outstanding shares of Sun in exchange for 33.8% of XenaCares outstanding common shares on a fully diluted basis. XenaCare borrowed approximately $977,000 from Sun Packing, Inc. On January 4, 2009, XenaCare received notice from Jon Grossman, Chairman of Sun, to terminate the Share Exchange Agreement and Plan of Reorganization. Sun claimed a right to terminate due to Suns inability to receive consent from its lender, Frost Bank of Houston, Texas, to complete the business combination.



17



---





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

In May 2009, Nutra-Pharma, Inc. awarded to XenaCare the US marketing rights to Cobroxin. Nutra-Pharma is a biotechnology company that is developing treatments for adrenomyeloneuropathy, HIV and multiple sclerosis. Cobroxin is the first opiate and acetaminophen-free pain reliever available as an over-the-counter formulation clinically proven to treat moderate to severe (Stage 2) pain. The Company has sales agreements with many major retailers.

In September 2010, XenaCare Holdings entered into an exclusive agreement with Dr. Phillip Schoenwetter whereby XenaCare gained all rights to the trademark EstraPetTM; to the domain www.estrapet.com and to the United States Patent Pending under the caption "Treatment for Domestic Animals Having Sex Hormone Deficiencies using Soy Germ Isoflavones". EstraPet answers the need for treating the unintended consequences caused by spaying and neutering and is the only known natural hormone modulator available on the market today.

During the third quarter of 2010, the Company entered into a new image marketing and branding agreement with Creative Management, Inc. and a companion spokesperson agreement with Dr. Bob Arnot, a nationally known medical and news correspondent. The terms of the agreements provide for image marketing and branding services for 36 months. The contract was prepaid through the issuance of 500,000 common shares valued at $.12 each, the fair value of the shares at the execution of the agreement.

Operations

Homeopathic Medication

The present focus of the Company is the sale of Cobroxin. On May 26, 2009 XenaCare was awarded the US marketing rights from Nutra-Pharma, Inc. Cobroxin is the first over-the-counter pain reliever clinically proven to treat chronic pain. Cobroxinis available as an oral spray for lower back pain, migraines, neck aches, shoulder pain, cramps and neuralgia, and as a topical gel for repetitive stress, arthritis and joint pain. Cobroxinis a derivative of cobra venom is all-natural, non-addictive, non-narcotic, non-opiate, long lasting and in some clinical tests proven to be more effective than morphine.

XenaCare is supporting its fast-growing network of retailers carrying Cobroxin with a comprehensive multi-million dollar national advertising campaign that includes direct response, print media, television commercials and national sponsorship programs. We market and distribute our products through a variety of retail outlets, including chain drug stores, independent pharmacies, grocery chains, mass marketers, catalog companies and e-commerce sites. Cobroxin was marketed through Internet sales during the last quarter of 2009, and in 2010 the product has been accepted by 40% of the 105,000 retail stores (as reported in the trade publication, Chain Drug Review) selling healthcare products across the country. Analgesic products average 21 inventory turnovers per year and are among the fastest sellers in drug stores. In Q111-YTD, two customers represented 72.24% and 15.63% of sales.

XenaCare has purchased advertising in a comprehensive array of mens, womens and specialty magazines. The ads made their debut in November 2009 and in the first quarter of 2010 generated about 108 million reader impressions. Cobroxin will also be featured through the distribution of 18 million retail catalogs throughout the US.

Additionally, the Company is authorized to use the American Arthritis Foundations logo on packaging, Websites, Customer websites and to send out direct mailings to 100,000 Arthritis foundation members. XenaCare Holdings advertised in the 2010 Super Bowl XLIV Game Program, the NFL Alumni Guide program and Yearbook, and in the 2010 NBA All-star as well as in the official annual publication of NASCAR that was seen by 8,000,000 attendees. XenaCare is also advertising in Prevention, Arthritis Today, Shape, Allure, Womans Day, Mens Journal, Martha Stewart Living and Redbook. Television commercials were also successfully market-tested in the third quarter of 2010. XenaCare has also contracted to publish Cobroxin advertisements in 2010 Major League Baseball (MLB) yearbooks. The advertisements are scheduled to run in the yearbooks of 6 major league cities, including the New York Mets, the Los Angeles Dodgers and the Chicago Cubs, and represents approximately seven times the viewership of that of the NCAA advertising campaign.In addition to its marketing campaigns, XenaCare is participating in an athletic sponsorship with Megan Walling, a professional beach volleyball player on the AVP Tour. Megan, a Florida native, has proven to be a strong force on the sand and in the world of business and has had six professional wins and 10 finals appearances in 2009; she also competed



18



---





against the two-time gold medalists from the 2004 Athens Olympics and 2008 Beijing Olympics. Her goal 2010 is to make the U.S. Olympic, Megan is rated #1 in Florida and in the top 30 in the world.

Cobroxin is available to independent pharmacy owners through membership in the Chain Drug Marketing Association (CDMA), one of the largest pharmacy organizations representing more than 6,000 outlets in 32 states. Additionally, Cobroxin is sold through most major drugstore chains, mass marketers, Cardinal Wholesale, a $100/B health care distributor, and food giants, as well as online at: Cobroxin.com, Amazon.com, Overstock.com and Drugstore.com. More than 200 brokers also Market Cobroxin through retail outlets.

During the first quarter of 2010, the Company entered into agreements for the sale of Cobroxin through major retail outlets. Although some of the retailers listed have not yet ordered product at the filing of this report, agreements are in place for all of them. These agreements do not require the customers to purchase any particular amounts of the product.

|                                |                      
|------------------------------- | ---------------------
|AMAZON.COM                      | AMERIMARK            
|BENCHMARK                       | CARDINAL WHOLESALE   
|CDMA                            | CVS                  
|DERMADOCTOR                     | DR. LEONARDS\       
|DRUG EMPORIUM                   | DRUGSTORE.COM        
|DUANE READE                     | EVITAMINS            
|HARDTOFIND BRANDS               | HD SMITH             
|HEALTHY PETS                    | IMPERIAL DISTRIBUTORS
|JOHNSON SMITH                   | KERR DRUG            
|KINNEY DRUG                     | MAX-WELNESS          
|MEIJER                          | NATURAL HEALTH CENTER
|MUTUAL DRUG CO.                 | OVERSTOCK.COM        
|UNIVERSAL DIRECT (SUPPORT PLUS) | QUICK2YOU            
|VALUE DRUG                      | VITAMIN/PURITAN PRIDE
|WALGREENS                       | WINN DIXIE           



Pet Care

EstraPetTM is a treatment for domestic animals having sex hormone deficiencies utilizing patent pending process of Soy Germ Isoflavones. EstraPetTM answers the need for treating the unintended consequences caused by spaying and neutering and is the only known natural hormone modulator available on the market today.

Protective NSP

During 2010 the Company has been attempting the liquidation of this merchandize along with any bulk product, however as a result of delays in consummating a final sale, the Company has fully impaired the SunPill® inventory, even though the SunPill® inventory has been retested and the shelf life has been extended for two years.

Clinical NSP

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

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



19



---





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

| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | · | XenaCor: the lowering of serum cholesterol, C-reactive protein and homocysteine levels. This product was designed to support cardiovascular health.
| | · | XenaTri: the lowering of triglycerides and raising of HDL. This product was designed to support cardiovascular health.                             
| | · | XenaZyme Plus: increases the body’s oxygen carrying capacities. This product was designed to support digestion.                                    



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

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. Our primary product Cobroxin is supplied to us under an exclusive distribution agreement from its manufacturer, who owns the formulation. Among other arrangements, the distribution agreement grants the company exclusive distribution rights in the US market provides in exchange for the commitment to purchase $250,000 of product per quarter. To the extent the manufacturers should discontinue their relationship with the Company, sales could be adversely impacted. The Company believes at the present time it will be able to obtain the quantity of products and supplies it will need to meet orders.

There is a dispute with the manufacturer which has attempted to terminate the distribution agreement effective April 11, 2011. The Company does not believe that such termination was valid and intends to vigorously pursue its rights in this matter.

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

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. Our personal performance products compete against a number of well-known brands. We are unaware of any competitors for our replenishment products, as these products are in their infancy. As the Companys sales grow, competitors may attempt to introduce products that compete directly against our products. Our failure to adequately respond to the competitive



20



---





challenges faced by the products it offers could have a material adverse effect on its business, financial condition and results of operations.

Proprietary Rights

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

Trademarks Owned by XenaCare

| |    |             |                                                                     
| | -- | ----------- | --------------------------------------------------------------------
| | 1. | B-ALERT     | Registered with USPTO, Registration # 3,251,557                     
| | 2. | SUN PILL    | Registered with USPTO on 10/31/2006, Registration# 3,166,408        
| | 3. | SUN PILL    | Registered under Madrid Protocol on 3/2/2006, Registration # 888,076
| | 4. | UV DEFENSE  | Pending with USPTO, Serial Number 78/564,974                        
| | 5. | SUN DEFENSE | Pending with USPTO, Serial Number 78/564,985                        
| | 6. | UV ORGANICS | Pending with USPTO, Serial Number 78/865,855                        



Governmental Regulation

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

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

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

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

| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| | · | The identification of dietary or nutritional supplements and their nutrition and ingredient labeling;                                         
| | · | requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support;                    
| | · | labeling requirements for dietary or nutritional supplements for which “high potency,” “antioxidant,” and “trans-fatty acids” claims are made;
| | · | notification procedures for statements on dietary and nutritional supplements; and                                                            
| | · | pre-market notification procedures for new dietary ingredients in nutritional supplements.                                                    



21



---





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

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

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

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

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

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

Labor Force

XenaCare employs six people. In addition, the Company utilizes the services of several consultants on a regular basis. We have 205 brokers who are commissioned salespeople in the field, under a three-year contract. We have a distribution center on a contractual basis, with 180 employees. XenaCare projects that during the next 12 months, its work force is likely to increase.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Companys discussion and analysis of its financial condition and operating results require the Companys management to make judgments, assumptions, and estimates that affect the amounts reported in its Financial Statements and the accompanying notes. Note 2, Summary of Significant Accounting Policies of this Form 10-Q and the Notes to Consolidated Financial Statements in the Companys 2010 Form 10-K describes the significant accounting policies and methods used in the preparation of the Companys Consolidated Financial Statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.



22



---





Management believes the Companys critical accounting policies and estimates are those related to revenue recognition, accounts receivable and allowance for doubtful accounts, inventory valuation and income taxes. Management considers these critical policies because they are both important to the portrayal of the Companys financial condition and operating results and they require management to make judgments and estimates about inherently uncertain matters.

Recent Accounting Pronouncements

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are discussed in Note 2 Summary of Significant Accounting Policies in the notes to the interim unaudited condensed financial statements included in this filing.

Results of Operations

Comparison of the three months ended March 31, 2011 (Q111-YTD) to the three months ended March 31, 2010 (Q110-YTD)

Net Revenues - Total net revenues decreased $497,614 or 55.6%, to $397,873 (Q111-YTD) from $895,487 (Q110-YTD). We began redirected our efforts and allocated available resources to concentrate on the marketing, promotion and distribution of Cobroxin commencing in the third quarter of 2009. That initial effort was directed primarily to internet based marketing directly to consumers. During the fourth quarter of 2009 and on into the current quarter, we began phase two of our marketing strategy which expanded our focus to retailers in the food and drug industry. In the first quarter of 2010 we have added a significant number of retailers, catalogs and drug chains as customers, as discussed above. After the initial rollout in late 2009 and early 2010, we shifted our marketing and promotional efforts from principally specific market campaigns in general circulation print media to in-store promotions at our principal retailers. Accordingly, we accounted for our promotional efforts in Q111-YTD as marketing allowance reductions from sales whereas general market campaigns engaged in during Q110-YTD were charged to selling and marketing expense. This change in our advertising direction and accordingly our difference in accounting for the advertising accounted for $205,000 of the reduction in net sales. The remaining decrease was a result of delays in scheduled shipments as our customers balanced and adjusted their inventory levels after the year-end holiday season.

Cost of Revenues - Total cost of revenues also decreased $88,359 or 32%, to $188,049 (Q111-YTD) from $276,408 (Q110-YTD). The decrease is directly related to gross sales volume decreases discussed above.

Selling and Marketing Costs - Selling and marketing costs decreased $202,659 or 54.7%, to $167,601 (Q111-YTD) from $370,260 (Q110-YTD). The decrease in selling and marketing expenses is primarily due to change in our advertising and marketing campaigns which resulted in different a accounting treatment as discussed above.

General and Administrative Costs - General and administrative costs decreased ($1,759) or 1.8%, to $97,928 (Q111-YTD) from $99,687 (Q110-YTD). The decrease in general and administrative expenses is nominal on a net basis but is primarily related to increases in compensation which was offset by reductions in professional fees and office expenses.

Other Income(Expense) - Other income(expense) increased $85,914 or 216.7% to ($125,561) (Q111-YTD) from ($39,647) (Q110-YTD). The increase in other expense is related primarily to interest expense associated with increased debt.

Net Income(Loss) - Net income(loss) increased $290,751 or 265.6% to ($181,266) (Q111-YTD) from $109,485 (Q110-YTD). The increase in net income(loss) is primarily related to substantial advertising and marketing expense as our result of our efforts to continue to promote the Cobroxin brand.

Liquidity and Capital Resources

Overview

We generated a net loss for the three months ended March 31, 2011 of $181,266 and had a deficit in working capital of $3,143,813 at March 31, 2011. Our loss is primarily the result of our continuing investment in advertising to build and support the Cobroxin brand. We believe that we have achieved a successful launch of our Cobroxin product and that its acceptance in the market place will continue to expand. Although we have raised approximately $2,500,000 in capital to implement our Cobroxin launch, we understand that we will need even more capital to continue to promote, acquire and support logistics



23



---





as our market penetration expands. For these reasons, specifically, limited track record of profitability and continued demand for capital to implement our Cobroxin product strategy, our ability to continue as a going concern is still in doubt.

Based on our current plans, we anticipate that revenues earned from Cobroxin 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 our 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 continue to be generated from product sales to cover our expenses. These revenues from product sales together with proceeds from private fundings 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, 2011 there were no commitments for long-term capital expenditures other than those discussed in Note 7 to the quarterly financial statements.

Cash Flows for the three months ended March 31, 2011

Our cash and cash equivalents increased $17,748 to $28,263 as of March 31, 2011 from $10,515 as of December 31, 2010.

Cash Flows from Operating Activities

Operating activities used net cash for Q111-YTD of $77,849. Net cash used resulted from a net loss of approximately $169,699, after adjustment for various items which impact net income but do not impact cash during the period, such as depreciation and stock issued related to services. Partially offsetting the net cash used by operating activities was net cash provided by a net change in working capital components of $91,850. The most significant working capital component changes were:

| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| | · | a ($210,050) increase in accounts receivables which used as a result of a slowing in receivables collection,
| | · | a $188,049 decrease in inventory as a result of timing of shipments by our customers,                       
| | · | a $37,154 decrease in prepaid expenses and                                                                  
| | · | a $76,697 increase in accounts payable as a result of increased supplier financing.                         



Cash Flows from Investing Activities

We had no cash flows from investing activities for Q111-YTD.

Cash Flows from Financing Activities

Our financing activities provided net cash of $95,597 for Q111-YTD. We raised approximately $67,875 in advances in the form of notes, which we repaid $37,778. We also received $15,500 in advances from related parties and $50,000 for the sale of common shares.

Financial Position

Our total assets decreased $118,654 to $1,421,940 as of March 31, 2011 from $1,540,594 as of December 31, 2010.

Most of the increase, $88,404 or 74.5% was from changes in our current assets which are described above in the discussion of cash flows from operating activities as it relates to net changes in working capital components. The remainder of the increase resulted from changes in other assets primarily associated with a change in a $29,000 claim from long term to current.

Borrowings Outstanding

As of March 31, 2011, we had borrowings of $3,787,071, which are discussed more fully in Note 6. However, most of our financing has come from private sources who are also shareholders in the Company. We also obtained financing from a potential merger partner, specifically $977,000 from Sun Packing, Inc. also discussed in Note 6. We do have a $10,000 available credit line from Wachovia which



24



---





was intended to establish a commercial banking relationship, however given its limit, we currently consider this facility to be nominal.

During the third quarter of 2010 the Company entered into a factoring agreement covering certain of its accounts receivable. The agreement provides for factoring at 85% of its face value and collection is subject to recourse. As of March 31, 2011, the Company had borrowings of $315,349 outstanding under the factoring agreement.

Material Commitments, Expenditures and Contingencies

We had no outstanding purchase commitments to purchase raw materials as of March 31, 2011. Our distribution and marketing agreement with the manufacturer of Cobroxin contains certain performance criteria, which the Company has satisfied. We believe that a minimum of an additional $1,000,000 will be needed over the next 3 months to continue the successful launch of the Cobroxin product based on purchase orders and commitments received.

Dividends

We have not paid any dividends.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.

CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures as of March 31, 2011. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that due to material weaknesses in our internal control over financial reporting the disclosure controls and procedures were not effective as of March 31, 2011.

No change in internal control over financial reporting occurred during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect internal control over financial reporting.



25



---





PART II  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None

ITEM 1A.

RISK FACTORS

There have been no material changes during the period ended March 31, 2011 in our risk factors as set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010.

A dispute with the supplier of Cobroxin could result in our inability to purchase such product. The Company received a letter from counsel for Nutra Pharma Corp. terminating its distribution agreement for Cobroxin effective April 10, 2011. The Company does not believe that such termination was valid and intends to vigorously pursue its rights in this matter. If we were to be unable to purchase additional Cobroxin inventory in the future this could have a materially adverse impact on our results of operation and financial position.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Common Stock

During the first quarter of 2011, we sold 833,000 shares of our common stock to an accredited investor for $50,000. No broker dealer was involved in the sale of the shares and no commissions or other remuneration was paid in connection with the sale. The shares were issued in a private placement to an accredited investor pursuant to an exemption from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof and Rule 506 of Regulation D. The shareholder who received the forgoing shares signed a subscription agreement acknowledging that the shares were not registered under the Securities Act of 1933, and could only be sold under a registration or exemption from registration. Each certificate for such shares contains a restrictive legend concerning the foregoing restrictions on transfer and a stop transfer order has been lodged against such shares. The investor was offered access to our books and records and the opportunity to ask our officers questions and receive answers concerning the terms and condition of the offering and the company. Additionally, during the first quarter of 2011, we cancelled 1,045,662 shares of our common stock upon termination of our funding agreements.

Preferred Stock

During the first quarter of 2011, there were no transactions of preferred stock.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

|     |                                                                                                
|---- | -----------------------------------------------------------------------------------------------
|No.  | Description                                                                                    
|31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
|31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.    
|32.1 | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
|32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.    



26



---





SIGNATURES

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

Date: May 23, 2011

| |                         |                        
| | ----------------------- | -----------------------
| |                         |                        
| |                         |                        
| | Xenacare Holdings, Inc.
| | By:                     | /s/ Frank Rizzo        
| |                         | Frank Rizzo            
| |                         | President/CEO          
| |                         |                        
| | By:                     | /s/ Bobby Story        
| |                         | Bobby Story            
| |                         | Chief Financial Officer







27