Summary of XENACARE HOLDINGS, INC.

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

Introduction

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

Terms and Definitions

Company

"XenaCare", "XC Holdings", "we", "us" or "our"

APB

Accounting Principles Board

ARB

Accounting Review Board

EITF

Emerging Issues Task Force

FASB

Financial Accounting Standards Board

FSP

FASB Staff Position

FIFO

First-in, First-out

SAB

Staff Accounting Bulletin

SEC

Securities Exchange Commission

SFAS or FAS

Statement of Financial Accounting Standards

NSP

Nutrition Supplement Product

Q108

Three Months Ended March 31, 2008

Q109

Three Months Ended March 31, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We purchase all of our products and supplies from third-party sources. We have no long-term contracts, as purchases are made on an order-by-order basis. In the event that a current manufacturer is unable to meet our manufacturing and delivery requirements at some time in the future, we may suffer short-term interruptions of delivery of certain products while we establish an alternative source.

Clinical NSPs

Our line of Clinical NSPs seek to shift a portion of current consumer "out-of-pocket" spending on ineffective and/or incomplete self-care and healing products, obtained through a myriad of retail and Internet distribution systems. Our Clinical NSPs provide consumers with access to proprietary nutritional supplements and supplement nutrient depletion resulting from the use of certain prescription pharmaceuticals. We also plan to sell and distribute these products through pharmacies and other distribution outlets as well as through infomercials and a book authored by Dr. Xenakis, Chairman of the Board, to promote our Clinical NSPs.

XenaCor, XenaTri and XenaZymePlus are specifically formulated to support and help maintain patient healthcare for many risk factors, including those related to homocysteine levels, lipid control, blood flow and blood pressure. These NSPs are formulated under the guidelines of the Food and Drug Administration ("FDA") and its regulation of the Nutritional supplement and Health Education Act. However, while the FDA regulates the nutritional supplement industry, no approvals by the FDA are required for our products.

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

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

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

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

We believe these NSPs significantly differentiate themselves from our competition including self-help vitamin and herbal product manufacturers and distributors. These NSPs are formulated to support the delivery of measurable subjective (improved medical history) and/or objective (laboratory results) effects

regardless of what other medications or supplements the patient is taking. We believe that these NSPs support significant positive health actions and outcomes without deleterious adverse side effects. The Company does not diagnose nor treat diseases. Our products are only formulated to support and maintain an individual's health and well being.

Body Replenishment Systems ("BRS") formulations provide patients access to NSPs that combat prescription drug induced nutrient depletion problems widely recognized by both consumer and clinician. As stated in The Drug-induced Nutrient Depletion Handbook, second edition (2003) by Ross Pelton et al., "16 of the top 20 drugs are associated with drug/nutrient interaction." BRS formulations focus on replacing prescription drug depleted nutrients and position themselves as extensions to the primary Clinical NSPs. We believe that BRS formulations will not compete with our historical Clinical NSPs as our historical Clinical NSPs specifically support disease treatment. We also believe that BRS formulations will meet a high revenue opportunity without affecting current revenue generating Clinical NSPs. The BRS formulations will be marketed and sold through the same outlets as our other Clinical NSPs. This strategy has no effect on the current and future operations of our other Clinical NSPs.

Presently twelve new formulations have been designed and manufactured for consumers being treated with prescription drugs for high blood pressure, heart disease, diabetes, ulcers, depression, infection, arthritis, aids and weight loss. BRS intends to utilize toll free telephone and virtual computer linkups, using the same marketing and sales practices as our current Clinical NSPs operations. We believe BRS is a natural supplementation for prescription induced nutrition depletion and is necessary and important for positive patient health outcomes. As part of our marketing program, Dr. Xenakis, our CEO and chairman, wrote a book titled, "When Good Medicines do Bad Things to Healthy Bodies" in 2006. In addition, an infomercial featuring Dr. Xenakis is being produced to educate the consumer on the depletion of nutrients by the use of prescription drugs.

Lifestyle Performance NSPs

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

Protective NSPs

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

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

Spokesperson Agreement

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

Formulation of NSPs

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

multiple trademark protection on certain service marks currently in commerce. We have historically expensed our formulation costs and do not have any separately itemized research and development expenses.

Manufacturing and Supplies

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

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

New Material Agreements

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

Competition

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

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

Proprietary Rights

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

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

Governmental Regulation

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

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

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

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

notification procedures for statements on dietary and nutritional supplements; and

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

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

In certain markets, including the United States, specific statements made by us with respect to our products may change the regulatory status of a product. For example, a product sold as a nutritional supplement but marketed as a treatment, prevention, or cure for a specific disease or condition would likely be considered by the FDA or other regulatory bodies as unapproved and asked to be removed from the market. To maintain the product's status as a nutritional supplement, the labeling and marketing must comply with the provisions in the Dietary Supplement Health and Education Act of 1994 (DSHEA) and the FDA's extensive regulations. As a result, we have procedures in place to promote and enforce compliance by our employees related to the requirements of DSHEA, the Food, Drug and Cosmetic Act, and various other regulations. Because of the diverse scope of regulations applicable to our products, and the varied regulators enforcing these regulatory requirements, determining how to conform to all requirements is often open to interpretation and debate. As a result, we can make no assurances that regulators will not question any of our actions in the future, even though we have put continuing effort into complying with all applicable regulations.

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

Regulators such as the Federal Trade Commission (FTC) regulate marketing practices and advertising of a company and its products. In the past several years, regulators have instituted various enforcement actions against numerous nutritional supplement companies for false and/or misleading marketing practices, as well as misleading advertising of certain products. These enforcement actions have resulted in consent decrees and significant monetary judgments against the companies and/or individuals involved. Regulators require a company to convey product statements clearly and accurately, and further require marketers to maintain adequate substantiation for their statements. The FTC requires such substantiation to be competent and reliable scientific evidence. Specifically, the FTC requires a company to have a reasonable basis for the expressed and implied product statement before it disseminates an advertisement. A reasonable basis is determined based on the statements made, how the statements are

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

Caution Concerning Forward-Looking Statements

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

Recent Accounting Pronouncements

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

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

Interim Disclosures about Fair Value of Financial Instruments

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

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

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

disclosures for assets and liabilities arising from contingencies in business combinations. This FASB Staff Position eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in Statement 141(R) and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141(R)-1 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. FSP
141(R)-1 had no impact on our financial position or results of operations and financial condition, since we have not had any business combinations closing on or after the January 1, 2009 effective date.

Critical Accounting Policies

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

Results of Operations

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

Net Revenues Total net revenues increased $14,231 or 32.3%, to $58,224 (Q109) from $43,993 (Q108). Our efforts redirecting and allocating available resources to concentrate on the distribution of the SunPill™, a defense system that protects the skin from the damaging effects of the sun, and the distribution of AlGal, a tasteless, odorless form of Omega 3 fatty acid, which is used as a food additive has began to yield results. No sales from AlGal products were generated in Q109 however the bulk of our increase in revenue was generated by sales of the SunPill™. We will continue to market our proprietary Clinical NSPs - XenaCor, XenaTri and XenaZymePlus distributed through the mail to our existing customer base.

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

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

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

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