Liabilities and Shareholders' Equity

Liquidity and Capital Resources

Our independent registered public accounting firm has issued a going concern opinion on our audited financial statements for the fiscal year ended December 31, 2008 since we have experienced recurring net losses and at December 31, 2008 have a working capital deficiency. Further, as stated in Note 1 to our consolidated financial statements for the year ended December 31, 2008, we have experienced significant losses from operations totaling $164,951 and $4,162,108 for the years ended December 31, 2007 and 2008, respectively and had an accumulated deficit of $24,271,202 for the period from our inception to December 31, 2008. We had a working capital and stockholders' deficit at December 31, 2008 of $2,574,408 and $2,556,334, respectively. Our operations have been largely reliant upon receiving loans from our Chief Executive Officer. At December 31, 2008 and at April 10, 2009, we were indebted to our Chief Executive Officer in the amount of $1,255,448 and $1,544,448, respectively, the funds of which have enabled us to continue our operations. Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

Uncertainties and Trends

Our operations and possible revenues are dependent now and in the future upon the following factors:

· Whether we successfully develop and commercialize the products from our research and development activities.

· If we fail to compete effectively in the intensely competitive biotechnology area, our operations and market position will be negatively impacted.

· If we fail to successfully execute our planned partnering and out-licensing of products or technologies, our future performance will be adversely affected.

· The recent economic downturn and related credit and financial market crisis may adversely affect our ability to obtain financing, conduct our operations and realize opportunities to successfully bring our technologies to market.

· Biotechnology industry related litigation is substantial and may continue to rise, leading to greater costs and possible unpredictable litigation.

· If we fail to comply with extensive legal/regulatory requirements affecting the healthcare industry, we will face increased costs, and possibly penalties and business losses.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements that would have any current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Pending adequate financing, we plan on spending total estimated expenses of $2,575,000 for the next 12 months, which will include: (a) $380,000 pertaining directly to our operations; (b) $120,000 pertaining to the operations of our subsidiary, Designer Diagnostics and (c) $2,075,000 pertaining to the operations of our subsidiary, ReceptoPharm. Our Plan of Operations does not involve: (a) any expected purchase or sale of a plant or significant equipment; and/or (b) any expected significant changes in the number of our employees.

EXPENSES PERTAINING TO OUR OPERATIONS

                                                                  Total            Monthly
Type of Expenditure                                             Expenditure       Expenditure

Salaries*                                                      $     175,000     $      14,583

Travel related expenses for our Chief Executive Officer
pertaining to research and due diligence                              40,000             3,333

Professional Fees -Legal and Accounting                              165,000            13,750

Total                                                          $     380,000     $      31,666

* Salaries include the following: (a) Chief Executive Officer - $130,000; and
(b) Administrative Assistant - $45,000

FUNDING OF RECEPTOPHARM, INC.

                                                                  Total           Monthly
Type of Expenditure                                            Expenditure       Expenditure

Salaries                                                       $    350,000     $      29,167

Clinical Trial expenses                                           1,045,000            87,083

R & D Expenses                                                      394,000            32,833

Cost of raw materials and production                                236,000            19,667

Operating Expenses (Rent, Supplies, Utilities, etc..)                50,000             4,167

Total                                                          $  2,075,000     $     172,917

FUNDING OF DESIGNER DIAGNOSTICS, INC.

                                                     Total           Monthly
Type of Expenditure                               Expenditure      Expenditure

Operating Expenses (Rent, supplies, utilities)   $      50,000      $      4,167
Salaries (President)                                    70,000             5,833
Total:                                           $     120,000      $     10,000

To date, we have accomplished the following in our Plan of Operations:

In approximately October 2005, we completed pre-clinical studies with various companies that ReceptoPharm has agreements with pertaining to ReceptoPharm's Multiple Sclerosis (MS) and HIV drugs, which consist of (a) and (b) below:

(a) MS Drug under Development (RPI-78M) - ReceptoPharm conducted microarray and histoculture studies and related analysis of the cells of Multiple Sclerosis patients to ascertain how RPI-78M affected the cells of these patients. Microarray analysis is the study of the gene expression of cells. Histoculture is the study of the entire cellular environment. We measured the effect of RPI-78M on gene expression using cDNA microarray technology to identify any potentially unique changes in gene expression that may be caused by RPI-78M. After statistical evaluation of the data, the researchers found more than sixty genes with significant changes in expression as compared to the control. In analyzing the affected genes, at least thirty of them may have a specific role in the progression of the disease and symptoms of MS; and

(b) HIV Drug under Development (RPI-MN) - Viral isolates are common mutations of HIV. ReceptoPharm, through an agreement with the University of California, San Diego, conducted research to study the effect of ReceptoPharm's drug under development on different viral isolates to determine the drug's efficacy in mutated forms of the HIV virus. The ability of the HIV virus to establish resistance to therapeutic drugs through genetic mutation is a major concern in the treatment of HIV/AIDS. HIV does not always make perfect copies of itself. With billions of viruses being made every day, lots of small, random differences can occur. The differences are called mutations and these mutations can prevent drugs from working effectively. When a drug no longer works against HIV, this is called drug resistance and the virus with the mutation is considered to be 'resistant' to the drug. With the increasing number of drug-resistant patients, it is of great importance in the development of new HIV/AIDS therapeutics that they will be effective against HIV of known resistance characteristics. The inhibition of multi-resistant HIV-1 strains by RPI-MN preparations was investigated at the La Jolla Institute of Molecular Medicine. The results from these trials indicate that the drug is effective against drug-resistant strains of HIV.

          ·         On January 24, 2006, we obtained NanoLogix's
                    intellectual property pertaining to the manufacture
                    of test kits for the rapid isolation, detection and
                    antibiotic sensitivity testing of certain
                    microbacteria, which includes reassignment to us of
                    11 key patents protecting the diagnostics test kit
                    technology and NanoLogix licensing to us, and the
                    remaining 18 patents that protect the diagnostics
                    test kit technology.

· In February 2006, we completed the initial funding of ReceptoPharm in the amount of $2,000,000.

· In January 2006, we established Designer Diagnostics to sell NonTuberculois Mycobacterium test kits.

          ·         Designer Diagnostics held a Continuing Medical
                    Education Seminar at the Mahatma Gandhi Institute in
                    India on March 24, 2006 during the World Stop TB
                    Day. At that meeting, Designer Diagnostics
                    officially began marketing their test kits for the
                    rapid isolation, detection and
                    antibiotic-sensitivity testing of microbacteria. In
                    March 2006, we made our first sales of Designer
                    Diagnostics' test kits.



          ·         In May of 2006, ReceptoPharm received approval from
                    the Medicines Health and Regulatory Agency (MHRA)
                    for its application of human clinical trials for the
                    treatment of Adrenomyeloneuropathy (AMN). The MHRA
                    is the medical regulatory agency within the British
                    Department of Health.



          ·         From March and April of 2006, ReceptoPharm published
                    two clinical trials on the use of their technology
                    for the treatment of pain.

          ·         In June of 2006, ReceptoPharm published the results
                    of their EAE rat model of  MS, which showed that
                    their drug, RPI-78M, had promising results in an
                    accepted animal model of the disease.



          ·         In October of 2006, ReceptoPharm received Ethics
                    Committee approval in the United Kingdom to begin
                    its Phase IIb human clinical trial for the treatment
                    of AMN. This approval allows for the late Phase
                    II/early Phase III (Iib/IIIa) trial to begin.



          ·         From November 29, 2006 to December 2, 2006,
                    ReceptoPharm presented their analgesic research on
                    RPI-78M at the International Conference on
                    Neurotoxins (ICoN) in Hollywood, Florida.



          ·         In January of 2007, we completed a series of
                    microarray studies with various companies that
                    ReceptoPharm has agreements with pertaining to
                    ReceptoPharm's anti-viral drug. The microarray
                    studies indicated that the exposure of healthy
                    immune T-cells to our antiviral drugs activates the
                    primary immune mechanisms. The expression of one
                    such immune trigger, interferon gamma, is increased
                    by as much as 20 times, acting as an effective
                    antiviral agent, but without the significant
                    negative clinical side effects of other
                    interferon-based therapies. This may explain the
                    broad antiviral activity observed with these types
                    of agents. Based upon this data, these products
                    could conceivably be used to substitute for the flu
                    shot in winter or protect against other contagious
                    viral diseases when vaccines are not readily
                    available.



          ·         In January of 2007, Designer Diagnostics received
                    positive results from its in-vitro analysis of its
                    Tuberculosis (TB) test kit. Normal culturing methods
                    can take as long as 10 weeks to produce results,
                    where Designer Diagnostics test kits have shown
                    similar results within 10 days.

· In January of 2007, ReceptoPharm began its Phase IIb human clinical trial for the treatment of AMN.

          ·         In February of 2007, ReceptoPharm expanded their
                    antiviral clinical research into Mexico and Peru
                    where RPI-MN was used in early clinical studies.
                    ReceptoPharm seeks to conduct two Phase II antiviral
                    trials each with a primary duration of 3-4 months.



          ·         In March of 2007, Designer Diagnostics engaged the
                    U.S. Commercial Service to help build international
                    sales of its diagnostic test kits.



          ·         On March 7, 2007, ReceptoPharm's signed a letter of
                    intent to create a Joint Venture with Nan gene
                    Biotechnology, a Chinese biotech company. The
                    proposed joint venture will develop the antiviral
                    drug, RPI-MN, for the Chinese market.



          ·         In March of 2007, ReceptoPharm published an article
                    in the Critical Reviews in Immunology special
                    conference issue. The article, entitled
                    "Alpha-Cobratoxin", discussed Alpha-Cobratoxin as a
                    possible therapy for Multiple Sclerosis, reviews the
                    literature leading to the development for this
                    application, and discusses the background and
                    reasoning behind ReceptoPharm's research on its
                    treatment for Multiple Sclerosis (MS).

          ·         On March 27, 2007, we completed our first licensing
                    payment on behalf of Designer Diagnostics to
                    NanoLogix for the patents protecting Designer
                    Diagnostics' test kits.



          ·         On April 11, 2007, ReceptoPharm filed a patent for
                    method of treating autoimmune diseases, including MS
                    and Rheumatoid Arthritis.



          ·         During April 2007, ReceptoPharm completed its
                    initial discussions with Zhong Xin Dong Tai Co., Ltd
                    ("Nanogene Biotechnology") to develop RPI-MN for the
                    China market. RPI-MN is ReceptoPharm's drug
                    candidate being researched for the treatment of
                    HIV/AIDS and other viral disorders. According to a
                    signed Memorandum of Understand between ReceptoPharm
                    and Nanogene Biotechnology. ReceptoPharm will need
                    to confirm safety and efficacy of RPI_MN by
                    completing pre-clinical studies at Soochow
                    University located in China. Nanogene Biotechnology
                    will provide the drug raw material and ReceptoPharm
                    will modify the products and provide the proper
                    study protocols. Upon successful completion of the
                    pre-clinical studies, ReceptoPharm and Nanogene
                    Biotechnology will proceed with clinical trials
                    aimed at gaining full regulatory approval in China.



          ·         On May 2, 2007, Designer Diagnostics announced that
                    it would conduct clinical trials for their
                    Tuberculosis and NonTuberculois Mycobacterium
                    diagnostic test kits at the National Jewish Medical
                    and Research Center in Denver, Colorado. The purpose
                    of the clinical trials are to validate the efficacy
                    of the test kits for use with Tuberculosis and
                    Non-Tubernulosis Mycobacterium patients as well as
                    for environmental testing. The clinical trials for
                    Designer Diagnostics are the final step required by
                    the FDA prior to applying for FDA regulatory
                    approval of the test kits. The studies are ongoing
                    with plans to complete testing throughout 2008.



          ·         During May 2007, Designer Diagnostics completed the
                    an upgrade of its Tuberculosis diagnostic test kits
                    enabling such the test kits to show more rapid and
                    reliable results.



          ·         During July 2007, ReceptoPharm successfully
                    completed enrollment in its phase llb human clinical
                    trial for the treatment of AMN.



          ·         In August of 2007, ReceptoPharm successful results
                    on the use of their technology for the treatment of
                    pain. The latest data demonstrated that RPI-78 was
                    as effective as morphine at blocking pain signals in
                    that part of the brain that signals the presence of
                    pain. It was also confirmed that the drug did not
                    use an opioid mechanism. Moreover, the duration of
                    RPI-78's effect was superior to morphine's.



          ·         In November 2007, the Designer Diagnostics test kit
                    technology was showcased at the 38th Union World
                    Conference on Lung Health in South Africa. The test
                    kits were used to isolate NTM from clinical samples
                    of 300 AIDS patients and for the first time ever on
                    the Indian subcontinent, M. Wolinskyi was
                    successfully isolated in clinical samples. In
                    addition, these test kits were also used for the
                    first time to isolate NTM from soil and water
                    samples collected from the environment of patients
                    with NTM disease.

· In November 2007, Designer Diagnostics was featured in an article published in the International Journal of TB and Lung Diseases. The article, which was authored by leading NonTuberculous Mycobacterium (NTM) research scientist, Dr. Rahul Narang, covered Designer Diagnostics' paraffin culture technology to isolate NTM.

· In December 2007, ReceptoPharm successfully completed its six-month patient crossover in the Phase IIb/IIIa clinical trial for the treatment of Adrenomyeloneuropathy (AMN).

· On December 27, 2007 the Company expanded its licensing agreement with NanoLogix, Inc., to include intellectual property for the use of testing the environment for NonTuberculous Mycobacterium (NTM).

· In February 2008, Designer Diagnostics started marketing the first-ever environmental test kit for the detection of Nontuberculous Mycobacteria (NTM) in water and soil.

· On April 10, 2008, we completed the acquisition of ReceptoPharm through our purchase of their remaining 61.9% interest. ReceptoPharm is now our wholly owned subsidiary and will act as our Drug Discovery division.

· During July 2008, ReceptoPharm successfully completed the Phase IIb/IIIIa clinical trial or its drug candidate for neurological and autoimmune disorders, RPI-78M as a treatment for AMN.

· During August 2008, ReceptoPharm renewed its collaborative agreement with the Centers for Disease Control and Prevention to study RPI-78M and RPI-MN for a possible therapy for Rabies.

· During August 2008, ReceptoPharm reported initial positive safety data from its Phase IIb/IIIIa clinical study of RPI-78M for treating AMN.

· During November 2008, we announced that ReceptoPharm will provide RPI-78M under compassionate release to patients previously enrolled in the Phase IIb/IIIa clinical study of AMN.

· During December 2008, we announced that ReceptoPharm has received an agreement from an Ireland based biotechnology firm, Celtic Biotech, Ltd, to provide GMP certified drug production of CB-24 for Celtic Biotech's upcoming European trial for the treatment of cancer

· After our 2008 Fiscal Year end, in February 2009, ReceptoPharm filed a patent application with the United States Patent and Trademark Office for the use of RPI-78 as a novel method for treating arthritis in humans.

· After our 2008 Fiscal Year end, in February 2009, ReceptoPharm, in collaboration with Soochow University in China published positive data from its recent animal studies on the use of RPI-78 (Cobratoxin) as a method for treating arthritis.

· After our 2008 Fiscal year end, in March 2009, ReceptoPharm's clean room manufacturing and laboratory facility achieved ISO class 5 certification from Biotec, a UK-based firm specializing in European clinical drug import and dstribution.

OUR TWELVE-MONTH PLAN OF OPERATIONS PENDING ADEQUATE FINANCING

We intend to accomplish the following regarding our Plan of Operations over the next twelve months.

Designer Diagnostics, Inc.

Designer Diagnostics' NTM Test Kits are now being marketed and will continue to be marketed to a global audience, including:

· Hospitals;

· Pharmaceutical companies;

· Biotechnology companies;

· Medical device distributors;

·            Governmental organizations;

·            Environmental testing facilities; and

·            Government water and soil testing facilities at the local,
             state and federal levels.

Over the next twelve months, Designer Diagnostics will attempt to distribute the test kits to the above companies and organizations. Our first sales occurred during our second quarter of 2006 with limited sales throughout 2007 and 2008. Our sales efforts during 2007 and 2008 have been inhibited by the necessity for FDA validation prior to active marketing in United States based markets. These markets include the CDC (Centers for Disease Control and Prevention) and the WHO (World Health Organization). Researchers at National Jewish Hospital in Denver, Colorado who are currently validating Designer Diagnostics' TB and NTM Test Kits. This research has been protracted due to budget restrictions at the hospital as well as our own limited funding. We currently anticipate the completion of this research and regulatory filing by the fourth quarter of 2009.

Additionally, the test kits are now utilized for environmental analysis for the presence of NTM in the water and/or soil. This allows investigators to easily find the source of contamination and may greatly reduce NTM infections and outbreaks. When and if sales of the test kits exceed our operating budget, we will use the test kit proceeds to fund drug research and clinical studies in the area of MS and HIV.

Designer Diagnostics' President will attempt to develop a distribution network and actively market the test kits to supply administrators of companies and/or governmental organizations in the following markets: hospitals; pharmaceutical; biotechnology; medical device distributors. Designer Diagnostics will also attempt to acquire other medical diagnostic products to develop that same distribution market. Designer Diagnostic's President will also seek license agreements to develop revenue streams consisting of drug discovery, drug development, and new medical device technologies.

ReceptoPharm

Clinical Studies

In January of 2007, ReceptoPharm began their clinical study in AMN. AMN is a genetic disorder that affects the central nervous system. The disease causes neurological disability that is slowly progressive over several decades. Throughout our twelve month Plan of Operations and for 3 months thereafter, ReceptoPharm plans to conduct clinical studies of its AMN drug. The study is underway and completed its patient recruitment process and is being conducted by the Charles Dent Metabolic Unit located in London, England to conduct a clinical study that provides for:

· Recruitment of 20 patients with AMN;

· Administering ReceptoPharm's AMN drug under development; and

· Monitoring patients throughout a 15-month protocol.

The clinical study is classified as a Phase IIb/IIIa study and is the final step required for regulatory approval of the drug.

In the areas of HIV and MS, ReceptoPharm plans to complete preclinical studies of its MS drug under development over the next 12 months. These include toxicology studies as well as pharmacokinetic studies required for regulatory approval. ReceptoPharm also plans to conduct clinical studies of its HIV and MS drugs under development. These "Phase II" studies will either prove or disprove the preliminary efficacy of ReceptoPharm's' HIV/MS drugs under development. ReceptoPharm is in the process of attempting to secure agreements with third parties to conduct such clinical studies.

We have estimated expenses of $2,575,000 pertaining to our twelve month Plan of Operations or $214,583 of monthly expenditures. Based on our current cash position, we do not have enough funds to accomplish our operational plan. Our ability to meet these expenses is dependent upon our ability to raise additional capital or our management loaning us sufficient funds to meet our expenses.

We will attempt to satisfy our estimated cash requirements for our twelve month Plan of Operations through the sale of Designer Diagnostics' test kits; however, if sales do not achieve adequate levels to provide for our operations, we will be have to raise additional capital through divestiture of assets, a private placement of our equity securities or, if necessary, possibly through shareholder loans or traditional bank financing or a debt offering; however, because we are a development stage company with a limited operating history and a poor financial condition, we may be unsuccessful in obtaining shareholder loans, conducting a private placement of equity or debt securities, or in obtaining bank financing. In addition, if we only have nominal funds by which to conduct our operations, we may have to curtail our research and development activities, which will negatively impact development of our possible products.

We have no alternative Plan of Operations. In the event that we do not obtain adequate financing to complete our Plan of Operations or if we do not adequately implement an alternative plan of operations that enables us to conduct operations without having received adequate financing, we may have to liquidate our business and undertake any or all of the following actions:

· Sell or dispose of our assets, if any;

· Pay our liabilities in order of priority, if we have available cash to pay such liabilities;

. . .