Gamma Pharmaceuticals Inc - FORM 10-Q

Attached files

file	filename
EX-99.13 - Gamma Pharmaceuticals Inc	gmpm_ex99-3.htm
EX-32.1 - Gamma Pharmaceuticals Inc	gmpm_ex32-1.htm
EX-31.1 - Gamma Pharmaceuticals Inc	gmpm_ex31-1.htm
EX-32.2 - Gamma Pharmaceuticals Inc	gmpm_ex32-2.htm
EX-31.2 - Gamma Pharmaceuticals Inc	gmpm_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number 000-53355

GAMMA PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

Delaware	72-1235452
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7477 W. Lake Mead Blvd., Suite 170

Las Vegas, NV 89128-1026

(Address including zip code of principal executive offices)

(702) 989-5262

(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.

Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

There were 63,584,397 shares of the registrant’s common stock, $0.001 par value, outstanding as of July 12, 2010.

GAMMA PHARMACEUTICALS INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2009

TABLE OF CONTENTS

	Page

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS	3
PART I FINANCIAL INFORMATION
Item 1 Financial Statements	4
Consolidated Statements of Operations for the six months ended September 30, 2009 and 2008 (unaudited)	4
Consolidated Statements of Cash Flows for the six months ended September 30, 2009 and 2008 (unaudited)	5
Consolidated Balance Sheets as of September 30, 2009 (unaudited) and March 31, 2009	6
Notes to Consolidated Financial Statements (unaudited)	7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3 Quantitative and Qualitative Disclosures About Market Risk	35
Item 4 Controls and Procedures	35
PART II OTHER INFORMATION
Item 1 Legal Proceedings	36
Item 1A Risk Factors	36
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3 Defaults Upon Senior Securities	47
Item 4 Submission of Matters to a Vote of Security Holders	47
Item 5 Other Information	47
Item 6 Exhibits	48

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

In this quarterly report, we include some forward-looking statements that involve substantial risks and uncertainties and other factors that may cause our operational and financial activity and results to differ from those expressed or implied by these forward-looking statements. In many cases, you can identify these statements by forward-looking words such as "may," "expect," "anticipate," "believe," "estimate," "plan," "intend" and "continue," or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition, or state other "forward-looking" information.

You should not place undue reliance on these forward-looking statements. The section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as any cautionary language in this quarterly report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from our expectations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Because of the risks and uncertainties, the forward-looking events and circumstances discussed in this quarterly report might not occur.

You should read the section captioned "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report and in conjunction with our discussion and analysis in our audited annual report on Form 10-K for the year ended March 31, 2009 which we filed on July 15, 2009.

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

Gamma Pharmaceuticals, Inc.
Consolidated Statements of Operations
(unaudited)

	For the three months ended						For the six months ended
	September 30,						September 30,
	2009			2008			2009			2008

Revenues	$	-		$	3,646		$	-		$	31,535

Cost of goods sold:
Materials		4,560			2,009			4,560			17,693
Labor		-			-			-			6,672
Freight		-			714			-			2,025
Impairment of obsolete inventory		142,233			-			142,233			-
Total cost of goods sold		146,793			2,723			146,793			26,390


Gross profit (loss)		(146,793	)		923			(146,793	)		5,145

Expenses:
Consulting - stock-based		33,958			117,433			168,466			182,433
Consulting - shares to be issued		9,167			-			9,167			-
Consulting		14,052			196,869			72,052			282,935
Executive compensation - stock-based		-			76,499			-			232,874
Executive compensation - shares to be issued		-			101,250			11,250			101,250
Executive compensation		221,500			192,041			418,000			382,041
General and administrative expenses - stock-based		-			12,000			12,000			54,500
General and administrative expenses		100,924			344,264			313,249			870,733
Depreciation and amortization		151,444			-			302,888			-
Total expenses		531,045			1,040,356			1,307,072			2,106,766

(Loss) from operations		(677,838	)		(1,039,433	)		(1,453,865	)		(2,101,621	)

Other income (expense):
Interest income		-			398			-			692
Miscellaneous income		-			-			1,397			-
Interest expense		(36,885	)		(22,032	)		(58,307	)		(44,368	)
Total other income (expense)		(36,885	)		(21,634	)		(56,910	)		(43,676	)

(Loss) before provision for income taxes		(714,723	)		(1,061,067	)		(1,510,775	)		(2,145,297	)

Provision for income taxes		-			-			-			-

Net (loss)	$	(714,723	)	$	(1,061,067	)	$	(1,510,775	)	$	(2,145,297	)

Weighted average number of common
shares outstanding - basic and fully diluted		27,013,453			18,341,923			25,619,570			17,634,994

Net (loss) per common share - basic and fully diluted	$	(0.03	)	$	(0.06	)	$	(0.06	)	$	(0.12	)

The accompanying notes are an integral part of the consolidated financial statements.

Gamma Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(unaudited)

	For the six months ended
	September 30,
	2009			2008
Cash flows from operating activities
Net (loss)	$	(1,510,775	)	$	(2,145,297	)
Adjustments to reconcile net (loss) to
net cash (used) by operating activities:
Depreciation and amortization		302,888			302,793
Shares issued for services		132,967			110,186
Shares issued for executive compensation		-			189,000
Amortization of debt discount		36,635			44,112
Amortization of prepaid stock compensation		67,916			227,250
Amortization of deferred financing costs payable in shares of common stock and warrants		15,323			-
Changes in operating assets and liabilities:
Decrease in accounts receivable		9,947			45,293
(Increase) decrease in inventory		142,233			(82,668	)
Decrease in prepaid expenses		-			33,588
(Increase) in deposits		(2,600	)		-
Increase in checks issued in excess of cash		-			5,180
Increase (decrease) in accounts payable and related party payable		7,980			(38,909	)
Increase in accrued compensation		408,638			308,832
Increase in accrued payroll taxes		10,368			26,795
Increase in accrued interest payable		3,430			-
Net cash (used) by operating activities		(375,050	)		(973,845	)

Cash flows from investing activities
Purchase of fixed assets		-			(7,354	)
Purchase of website		(2,112	)		(43,838	)
Net cash (used) by investing activities		(2,112	)		(51,192	)

Cash flows from financing activities
Proceeds from sale of common stock		127,000			1,000,000
Proceeds from notes payable		177,000			-
Principal payments on notes payable		(32,914	)		(46,172	)
Net cash provided by financing activities		271,086			953,828

Net (decrease) in cash		(106,075	)		(71,209	)
Cash - beginning		116,669			71,209
Cash - ending	$	10,594		$	-

Supplemental disclosures:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

Non-cash transactions:
Minimum guaranteed payments for intangible assets:
Issuance of common stock on notes payable	$	26,208		$	4,411
Issuance of shares for stock payable	$	177,000		$	256,500
Issuance of shares for prepaid stock compensation	$	-		$	-
Issuance of shares for satisfaction of accrued executive compensation	$	25,916		$	-
Issuance of shares for executive compensation	$	11,250		$	-
Issuance of shares and warrants for deferred financing costs	$	183,878		$	-
Accrual of preferred stock dividend	$	35,822		$	-

The accompanying notes are an integral part of the consolidated financial statements.

Gamma Pharmaceuticals, Inc.
Consolidated Balance Sheets

	September 30,			March 31,
	2009			2009
	(Unaudited)
Assets

Current assets:
Cash	$	10,594		$	116,669
Accounts receivable		-			9,947
Inventory		-			142,233
Total current assets		10,594			268,849

Deposits		2,600			-
Fixed assets, net		7,048			11,524
Website, net		25,878			23,766
Intangible assets, net		5,709,397			6,007,809

Total assets	$	5,755,517		$	6,311,948

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expense	$	335,472		$	269,972
Accounts payable and accrued expense - related party		20,878			78,398
Accrued compensation		408,637			-
Accrued compensation - shares to be issued		11,250			25,916
Accrued payroll taxes		85,001			77,633
Accrued interest payable		6,349			2,919
Notes payable, net		90,529			3,000
Current portion of long term notes payable, net		530,035			479,997
Preferred stock dividends payable		35,822			-
Total current liabilities		1,522,973			937,835

Long-term liabilities
Notes payable, net		242,634			307,159
Total long-term liabilities		242,634			307,159

Total liabilities		1,769,607			1,244,994

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.001 par value, 2,000,000 shares
authorized, 7,462 and 7,462 shares issued and outstanding
at September 30, 2009 and March 31, 2009		7			7
Common stock, $0.001 par value, 100,000,000 shares
authorized, 27,013,453 and 23,538,354 shares issued and
outstanding at September 30, 2009 and 2008, respectively		27,014			22,538
Additional paid in capital		15,660,975			15,196,776
Stock payable		299,045			318,000
Prepaid stock compensation		(56,250	)		(159,167	)
Deferred financing costs - Payable in shares of common stock and warrants		(87,084	)		-
Accumulated deficit		(11,857,797	)		(10,311,200	)
Total stockholders' equity		3,985,910			5,066,954

Total liabilities and stockholders' equity	$	5,755,517		$	6,311,948

The accompanying notes are an integral part of the consolidated financial statements.

GAMMA PHARMACEUTICALS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009

(unaudited)

Note 1: Basis of Presentation

The basis of the financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. The results of the operations for the interim periods are not necessarily indicative of the results to be expected for an entire year. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2009.

Note 2: Organization and Description of Business

Organization

Emerging Gamma Corporation (the "Company") was incorporated under the laws of the State of Delaware on February 10, 1993. On April 25, 2006, the Company amended its articles of incorporation and changed its name to Sunburst Pharmaceuticals, Inc. On July 11, 2006, the Company amended its articles of incorporation and changed its name to Gamma Pharmaceuticals, Inc.

On October 17, 2006, the Company acquired 100% of Gamma Pharmaceuticals (HK) Limited (“Gamma HK”). Gamma HK was a recently formed corporation with no operations.

On December 8, 2006 our Hong Kong subsidiary company, Gamma Pharmaceuticals (HK) Ltd., established Gamma Pharmaceuticals (HK) Limited Beijing Representative Office, in Beijing China. The Representative Office will represent Gamma Pharmaceuticals (HK) Ltd., interests in China. All invoicing and commercial arrangements for China will be contracted through our Hong Kong subsidiary company.

Description of Business

Our business is focused on the formulation, marketing and sale of vitamins and nutriceuticals, OTC pharmaceutical products and personal care products in Greater China and the United States.

Note 3: Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Gamma Pharmaceuticals, Inc. (US corporation), and its wholly-owned subsidiary Gamma HK. All significant inter-company balances and transactions have been eliminated. Gamma Pharmaceuticals, Inc. (US Corporation) and Gamma HK will be collectively referred herein to as the “Company”.

Reclassifications

Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

Inventory

Inventories are stated at the lower of cost (first-in, first-out basis) or market (net realizable value).

Fixed Assets

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

Computer equipment	3 years
Equipment	3 years
Furniture and fixtures	7 years

The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as September 30, 2009.

Website

The Company capitalizes the costs associated with the development of the Company’s website pursuant to Statement of Position 98-1 and Emerging Issues Task Force 00-20. Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes. The Company will commence amortization once the economic benefits of the assets begin to be consumed and they plan to record amortization once the website is completed and is fully operational. As of September 30, 2009, the Company has not commenced amortization.

Intangible Assets

ASC 350 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. As of September 30, 2009, the Company believes there is no impairment of its intangible assets.

The Company's intangible assets consist of the costs of filing and acquiring various trademarks. The trademarks are recorded at cost. The Company determined that the trademarks have an estimated useful life of 10 – 15 years and will be reviewed annually for impairment. Amortization will recorded over the estimated useful life of the assets using the straight-line method for financial statement purposes. The Company will commence amortization once the economic benefits of the assets begin to be consumed and they plan to record amortization once production begins and the related revenues are recorded.

The Company acquired intangible assets from an officer of the Company during April 2006 and May 2007. During the year ended March 31, 2008, the Company has commenced production on products and they have started amortization effective October 2007. The amortization of the intangible assets is based on an estimated useful life of 10 years.

Concentrations

During the six months ended September 30, 2009, there was no revenue. During the six months ended September 30, 2008, one customer accounted for 100% of sales. Of the total sales, 100% was generated from sales in the U.S. As of September 30, 2009 and March 31, 2009, one customer accounted for 100% and 100% of accounts receivable, respectively.

During the fiscal year ended March 31, 2009, the Company was advised by its sole customer that elements of the packaging graphics that the customer required the Company to create under the agreement for private label products were objected to by the Federal Trade Commission and that the packaging graphics had to be changed. The sole customer has removed all products from their shelves and the Company has stopped production on their products. The Company has produced new graphics that have been approved by its sole customer who states that the new graphics are in compliance with the Federal Trade Commission instructions. During the six months ended September 30, 2009 there have been no sales to its sole customer in the U.S.

Revenue Recognition

The Company recognized revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured. The Company will primarily derive its revenues from the sales of its vitamins, nutriceutical products and personal care products.

The Company has products that are in China that are sold on a consignment basis. Once the products are shipped to a customer they will have 30 days to return product and the Company grants the customer an additional 30 days to pay for the product. Because of the return policy the Company will defer the recognition of revenue until end of the 30 day return policy.

Foreign Currency Adjustments

The U.S. dollar is the functional currency of the Company’s consolidated financial statements. All foreign currency asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange rates, except for inventories, prepaid expenses, and fixed assets, which are remeasured at historical rates. Exchange gains and loss arising from remeasurement of foreign currency denominated monetary assets and liabilities are included in income in the period in which they occur.

Recent Accounting Pronouncements:

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-18 (ASU 2010-18), Receivables (Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That Is Accounted for as a Single Asset-a consensus of the FASB Emerging Task Force. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. The Company does not expect the provisions of ASU 2010-18 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-16 (ASU 2010-16), Entertainment-Casinos (Topic 924): Accruals for Casino Jackpot Liabilities-a consensus of the FASB Emerging Issues Task. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. The amendments should be applied by recording a cumulative-effect adjustment to opening retained earnings in the period of adoption. The Company does not expect the provisions of ASU 2010-16 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-15 (ASU 2010-15), Financial Services-Insurance (Topic 944): How Investments held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments-a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption is permitted. The amendments in this Update should be applied retrospectively to all prior periods upon the date of adoption. The Company does not expect the provisions of ASU 2010-15 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-14 (ASU 2010-14), Accounting for Extractive Activities – Oil & Gas - Amendments to Paragraph 932-10-S99-1 (SEC Update). The Amendments are designed to modernize and update the oil and gas disclosure requirements to align them with current practices and changes in technology. The Company does not expect the provisions of ASU 2010-14 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-13 (ASU 2010-13), Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-12 (ASU 2010-12), Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. After consultation with the FASB, the SEC stated that it “would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation Act of 2010 when accounting for the Patient Protection and Affordable Care Act”. The Company does not expect the provisions of ASU 2010-12 to have a material effect on the financial position, results of operations or cash flows of the Company.

In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-10 (ASU 2010-10), Consolidation (Topic 810): Amendments for Certain Investment Funds. The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for Interim periods within that first reporting period. Early application is not permitted. The Company does not expect the provisions of ASU 2010-10 to have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-09 (ASU 2010-09), Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This amendment addresses both the interaction of the requirements of this Topic with the SEC’s reporting requirements and the intended breadth of the reissuance disclosure provision related to subsequent events (paragraph 855-10-50-4). All of the amendments in this Update are effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company does not expect the provisions of ASU 2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.

In February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-08 (ASU 2010-08), Technical Corrections to Various Topics. This amendment eliminated inconsistencies and outdated provisions and provided the needed clarifications to various topics within Topic 815. The amendments are effective for the first reporting period (including interim periods) beginning after issuance (February 2, 2010), except for certain amendments. The amendments to the guidance on accounting for income taxes in reorganization (Subtopic 852-740) should be applied to reorganizations for which the date of the reorganization is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. For those reorganizations reflected in interim financial statements issued before the amendments in this Update are effective, retrospective application is required. The clarifications of the guidance on the embedded derivates and hedging (Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009, and should be applied to existing contracts (hybrid instruments) containing embedded derivative features at the date of adoption. The Company does not expect the provisions of ASU 2010-08 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-07 (ASU 2010-07), Not-for-Profit Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions. This amendment to Topic 958 has occurred as a result of the issuance of FAS 164. The Company does not expect the provisions of ASU 2010-07 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This amendment to Topic 820 has improved disclosures about fair value measurements on the basis of input received from the users of financial statements. This is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the provisions of ASU 2010-06 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-05 (ASU 2010-05), Compensation – Stock Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed Share Arrangements and the Presumption of Compensation.

In January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-04 (ASU 2010-04), Accounting for Various Topics—Technical Corrections to SEC Paragraphs.

In January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-03 (ASU 2010-03), Extractive Activities—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This amendment to Topic 932 has improved the reserve estimation and disclosure requirements by (1) updating the reserve estimation requirements for changes in practice and technology that have occurred over the last several decades and (2) expanding the disclosure requirements for equity method investments. This is effective for annual reporting periods ending on or after December 31, 2009. However, an entity that becomes subject to the disclosures because of the change to the definition oil- and gas- producing activities may elect to provide those disclosures in annual periods beginning after December 31, 2009. Early adoption is not permitted. The Company does not expect the provisions of ASU 2010-03 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. (See FAS 167 effective date below)

In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below)

In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. (See EITF 09-1 effective date below)

In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.

In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Company does not expect the provisions of ASU 2009-12 to have a material effect on the financial position, results of operations or cash flows of the Company.

In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance” (“EITF 09-1”). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15, 2009. The Company does not expect the provisions of EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.

In June 2009, the FASB issued SFAS No. 167 (ASC Topic 810), “Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010. The Company does not expect the provisions of SFAS 167 to have a material effect on the financial position, results of operations or cash flows of the Company.

In June 2009, the FASB issued SFAS No. 166, (ASC Topic 860) “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). The provisions of SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140, eliminate the exemption from consolidation for qualifying special-purpose entities and require additional disclosures. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the provisions of SFAS 166 to have a material effect on the financial position, results of operations or cash flows of the Company.

Note 4: Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of $1,510,775 for the six months ended September 30, 2009, with an accumulated loss of $11,821,975. The Company’s current liabilities exceed its current assets by $1,512,379 as of September 30, 2009.

These conditions give rise to substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

Management’s plan, in this regard, is to raise financing of approximately $7,000,000 through a combination of equity and debt financing. Management believes this amount will be sufficient to finance the continuing development for the next twelve months. However, there is no assurance that the Company will be successful in raising such financing.

Note 5: Inventory

During the six month ended September 30, 2009, the Company impaired its inventory due to obsolescence and expiration dates of the products totaling $142,233. The impairment expense is included in cost of goods sold.

Note 6: Fixed Assets

Fixed assets as of consisted of the following as of September 30, 2009:

	September 30,
	2009
Computer equipment	$	13,567
Equipment		12,825
Furniture and fixtures		1,087
Accumulated depreciation		(20,431	)
	$	7,048

During the six months ended September 30, 2009 and 2008, the Company recorded depreciation expense of $4,476 and $4,380, respectively.

Note 7: Intangible Assets

On April 7, 2006, the Company entered into a Technology Transfer Agreement (the "Technology Transfer Agreement") pursuant to which, the Company has obtained all copyrights, trademarks, and know-how (collectively "Transferred Technology") to a portfolio of vitamin and nutriceutical products and personal care products. The transferred technology is based on propriety formulation technology, and the Company believes that such technology represents improved versions of branded products currently being marketed by other companies. The Company issued 9,045,900 shares of common stock under the Technology Transfer Agreement is recorded at the estimated fair value of the Transferred Technology totaling $5,951,250 and is included as an intangible asset on the balance sheet at September 30, 2009.

On May 4, 2007, the Company purchased intellectual property from an officer and director of the Company for cash of $17,000 and would be eligible to participate in any additional management compensation structure. The value was based on the historical costs incurred by the officer and director of the Company. The Company views the intellectual property as a core component of its pending patent application.

On August 5, 2006, the Company executed a license agreement with Jugular, Inc. for the use of their trade name through December 31, 2010 on two product lines in exchange for $31,400. On July 2, 2007, the Company amended its license agreement with Jugular, Inc. to expand the scope of product lines. Additionally, on August 29, 2007, the Company amended the license agreement and increased the term to 15 years with an automatic renewal for 5 year terms if the Company meets the minimum sales requirements. On July 14, 2008, the Company executed an amended and restated agreement with Jugular to clarify the terms of the agreement and to consolidate the original agreement and its amendment in one agreement. As part of the amendments to the license agreement, the Company agreed to issue a total of 110,000 shares of common stock, 17,000 warrants and $15,000 to be paid in cash. The warrants shall be exercisable at any time until August 29, 2012 at a price of $1.00 per share. As of March 31, 2008, the Company issued the shares of common stock, warrants and paid the cash of $15,000. The Company is obligated to pay minimum guaranteed quarterly payments totaling $1,598,306 over a period of four years. The present value of the total payments is $1,217,799 and the Company has capitalized this cost. The Company has imputed interest at approximately 10% per annum and will amortize the interest over the four year period. During the nine months ended December 31, 2008, the Company recorded interest expense totaling $65,693 and paid cash of $46,172 and shares of common stock valued at $13,111 in guaranteed payments to Jugular, Inc. As of December 31, 2008, the Company is in default and is renegotiating its agreement with Jugular, Inc. The total value of the amendment to the license agreement is $1,323,985.

	September 30,
	2009
Intangible assets	$	6,903,047
Accumulated amortization		(1,193,650	)
	$	5,709,397

During the six months ended September 30, 2009 and 2008, the Company recorded amortization expense of $298,412 and $298,412, respectively.

Note 8: Notes Payable

On February 1, 2009, the Company executed a promissory note for $3,000 with an unrelated third party. The loan bears 0% interest and is due on September 30, 2009.

On April 6, 2009, the Company executed a promissory note for $21,000 with an unrelated third party. The loan bears 0% interest and is due on August 3, 2009. The first monthly payment of $4,000 was due on April 6, 2009. The second monthly payment of $4,250 was due on May 4, 2009. The third monthly payment of $4,250 was due on June 1, 2009. The fourth monthly payment of $4,250 was due on July 6, 2009. The final monthly payment of $4,250 was due on August 3, 2009. During the six months ended September 30, 2009, the Company made principal payments totaling $8,000. As of September 30, 2009, the Company is in default.

On June 17, 2009, the Company executed a promissory note for $1,000 with an unrelated third party. The loan bears 0% interest and is due on December 31, 2009.

On June 19, 2009, the Company executed a promissory note for $5,000 with an unrelated third party. The loan bears 0% interest and is due on December 31, 2009.

On July 13, 2009, the Company executed a promissory note for $25,000 with an unrelated third party. The loan bears 0% interest and was due on August 13, 2009. As of September 30, 2009, the Company is in default.

On June 24, 2009, the Company executed a promissory note for $5,000 with an unrelated third party. The loan bears 0% interest and was due on June 26, 2009. As of September 30, 2009, the note is in default. In the event of default, the holder shall provide the Company with written notice thereof and if the Company fails to pay this note within 5 business days from receipt of written notice, then the Company will direct a third party to make available to the holder, free and clear of any restrictions 50,000 shares of the Company’s common stock. To date, no notice of default has been received.

During the six months ended September 30, 2009, the Company executed promissory notes for $95,000 from various individuals and entities. The loans bear 11% interest and are due in March 2010. The note holders also received a total of 950,000 shares of common stock and 950,000 warrants. The warrants have an exercise price of $0.20 and are exercisable for 3 years. The fair value of the common stock and the warrants total $183,878 which was recorded to deferred financing costs in the equity section and are amortized over the life of the loan. During the six months ended September 30, 2009, the Company recorded interest expense of $15,323.

Note 9: Equity

Effective May 15, 2006, the Company declared a stock dividend of 18 shares for each share of its common stock which has the effect of a 19 for one stock split, resulting in 10,071,000 shares of common stock issued and outstanding. The stock split has been reflected in the accompanying financial statements by retroactively restating all shares and per share amounts.

During May 2008, the Company authorized its amendment to the articles of incorporation and increased its authorized capital from 500,000 shares of $0.001 preferred stock to 2,000,000 shares of $0.001 preferred stock and from 20,000,000 shares of $0.001 common stock to 100,000,000 shares of $0.001 common stock.

Series A Preferred Stock

On March 31, 2009, the Company designated 10,000 shares of its authorized preferred stock as 8% Series A Convertible Preferred Stock. The holders of the preferred stock will be entitled to receive a dividend at a rate of 8% per annum. The dividends will be cumulative and shall be paid quarterly at the option and discretion of the Company either in cash or shares of the Company’s common stock at a price of $0.12 per share. Each 1 share of preferred stock shall be convertible into 1,000 shares of common stock at the option of the holder.

During the six months ended September 30, 2009, the Company recorded dividends of $35,822 for the preferred stock.

During the six months ended September 30, 2009, the Company did not issue any additional preferred stock.

Common Stock

On May 28, 2009, the Company issued a total of 1,005,500 shares of common stock to an individual for consulting services rendered. The shares were valued at the fair market value of the stock at $100,550.

On May 28, 2009, the Company issued a total of 225,045 shares of common stock to the executives as part of the variable compensation award that was declared during the fiscal year ended March 31, 2009. The shares were valued at the fair market value of the stock at $25,916 and it was recorded as a reduction is accrued executive compensation.

On May 28, 2009, the Company issued a total of 270,000 shares of common stock for cash of $27,000.

On May 28, 2009, the Company issued a total of 1,770,000 shares of common stock for cash of $177,000 which was received during the fiscal year ended March 31, 2009 and it was recorded as a reduction of stock payable.

On May 28, 2009, the Company issued 110,954 shares of common stock to an entity for accounting services rendered. The shares were valued at the fair market value of the stock at $12,000.

On May 28, 2009, the Company issued 1,000,000 shares of common stock to an individual for cash of $100,000. Additionally, the Company issued 500,000 common stock purchase warrants. The warrants are exercisable for cash for a period of 3 years at an exercise price of $0.25 per share and vest immediately.

On May 28, 2009, the Company issued 93,600 shares of our common stock to Jugular, Inc. for payment of the notes payable for the minimum annual guarantee payments. The shares were valued at $26,208 based on the fair value of the common stock on the date of grant.

As of September 30, 2009, the Company had a stock payable for $299,045 for a total of 1,310,000 shares of common stock.

Note 10: Stock Warrants

The following is a summary of the status of all of the Company’s stock warrants as of September 30, 2009 and changes during the three months ended on that date:

	Number Of Warrants		Weighted-Average Exercise Price
Outstanding at March 31, 2009		12,499,393	$	1.00
Granted		1,450,000	$	0.22
Exercised		-	$	0.00
Cancelled		-	$	0.00
Outstanding at September 30, 2009		13,949,393	$	0.92
Warrants exercisable at March 31, 2009		12,499,393	$	1.00
Warrants exercisable at September 30, 2009		13,949,393	$	0.92

The following tables summarize information about stock warrants outstanding and exercisable at September 30, 2009:

		STOCK WARRANTS OUTSTANDING
Exercise Price		Number of Warrants Outstanding		Weighted-Average Remaining Contractual Life in Years		Weighted- Average Exercise Price
$	0.20		950,000		2.96	$	0.20
$	0.25		500,000		2.62	$	0.25
$	0.75		4,166,491		3.76	$	0.75
$	1.00		4,174,951		3.76	$	1.00
$	1.25		4,157,951		3.76	$	1.25
			13,949,393		3.76	$	0.97

		STOCK WARRANTS EXERCISABLE
Exercise Prices		Number of Shares Exercisable		Weighted- Average Exercise Price
$	0.20		950,000	$	0.20
$	0.25		500,000	$	0.25
$	0.75		4,166,491	$	0.75
$	1.00		4,174,951	$	1.00
$	1.25		4,157,951	$	1.25
			13,949,393	$	0.97

Note 11: Related Party Transactions

On August 30, 2007, the Company established an executive variable compensation pool plan. The maximum award amounts vary per quarter and in some quarters are based on a percentage of net revenue. The plan is administered by the Chief Executive Officer (CEO). At the end of each quarter the CEO will determine the amount of the award and whether it will be paid in cash or shares of common stock.

During the quarter ended June 30, 2009, the maximum amount that can be awarded was $312,500. The CEO has declared an award of $11,250 to be paid in shares of common stock and $75,000 in cash to the executives. The difference of $226,250 will be rolled over to the variable compensation pool plan for the next quarter. As of September 30, 2009, the shares have not been issued and the cash was not paid and are recorded as accrued executive compensation.

During the quarter ended September 30, 2009, the maximum amount that can be awarded was $312,500. The CEO has declared an award of $100,000 in cash to the executives. The difference of $212,500 will be rolled over to the variable compensation pool plan for the next quarter. As of September 30, 2009, the cash was not paid and are recorded as accrued executive compensation.

On August 31, 2007, the Company executed a five year employment agreement with Peter Cunningham for the position of Chief Executive Officer. Mr. Cunningham will receive an annual salary of $160,000 per year and is eligible to participate in the Company’s executive variable compensation pool plan. On September 1, 2008, Mr. Cunningham received a raise due to cost of living adjustment and his annual salary was increased to $168,000.

On August 31, 2007, the Company executed a five year employment agreement with Joseph Cunningham for the position of Chief Financial Officer. Mr. Cunningham will receive an annual salary of $150,000 per year and is eligible to participate in the Company’s executive variable compensation pool plan. On September 1, 2008, Mr. Cunningham received a raise due to cost of living adjustment and his annual salary was increased to $159,000.

On August 31, 2007, the Company executed a five year employment agreement with Hao Zhang for the position of Chief Marketing Officer. Mr. Zhang will receive an annual salary of $150,000 per year and is eligible to participate in the Company’s executive variable compensation pool plan. On September 1, 2008, Mr. Zhang received a raise due to cost of living adjustment and his annual salary was increased to $159,000.

As of September 30, 2009, the Company owed a total of $419,887 to the officers of the Company for accrued salaries.

As of September 30, 2009, the Company had accounts payable due to related parties totaling $20,878.

Note 12: Subsequent Events

The Company has evaluated subsequent events through July 28, 2010, the date which the financial statements were available to be issued.

In November 2009, the Company issued a total of 8,617,965 shares of common stock. Of the total 193,333 shares were issued for cash received in prior quarters. Of the total 1,120,455 shares were issued to executives for reduction in accrued executive compensation. Of the total 2,180,000 shares were issued in connection with notes payable. Of the total 4,124,177 shares were issued for services. Of the total, 1,000,000 shares were issued for a lost certificate. The Company plans to cancel the 1,000,000 shares issued for the certificate that was lost in the mail.

In January 2010, the Company issued a total of 17,850,000 shares of common stock. Of the total 200,000 shares were issued for cash. Of the total 12,500,000 shares were issued to executives for reduction in accrued executive compensation. Of the total 4,250,000 shares were issued in connection with notes payable. Of the total 900,000 shares were issued for services.

In March 2010, the Company issued a total of 10,095,556 shares of common stock. Of the total 6,000,000 shares were issued to executives for reduction in accrued executive compensation. Of the total 100,000 shares were issued in connection with notes payable. Of the total 555,556 shares were issued to Jugular for the settlement of the license agreement. Of the total 3,440,000 shares were issued for services.

On February 12, 2010, the Company entered into a license and joint venture agreement with Jugular, Inc. to form Gamma Jugular, LLC. The license agreement replaces all prior license agreements with Jugular, Inc.

On February 18, 2010, the Company entered into joint venture with Holyfield International, LLC to form Holyfield Gamma Choice, LLC and entered into a related License Agreement with Holyfield Gamma Choice, LLC and Holyfield Choice, LLC (f/s/o Evander Holyfield).

On February 23, 2020, the Company entered into a multi-year agreement with one of North America’s leading wholesale distribution organizations to distribute the full line of Gamma products.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this quarterly report to “we,” “our,” “us,” “Gamma,” “the Company,” and similar terms refer to Gamma Pharmaceuticals Inc. and its wholly owned subsidiary Gamma Pharmaceuticals (HK) Ltd. unless otherwise expressly stated or the context otherwise requires.

OVERVIEW AND OUTLOOK

We are a marketing and product formulation company selling our own branded products through wholesalers and direct to retailers both in the US and internationally. Our core focus is the marketing and sale of vitamins and nutriceuticals, over-the-counter (“OTC”) pharmaceutical products and personal care products in the United States and greater China. We sell our branded nutritional supplements under the trademarks Brilliant Choice™ children’s nutritional supplements featuring the call to action – “Mom you’ve made a brilliant choice for your children’s nutrition,” SAVVY™ adult nutritional supplements featuring the call to action “Be SAVVY Stay Healthhy,” and Jugular Energy Products™ and high performance supplements featuring the call to action “Go for the Jugular™.” Our customer focus is on selling products in the Lifestyle of Health & Sustainability ("LOHAS") marketplace and in the energy supplement market. We offer the health conscious consumer a series of innovative product forms utilizing our patent pending Gamma “Gel Dilivery System,” distinctive packaging supported cost effective marketing designed to support our retail partners. Our unique product formulation and dynamic marketing programs have attracted joint venture and strategic alliance opportunities to use our technology and marketing, as well as product development and marketing opportunities with U.S. and Canadian water producers. Moreover, the Company’s distinctive marketing programs and multi-channel retail reach have attracted a network of leading independent distributors in the U.S. and abroad.

We have copyrights, trademarks, trade secrets and knowhow for product lines of vitamins and nutriceuticals, energy products and personal care products spread across four major brands. The products are formulated to be in compliance with prevailing regulations of the appropriate government regulatory agencies in China, Taiwan, Hong Kong and the U.S. Final submission of labeling and product performance claims, to the same regulatory agencies, has been made for certain products and is pending for certain other products. We intend to take the necessary steps to market the products in these jurisdictions and will undertake manufacturing through qualified third party sources. In all of these major markets, our management has experience in marketing and selling similar products.

A large part of our initial product line of nutritional supplements, personal care products and OTC pharmaceutical products is based on proprietary uses of plant-based Gel technology to create innovative products. We believe that products based on our “Gel Delivery Technology” offer a highly desirable innovation over the typical tablets and capsules to which consumers have grown accustomed. We also believe that Gel based products are the latest product forms consumers are seeking in the healthcare and supplement industries. Therefore, our Gel Delivery Technology will be a significant part of our marketing strategy.

Gamma’s strategy is consumer-centric. Management started with a simple question, “What are consumers looking for in vitamins and nutritional supplements?” Experience suggested and surveys confirmed: great tasting, easy to take products in product forms other than pills or capsules. Expanding further, Management identified particular demographic groups that demonstrated a strong willingness to buy specific products aimed at the different stages in one's life. Gamma’s corporate consumer message is best reflected in its marketing position statement, “Easy to take, great tasting nutritional supplements for all ages and all stages of life.” In short, a “cradle to grave” offering of health and wellness nutritional supplements. Management has differentiated the Company’s brands and products from its competitors based on product form, demographics (life stages), and a brand message incorporating innovative packaging and unique promotional messaging that drives consumers to repeat purchases. This enables Gamma to gain the trust of the consumer throughout their lives and, importantly, enables Gamma to price its products at the upper end of the pricing spectrum.

In the period ended December 31, 2007, we shipped our first products to test several commercial and operational capabilities and systems, and to demonstrate the consumer preference for products made utilizing Gamma’s Gel Delivery Technology, versus well established technologies in the market. Sales have been made to a major national retail account for a product utilizing Gamma's proprietary Gel Technology, in a gumdrop product form. All tests were successful. We undertook timely order processing, efficient and effective manufacturing processes, billing and collection processes and financial reporting processes and product recall processes. During the period ended September 30, 2007, we launched our Product Distributor / Broker Management Program. Agreements have been signed that establish Gamma's national network of product brokers and distributors in the United States. The consumer acceptance of the Gamma Gel Delivery Technology has been overwhelmingly positive. Gamma is in the process now of taking orders for own brands of products manufactured utilizing the Gamma Gel Delivery Technology both in the US and internationally.

On December 24, 2007, our common stock began trading on the Financial Industry Regulatory Authority's (FINRA) Over-the-Counter Bulletin Board under the symbol GMPM.PK.

We have incurred losses since inception. For the quarter ended September 30, 2009, we had a net loss of $689,002 as compared to a net loss of $1,061,067 for the quarter ended September 30, 2008. Our ability to proceed with our plan of operation has continuously been a function of our ability to increase revenues and raise sufficient capital to continue our operations.

Recent Developments

Press Releases

On March 27, 2009, we issued a press release to announce the receipt of purchase orders for our Jugular® brand Energy Products from Texas Liquid Energy Distributing Co. of San Antonio, Texas.

On June 4, 2009, we issued a press release to announce we have been issued Purchase Orders from pharmacy and supermarket chains in the American Southwest.

On June 9, 2009, we issued a press release announcing the receipt of purchase orders from Liberty USA, Inc., a distributor in Pennsylvania, Ohio and West Virginia.

On June 15, 2009, we issued a press release announcing an agreement with Mr. Checkout, a national network of distributors for coverage in selected territories.

On June 23, 2009, we issued a press release announcing an agreement with 360 Distribution, a distributor in Texas.

On July 23, 2009, we issued a press release announcing that effective at the open of business on July 24, 2009, the Company’s common stock will be quoted on the Pink Sheets; it will cease being quoted on the OTCBB, as a result of a notice of OTCBB ineligibility received from FINRA due to the Company filing its Annual Report, Form 10-K, seven minutes late. A copy of the press release is attached hereto as Exhibit 99.13.

On August 19, 2009, we entered into a non-binding letter with Gandolf Marketing concerning our interest in a product promotion program featuring certain of our products. The letter with Gandolf Marketing reflects the present intentions of the parties and is subject to execution of a definitive agreement. As of the date hereof, we have not entered into a definitive and/or binding agreement for the letter with Gandolf Marketing. When any such agreement is reached we will file notice of such agreement or facts with the Securities and Exchange Commission on Form 8-K.

On September 10, 2009, we entered into a non-binding letter with Mr. Evander Holyfield concerning our interest in having Mr. Holyfield commercially exploit certain new concepts. The concepts include certain improved nutritional formulations and workout techniques that have application for selected nutritional and fitness market categories with related ancillary products and services. The letter with Mr. Holyfield reflects the present intentions of the parties and is subject to execution of a definitive agreement. As of the date hereof, we have not entered into a definitive and/or binding agreement for the letter with Mr. Holyfield. When any such agreement is reached we will file notice of such agreement or facts with the Securities and Exchange Commission on Form 8-K.

Subsequent Events

On October 13, 2009, we announced the signing of an Agreement for Purchase Order Financing and an Account Purchase (Factoring) facility. Combined, the financing package enables Gamma to amplify its manufacturing and retail resources in support of increased demand for the Company’s products and its substantial purchase order pipeline.

On October 28, 2009, we announced a Product Brokerage agreement with J&A Lazier Racing. The Agreement supports Gamma’s entry into the world of Indy Car Racing. Gamma has built a full promotional and marketing program designed to attract motor sports fans to Gamma’s branded products.

On October 29, 2009, Gamma announced it has successfully completed the registration of six of the Company’s Brand Trademarks with The State Trademark Bureau of China. This important milestone is the conclusion of a two-year registration process and will provide Gamma with exclusivity of use and trademark protection on its commercial products in China. Gamma has a wholly-owned subsidiary in Hong Kong and a Representative office in Beijing to facilitate its Asian business.

On January 21, 2010, the Company announced that it signed a Distribution Agreement for Gamma's branded product ranges. Under the Distribution Agreement, Gamma's monthly sales are expected to ramp-up to $3.4 million. The first monthly purchase order has been accepted with a value of $1.03 million.

On February 25, 2010 we released a letter to our shareholders and announced a multiyear agreement with minimal annual sales revenue plus several strategic initiatives designed to expand global sales, market share and to drive shareholder value.

On March 1, 2010, we announced the formation of a Joint Venture Company with Boxing World Heavyweight Champion Evander Holyfield. Mr. Holyfield is the only 4-time Boxing World Heavyweight Champion and in unaided focus groups is identified as one of the world’s most recognized athletes. The joint venture, branded “Holyfield Choice,” is formulating and marketing an innovative line of vitamins and nutritional products utilizing Mr. Holyfield’s expertise in nutrition and physical training and Gamma’s formulation and marketing knowhow. Holyfield Choice is closely integrated with Gamma’s existing corporate infrastructure and distribution channels, and currently has four product lines and seven SKUs, with plans for expansion. Under the terms of the venture, Gamma will consolidate the joint venture’s performance into Gamma’s financials.

On March 3, 2010, we announced that we had entered into a multi-year agreement with one of North America’s leading wholesale distribution organizations to distribute the full line of Gamma products. The agreement, which is evergreen in duration and provides for minimum monthly volume purchases of Gamma products at agreed upon pricing per SKU. The terms cover 40,000 cases per month of Gamma product with an estimated annualized value of approximately $48.0 million. Gamma's new distribution partner is one of the largest wholesale distributors of branded consumer products in North America, and is credited with the enormous commercial success of many leading consumer brands.

On March 9, 2010, we announced the formation of a joint venture company with Jugular, Inc. replacing the brand licensing agreement in place between Gamma and Jugular since 2007. The new company, Gamma Jugular, LLC is closely integrated with Gamma’s existing corporate infrastructure and distribution channels, and currently has three product lines and six SKUs with plans for expansion. Under the terms of the joint venture, Gamma will consolidate Gamma Jugular’s performance into Gamma’s financials.

On March 15, 2010, we announced the retention of a leading investment banking boutique and a national law firm to advise on financial and strategic alternatives. The Company has retained Burnham Securities Inc., (“Burnham”), the New York based investment banking boutique, and Nelson Mullins Riley & Scarborough LLP (“Nelson Mullins”), a national general practice law firm to assist and advise Gamma’s management in a variety of corporate initiatives and to assist us in seeking financial and strategic alternatives.

On March 24, 2010, we announced that our joint venture company, Holyfield Gamma Choice, LLC, launched the Holyfield challenge on college campuses. College students participating in the Holyfield Challenge are encouraged to improve academic performance, as well as quality-of-life and health parameters through a healthy body and improved lifestyle program that awards scholarships, jobs and other incentives to participants and their colleges. Holyfield Gamma Choice, LLC utilizes Evander Holyfield, the four-time World Boxing Heavy Weight Champion’s expertise in nutrition and physical training and Gamma’s formulation and marketing know-how to create and supply nutritional products to Holyfield Challenge participants along with wellness programs targeted at the college market. Livingstone College in Salisbury, North Carolina is the first campus to collaborate for the implementation of the Holyfield Challenge.

On March 29, 2010, we announced that our joint venture company Holyfield Gamma Choice, LLC launched Holyfield Choice Water. “Holyfield’s Choice Water” is an Alkaline Water. Scientific studies conclude that Alkaline Water can offset the effects on the body’s normal pH caused by exercise, diet, the environment and other causes. Our initial distribution plan is to use Gamma’s existing distribution arrangements.

Our Strengths

We believe that Gamma has the following competitive strengths that could enable us to capitalize on the large, fragmented and growing market for our Gel based products:

Fully integrated product, brand and promotional platform for sustainable growth;

Diverse product categories, addressing health and nutrition in every life stage that provides operating flexibility;

Recognizable brand names that can be leveraged for additional growth;

Global product appeal;

Geographic diversity to mitigate market risk concentration;

Demonstrated ability to identify and commercialize opportunities;

Experience and results oriented management team; and

Strong distribution platform, contractually obligated distribution arrangements with guaranteed minimum purchases.

Results of Operations

The following table summarizes selected items from the statement of operations for the three and six months ended September 30, 2009 and the comparable period ended September 30, 2008.

SALES AND COST OF GOODS SOLD:

	Three Months Ended September 30,						%			Six Months Ended September 30,						%
	2009			2008			Change			2009			2008			Change
Sales	$	-		$	3,646			-		$	-		$	31,535			-

Cost of Goods Sold	$	146,793			2,723			5,291	%	$	146,793			26,390			4,562	%

Gross Profit (loss)	$	(146,793	)		923			(16,004	%)	$	(146,793	)		5,145			(2,953	%)

Gross Profit (loss) Percentage of Sales		-			25	%		-			-			16	%		-

Sales

We did not have sales in the six months ended September 30, 2009. Our sales during the same six month period in 2008 was $31,535. The decrease in our sales during the period ended September 30, 2009 is a result of the decrease in the amount of orders we have from our major customer. The sales to date are influenced significantly by the fact our sole customer received a citation from the Federal Trade Commission relating to our product’s packaging graphics, which resulted in it removing our product from its shelves.

Cost of goods sold / Gross profit percentage of sales

In the six month period ended September 30, 2009, our cost of goods sold was $146,793 as a result of not having sales relative to the cost to produce our products. Gross profit margins for the six months ended September 30, 2009 was also $146,793 as a result of not having sales in the same period.

EXPENSES:

	Three Months Ended September 30,						%			Six Months Ended September 30,						%
	2009			2008			Change			2009			2008			Change
Expenses:
Consulting – stock-based	$	33,958		$	117,443			(71	%)	$	168,466		$	182,433			(8	%)
Consulting – shares to be issued		9,167			-			-			9,167			-			-
Consulting		14,052			196,869			(93	%)		72,052			282,935			(75	%)
Executive compensation – stock-based		-			76,499			-			-			232,874			-
Executive compensation – shares to be issued		-			101,250			-			11,250			101,250			(89	%)
Executive compensation		221,500			192,041			15	%		418,000			382,041			9	%
General and administrative expenses – stock-based		-			12,000			-			12,000			54,500			(78	%)
General and administrative expenses		100,924			344,264			(71	%)		313,249			870,733			(64	%)
Depreciation and amortization		151,444			-			-			302,888			-			-
Total operating expenses		531,045			1,040,356			(49	%)		1,307,072			2,106,766			(38	%)

(Loss) from operations		(677,838	)		(1,039,433	)		(35	%)		(1,453,865	)		(2,106,621	)		(31	%)

Other income (expense):
Interest income		-			398			-			-			692			-
Miscellaneous income		-			-			-			1,397			-			-
Interest expense		(36,885	)		(22,032	)		67	%		(58,307	)		(44,368	)		31	%
Total other (expense)		(36,885	)		(21,634	)		70	%		(56,910	)		(43,676	)		30	%

Net (loss)	$	(714,723	)	$	(1,061,067	)		(33	%)	$	(1,510,775	)	$	(2,145,297	)		(30	%)

Consulting Expenses

Our consulting expenses have decreased from 2008 for the three and six month periods ended September 30, 2009, respectively. The decrease in consulting expenses was the result of a decline in revenue and our current financial position. Due to limited cash resources, we temporarily scaled back the use of consultants.

Executive Compensation

Executive compensation is comprised of cash and stock based compensation. For the three and six month periods ended September 30, 2009, executive compensation decreased by 40% from the same period a year ago. The decrease in executive compensation was the result of the decrease in the stock price which affected the value of the quarterly variable compensation award.

General and Administrative Expenses

General and administrative expenses decreased from 2008 for the three and six month periods ended September 30, 2009, respectively. The decrease in general and administrative expenses was mainly due to the scale back of expenses due to limited cash resources.

Loss from Operations

The loss from operations for the three months ended September 30, 2009 was $677,838, versus a loss from operations of $1,039,433 for the three months ended September 30, 2008, a change in loss from operations of $361,595 or 35%. During the six months ended September 30, 2009 our loss from operation decreased by $652,756 or 31%. The decrease in the loss from operations, during these periods, resulted from the scaling back of expenses due to limited cash resources.

Interest Income and Interest Expense

Interest income decreased by 100% in the three and six months ended September 30, 2009. The decrease of interest income was as a result of greater use of non-interest bearing accounts and lower account balances. Interest expense increased during the second fiscal quarter of 2009 compared to the second fiscal quarter of 2008. Our interest expense in 2009 was higher because of the amortization of the discount on the amount owed to Jugular for intangible assets.

Net Loss

Our net loss for the three months ended September 30, 2009 was $714,723, a decrease of $346,344, or 33%, from $1,061,067 for the three months ended September 30, 2008. For the six month period ended September 30, 2009, our net loss was $1,510,775, a decrease of $634,522 or 30% from $2,145,297 for the six month period ended September 30, 2008.

Operation Plan

We are a marketing and product formulation company selling our own branded products through wholesalers and direct to retailers both in the US and internationally. Our core focus is the marketing and sale of vitamins and nutriceuticals, OTC pharmaceutical products and personal care products in Greater China and the United States. We sell our branded nutritional supplements under the trademarks Brilliant Choice™ children’s nutritional supplements featuring the call to action – “Mom you’ve made a brilliant choice for you children’s nutrition,” SAVVY™ adult nutritional supplements featuring the call to action “Be SAVVY Stay Healthhy,” and Jugular Energy Products™ and high performance supplements featuring the call to action “Go for the Jugular™.” Our customer focus is on selling products in the Lifestyle of Health & Sustainability ("LOHAS") marketplace and in the Energy Supplement Market. We developed a series of innovative marketing programs to support our product sales and retail partners. We have sought and will continue to seek financing opportunities to fund our development and to support our marketing programs and the commercialization of our product lines. Additionally, we have assembled a comprehensive business platform including a distribution agreement with minimum quantity guarantees expected to equate to approximately $3.8 million in monthly sales. We have recently begun taking orders under this agreement.

Our Growth Strategy

Our strategy has been focused initially on developing, marketing and selling products in the LOHAS marketplace and in the Energy Supplement Market in the United States and Greater China. LOHAS is a term popularized by the Natural Marketing Institute for the American Botanical Council as well as others industry opinion leaders. The LOHAS market is an identifiable consumer category. In the LOHAS category, there are found high growth sub-segments of selected vitamins and nutriceuticals, over-the-counter ("OTC") pharmaceutical products, and personal care products. We believe that these categories of the LOHAS market are fast developing worldwide but in particular in both Greater China and the United States. We further believe that the United States and Greater China market offers the fastest path to grow revenues and achieve profitability in this business.

In China, the economy has grown between 8% and 10% in each year of this decade and the Chinese economy has been the least affected major economy during the current global economic slowdown. According to Frost & Sullivan, total expenditures on pharmaceuticals products in China are expected to reach $125 billion in 2011. IMS Health estimates that China will become the second largest pharmaceuticals market in the world by 2020. Expenditures on health supplements for health maintenance and disease prevention were estimated to have been approximately $9.10bn in 2006 and are expected to double to approximately $13.4bn by 2010 according to a report entitled, The Health Food / Dietary Supplements Market in China, published by the Commercial Services Unit of the US Embassy, Beijing. In the United States, LOHAS is the fastest growing market in the nutritional supplement category, and according to research reports from The National Marketing Institute, 68 million Americans are LOHAS consumers. Consumer spending by LOHAS consumers was estimated to have been $118bn on personal health products in 2005. According to the LOHAS Market Review, the U.S. LOHAS market grew by approximately 1% new joiners and 10% new spending per year. At that level of spending, the wellness products category accounts for approximately 25% of the spending amongst the LOHAS consumer category.

The Energy Supplement Market is largely defined by the Energy Beverage category. The Energy Beverage category is, by most measures, the fastest growing beverage category in North America and overseas. This category is led by Red Bull with North American sales of nearly $272 million according to Energy Drink Buyer Guide and a 50% market share in the North American market according to a recent article in Business Week Magazine. Our strategy is to use our Jugular Energy Products (“Go for the Jugular”) to side-step head-to-head competition in the beverage market but to use our Gel technology to stretch the category definition to include Energy Strips, Energy Gels and other energy related products that complement the fast growing Energy Beverage category. We believe that, in part, the high growth of the Energy Beverage category is driven by health and wellness trends that complement the LOHAS consumer category.

On March 9 2010, we terminated our license agreement with Jugular, Inc., and formed a joint venture, Gamma Jugular, LLC. By converting the Licensing Agreement to a Joint Venture, we reduced balance sheet debt payable and gained more control over the operating venture.

We are aiming to become a technology and formulation leader in the wellness products category of the fast growing LOHAS market. Our management team has experience with formulation, production and commercialization for medicated confectionary supplement products and personal care products. We have proprietary formulations for vitamin and nutritional supplements, and have developed formulations for adjunctive therapies for type II diabetes, symptoms of menopause, cognition, stress reduction, and relief from selected side effects of chemotherapies. Also, we intend to become a major competitor in personal care products.

Our management team has decades of experience in the healthcare, personal care, OTC pharmaceutical and prescription pharmaceutical industries worldwide and, in particular, in Asia. Our product offerings take advantage of the following market place characteristics:

A well defined target demographic;

Identifiable market segments for our products and known consumer purchasing patterns by targeted customers;

High growth markets in the United States, and in Asia including Greater China;

High gross margins based on volume and manufacturing know-how;

Multi-tiered price points for product and market differentiation; and

Brands with strong consumer appeal and retail sell through

Innovative product forms and product packaging. Great teasting single step product application;

Products absorbed up to 80x faster than typical pills and capsules.

We believe the combination of the above marketplace characteristics, combined with our management expertise and products, will enable our business model to achieve long term sustained profitability.

We developed our corporate infrastructure as a marketing and sales organization. We will not initially seek to acquire manufacturing in the United States or in Greater China but will instead look to leverage our management's contacts and expertise to outsource manufacturing to a third party original equipment manufacturer ("OEM"). We believe this will provide us with an advantage in cost of goods sold manufacturing margins and improve our return on assets. We may, in the future, look to acquire or partner more closely with a single manufacturer for certain products or for product distribution. Our objective is to utilize our management's marketing and sales abilities and resources to generate revenue and establish a market presence in key product categories that can be expanded as we develop local capacity in Asia. Our aim is to establish a known and recognized product brand that, we believe, will attract attention from local suppliers and retailers who will seek to carry our product offerings.

Our corporate organization today is comprised of a US based headquarters in Las Vegas, Nevada, a wholly owned subsidiary in Hong Kong (Gamma Pharmaceuticals (HK) Ltd) and a Representative office in Beijing, The Peoples Republic of China (Gamma Pharmaceuticals (HK) Limited Beijing Representative Office). We plan to use a variety of contract and third party resources in China and will undertake all invoicing and most administration for their services from our Hong Kong subsidiary.

Liquidity and Capital Resources

The following table summarizes total current assets, total current liabilities and working capital at September 30, 2009 and March 31, 2009.

	September 30, 2009			March 31, 2009			Increase / (Decrease)
							$			%

Current Assets	$	10,594		$	268,849		$	(258,255	)	(96	%)

Current Liabilities	$	1,522,973		$	937,835		$	585,138		62	%

Working Capital (deficit)	$	(1,512,379	)	$	(668,986	)	$	843,393		126	%

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of stock and by borrowings. In the future, we anticipate that we will be able to provide the necessary liquidity we need by the revenues generated from the sales of our products, however, if we do not generate sufficient sales revenues we will continue to finance our operations through equity and/or debt financings with traditional financial or industry “partners.”

Cash used in operating activities for the six months ended September 30, 2009 was $375,000 as compared to $974,000 for the six months ended September 30, 2008. This decrease in cash used in operating activities was due primarily to a decrease in cash reserves available for operations.

For the six months ended September 30, 2009, net cash used in investing activities of $2,000 was primarily the result of a decrease in cash reserves.

For the six months ended September 30, 2009, net cash provided by financing activities of $271,000, as compared to $954,000 for the six months ended September 30, 2008, was primarily the result of the default of the Kinridge Holding LLC (see note below) investment obligation in the amount of $400,000 and difficulties raising additional capital in the global capital markets.

As of September 31, 2009, we continued to use equity sales and debt financing to provide the capital we need to run our business. In the future we need to generate sufficient revenues from product sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. During the six months ended September 31, 2009 , we raised $127,000 by way of a private placement. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

On June 17, 2008, we executed a Securities Purchase Agreement with Kenridge Holdings LLC (“Kenridge”). Pursuant to the Securities Purchase Agreement, Kenridge agreed to purchase 1,333,333 shares of our restricted common stock for a total purchase price of $1,000,000 or $0.75 per shares. In connection with the Securities Purchase Agreement, we agreed to issue Kenridge 1,333,333 series “A” warrants exercisable at $0.75 per share; 1,333,333 series “B” warrants exercisable at $1.00 per share; and 1,333,333 series “C” warrants exercisable at $1.25 per share. During the second quarter ended September 30, 2008, we received $600,000 from Kenridge in exchange for 799,999 shares of the 1,333,333 shares of our restricted common stock, 799,999 series “A” warrants (of the 1,666,666 series “A”), 799,999 series “B” warrants (of the 1,666,666 series “B”) and 799,999 series “C” warrants (of the series “C”). As of the date of this filing 666,666 of the shares have been issued and 133,333 of the shares remain unissued. As of the date of this filing, Kenridge owes the Company the remaining $400,000. The Company continues to pursue Kenridge for the remaining balance of $400,000 on its investment obligation to the Company. The Company is currently evaluating its legal options and continues to maintain a dialogue with Kenridge towards resolving this matter.

Promissory Notes

On February 1, 2009, we executed a promissory note for $3,000 with an unrelated third party. The loan bears 0% interest and is due on September 30, 2009. As of the date of this filing, we have not repaid the principal amount.

On April 6, 2009, we executed a promissory note with an entity for the principal amount of $21,000. Pursuant to the promissory note, we agreed to repay the principal amount as follows; a) $4,000 on April 6, 2009; b) $4,250 on May 4, 2009; c) $4,250 on June 1, 2009; d) $4,250 on July 6, 2009; and $4,250 on August 2, 2009. During the six months ended September 30, 2009, we made principal payments totaling $8,000. As of September 30, 2009, the Company is in default.

On June 24, 2009, we executed a promissory note with an individual for the principal amount of $5,000. Pursuant to the promissory note, we agreed to repay the principal amount with no interest by June 26, 2009 or upon demand thereafter. In the event of default on payment, we agreed to issue 50,000 shares of our common stock to the individual. As of the date of this filing we have not repaid the principal amount and have not issued the 50,000 shares of common stock.

On June 17, 2009, we executed a promissory note with an individual for the principal amount of $1,000. Pursuant to the promissory note, we agreed to repay the principal amount with no interest by December 31, 2009. In the event of default on payment and the note is turned over for collection, we agree to pay all reasonable legal fees and costs of collection to the extent permitted by law.

On June 19, 2009, we executed a promissory note with an entity for the principal amount of $5,000. Pursuant to the promissory note, we agreed to repay the principal amount with no interest by December 31, 2009. In the event of default on payment and the note is turned over for collection, we agree to pay all reasonable legal fees and costs of collection to the extent permitted by law.

On July 13, 2009, we executed a promissory note with an individual for the principal amount of $25,000. Pursuant to the promissory note, we agreed to repay the principal amount with no interest by August 13, 2009. In the event of default on payment, we agreed to issue 150,000 shares of our common stock to the individual. As of the date of this filing, we have not repaid the principal amount and have not issued the 150,000 shares of common stock.

On July 13, 2009, we executed a promissory note for $25,000 with an individual for the principal amount of $25,000. Pursuant to the promissory note, we agreed to repay the principal amount with no interest by August 13, 2009. In the event of default on payment, we agreed to issue 150,000 shares of our common stock to the individual. As of the date of this filing, we have not repaid the principal amount and have not issued the 150,000 shares of common stock.

Satisfaction of our cash obligations for the next 12 months.

As of September 31, 2009 , our cash balance was $10,594. Our plan for satisfying our cash requirements for the next twelve months is through additional sales of our common stock, third party financing, and/or traditional bank financing. In the three months ended September 30, 2008, we received $600,000 from Kenridge pursuant to our agreement dated June 17, 2008. As of the date of this filing, we have not received the remaining $400,000 from Kenridge pursuant to our agreement. The Company is pursuing Kenridge for the remaining balance of $400,000 on its investment obligation to the Company. We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.

Since inception, we have financed cash flow requirements through debt financing and the issuance of common stock for cash and services. As we continue to expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of revenues from product sales, and will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings, giving consideration to loans and working diligently to move sales ahead to the extent necessary to provide working capital.

We anticipate incurring operating losses over the majority of the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving technology markets. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

As a result of our cash requirements and our lack of revenues, we anticipate continuing to issue stock in exchange for loans and/or equity financing, which may have a substantial dilutive impact on our existing stockholders.

Going Concern

The consolidated financial statements included in this filing have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Gamma has incurred a net loss of $1,510,775 for the six months ended September 30, 2009, with an accumulated loss of $11,821,975. Gamma’s current liabilities exceed its current assets by $1,512,379 as of September 30, 2009.

These conditions give rise to substantial doubt about Gamma’s ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should Gamma be unable to continue as a going concern. Gamma’s continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

Summary of product research and development that we will perform for the term of our plan.

We do not anticipate performing any significant product research and development under our plan of operation until such time as we can raise adequate working capital to sustain our operations. To date, all research and development work has been undertaken in-house, by management, with input from outside consultants. Management’s experience with research and development enable the Company to reasonably control most associated research and development expenses.

Expected purchase or sale of any significant equipment.

We do not anticipate the purchase or sale of any significant equipment, as such items are not required by us at this time or anticipated to be needed in the next twelve months.

Significant changes in the number of employees.

We currently have 3 full time employees in China and in the United States. We intend to hire additional full time employees to fill specific functions in our organization as product sales commence and our operations expand. We will also hire part-time or independent contractors in connection with certain projects in Greater China and the United States. We expect to have full-time-equivalent employees working directly for our distributors, manufacturers, and advertising and public relations agencies. We will vary employment as product demand dictates. We have planned to expand our full time employment over the next 12 months to meet our existing or anticipated operational needs.

Critical Accounting Policies

Intangible Assets

Financial Accounting Standards Board (“FASB”) Statement No. 142, Goodwill and Other Intangible Assets ("FAS 142") requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of FAS 142. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment. As of September 30, 2009, the Company believes there is no impairment of its intangible assets.

The Company's intangible assets consist of the costs of filing various trademarks. The trademarks are recorded at cost. The Company determined that the trademarks have an estimated useful life of 10 - 15 years and will be reviewed annually for impairment. Amortization will be recorded over the estimated useful life of the assets using the straight-line method for financial statement purposes. The Company will commence amortization once the economic benefits of the assets begin to be consumed and they plan to record amortization once production begins and the related revenues are recorded.

Revenue Recognition

The Company recognized revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonably assured. The Company will primarily derive its revenues from the sales of its vitamins, nutriceutical products and personal care products.

Stock Based Compensation

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R (revised 2004), “Share-Based Payment,” requiring the Company to recognize expense related to the fair value of its employee stock option awards. SFAS-123R eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 (APB-25), “Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, Peter Cunningham and Joseph Cunningham, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on that evaluation, Messrs. Cunningham concluded that our disclosure controls and procedures are ineffective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material legal proceedings.

Item 1A. Risk Factors.

Our business, financial condition and operating results could be adversely affected by any of the following factors, in which case the value of our equity securities could decline, and investors could lose part or all of their investment. The risks and uncertainties described below are not the only ones that the Company faces. Additional risks and uncertainties not presently known to management, or that management currently thinks are immaterial, may also impair future business operations.

RISKS RELATING TO OUR COMPANY.

We are required to make accounting estimates and judgments in preparing our consolidated financial statements.

In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the United States, we make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain information that is used in the preparation of our consolidated financial statements is dependent on future events, or cannot be calculated with a high degree of precision from data available. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. The estimates and the assumptions having the greatest amount of uncertainty, subjectivity and complexity are related to our accounting for bad debts, returns and allowances, warranty and repair costs, derivatives, and asset impairments. Actual results could differ materially from the estimates and assumptions that we use, which could have a material adverse effect on our financial condition and results of operations.

Our auditor’s report reflects the fact that without realization of additional capital, it would be unlikely for us to continue as a going concern.

As a result of our deficiency in working capital at September 30, 2009, our auditors have included a paragraph in their report regarding substantial doubt about our ability to continue as a going concern. Our plans in this regard are to seek additional funding through future equity private placements, with traditional financing firms and/or with an industry partner, or debt facilities.

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

We have a limited operating history. We were established in 1993, for the purpose of seeking out business opportunities, including acquisitions that the Board of Directors, in its discretion, believes to be good opportunities. Pursuant to the Technology Transfer Agreement and the Employment Agreements with our managements the Company is poised to begin operations in the field of OTC pharmaceuticals, vitamins, and supplements. We will be heavily dependent on the skills, talents, and abilities of our management to successfully implement our business plan. The marketing and sale of vitamins, nutriceuticals, OTC pharmaceutical and personal care products is highly risky and speculative. Our current cash balance will not be adequate for us to continue our operations for this fiscal year; and, in order to compete in this new business opportunity an additional cash infusion will be required and without such additional cash infusion we will very rapidly deplete our current cash reserve. In such event, we may be forced to cease operations and investors' shares would become worthless.

Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving markets such as the growing market for vitamins and nutriceuticals in Greater China and the United States. Some of these risks and uncertainties relate to our ability to:

offer products to attract and retain a larger customer base;

attract additional customers and increased spending per customer;

increase awareness of our brands and continue to develop customer loyalty;

respond to competitive market conditions;

respond to changes in our regulatory environment;

manage risks associated with intellectual property rights;

maintain effective control of our costs and expenses;

raise sufficient capital to sustain and expand our business;

attract, retain and motivate qualified personnel; and

upgrade our technology to support additional research and development of new products.

If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

We will need additional capital to fund our operations, and we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

As of September 30, 2009, we had $10,594 in cash. Our management plans to raise additional equity capital to begin executing our business plan, but there can be no assurance that we will be able to raise such funds. Even if we are able to raise additional capital to begin to execute our business plan, as we continue to implement our plan to expand into additional markets, we will experience increased capital needs and we will not have enough capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (1) our profitability; (2) the release of competitive products by our competition; (3) the level of our investment in research and development; and (4) the amount of our capital expenditures. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

If we cannot obtain initial or additional funding, we may be required to:

limit our marketing efforts; and

decrease or eliminate capital expenditures.

Such reductions could materially adversely affect our business and our ability to compete.

Even if we do find a source of initial and additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

We need to manage growth in operations to maximize our potential growth and achieve our expected revenues.

In order to maximize potential growth in our current and potential markets, we believe that we must expand our marketing operations. To fund our anticipated expansion, we need an increased amount of working capital. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

If we are not able to implement our strategies in achieving our business objectives, our business operations and financial performance may be adversely affected.

Our business plan is based on circumstances currently prevailing and the bases and assumptions that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involved in various stages of development. However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial performance may be adversely affected.

We may have difficulty defending our intellectual property rights from infringement.

We regard our service marks, trademarks, copyrights, trade secrets, pending patent applications and similar intellectual property as critical to our success. We will rely on trademark, copyright, patent and trade secret law, as well as confidentiality and license agreements with our employees, customers, partners and others to protect our proprietary rights. We have registered a trademark in the United States and will seek to utilize our US trademark approval in all markets of interest including the People's Republic of China. No assurance can be given that our copyrights, trademarks or other intellectual property will not be challenged, invalidated, infringed or circumvented, or that our intellectual property rights will provide a competitive advantage to us. There can be no assurance that we will be able to obtain a license from a third-party technology that we may need to conduct our business or that such technology can be licensed at a reasonable cost.

We intend to sell our products mainly in China, the United States and other significant territories in the Greater China area including Hong Kong, Macau, Taiwan, (Greater China) and South Korea. Asia including Greater China will remain our primary market for the foreseeable future. We are looking at other markets, but we do not have immediate plans to market our products into any other countries or regions. Other than the United States, China and Hong Kong we have not applied for any trademark or patent protection in any other countries but intend to do so in the near future. Therefore, the measures we take to protect our proprietary rights may be inadequate and we cannot give you any assurance that our competitors will not independently develop formulations and processes that are substantially equivalent or superior to our own or copy our products.

Intense competition from existing and new entities may adversely affect our revenues and profitability.

We compete with other companies, many of whom are developing or can be expected to develop products similar to ours. Our market is a large market with many competitors. Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing and other resources than we presently possess. Some of our competitors have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to brand our products and create brand awareness for our brands so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

The products and the processes we use could expose us to substantial liability.

We face an inherent business risk of exposure to product liability claims in the event that the use of our technologies or products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. These risks will exist for those products in clinical development and with respect to those products that have received regulatory approval for commercial sale. We plan to carry insurance policies which are customary for enterprises in our industry. We do not expect any special restrictions or exceptions attached to this coverage other than fraudulent or criminal conduct on the part of the claimant.

Our failure to comply with current or future governmental regulations could adversely affect our business.

The formulation, manufacturing, packaging, labeling, advertising, distribution, and sale of nutriceuticals, such as those sold by us, are subject to regulation by a number of federal, state and local agencies, principally, the FDA, and the FTC, as well as foreign agencies in areas where we may operate. Among other matters, this regulation is concerned with product safety and claims made with respect to a product's ability to provide health-related benefits. These agencies have a variety of procedures and enforcement remedies available to them, including the following:

initiating investigations;

issuing warning letters and cease and desist orders;

requiring corrective labeling or advertising;

requiring consumer redress, such as requiring that a company offer to repurchase products previously sold to consumers;

seeking injunctive relief or product seizures; and

imposing civil penalties or commencing criminal prosecution.

Federal and state agencies have in the past used these remedies in regulating participants in the nutriceuticals industry, including the imposition by federal agencies of civil penalties in the millions of dollars against a few industry participants. In addition, publicity related to nutriceuticals may result in increased regulatory scrutiny of the nutriceuticals industry.

Our failure to comply with applicable laws could subject us to severe legal sanctions, which could have a material adverse effect on our business and results of operations. The regulatory environment in which we operate could change and such regulatory environment, or any specific action taken against us, could result in a material adverse effect on our business and operations. A state could interpret claims presumptively valid under federal law as illegal under that state's regulations, and future FDA regulations or FTC decisions could restrict the permissible scope of such claims. Any such proceedings or investigations or any future proceedings or investigations could have a material adverse effect on our business or operations.

We depend on our key management personnel and the loss of their services could adversely affect our business.

We will place substantial reliance upon the efforts and abilities of our executive officers: Peter Cunningham, our Chief Executive Officer; Joseph Cunningham, our Chief Financial Officer; and Hao Zhang, our Chief Marketing Officer. The loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance on the lives of these individuals.

We may never pay any dividends to our stockholders.

Our board of directors does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Our future success will depend on our ability to anticipate and respond in a timely manner to changing consumer demands.

Our future success will depend on our products’ appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. If our products do not meet consumer demands, our sales may decline. In addition, our growth depends upon our ability to develop new products through product line extensions and product modifications, which involve numerous risks. We may not be able to accurately identify consumer preferences and translate our knowledge into customer-accepted products or successfully integrate these products with our existing product platform or operations. We may also experience increased expenses incurred in connection with product development, marketing and advertising that are not subsequently supported by a sufficient level of sales, which would negatively affect our margins. Furthermore, product development may divert management’s attention from other business concerns, which could cause sales of our existing products to suffer. We cannot assure you that newly developed products will contribute favorably to our operating results.

If our products fail to perform properly, our business could suffer with increased costs and reduced income.

Our products may fail to meet consumer expectations. Failure of our products to meet expectations could:

damage our reputation;

decrease sales;

incur costs related to returns;

delay market acceptance of our products;

result in unpaid accounts receivable; and

divert our resources to reformulation or alternative products.

International unrest or foreign currency fluctuations could adversely affect the Company’s results.

There are a number of risks arising from the Company's international business, including:

foreign currencies it receives for sales outside the U.S. could be subject to unfavorable exchange rates with the U.S. dollar and reduce the amount of revenue that the Company recognizes;

the possibility that unfriendly nations or groups could boycott its products;

general economic and political conditions in the markets in which it operate;

potential increased costs associated with overlapping tax structures;

more limited protection for intellectual property rights in some countries;

unexpected changes in regulatory requirements;

the difficulties of compliance with a wide variety of foreign laws and regulations;

longer accounts receivable cycles in certain foreign countries; and

import and export licensing requirements.

A significant portion of the Company's business is conducted in currencies other than the U.S. dollar, which is its reporting currency. The Company recognizes foreign currency gains or losses arising from its operations in the period incurred. As a result, currency fluctuations between the U.S. dollar and the currencies in which the Company does business have caused, and will continue to cause, foreign currency transaction gains and losses. The Company cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures, and the potential volatility of currency exchange rates. The Company engages in limited foreign exchange hedging transactions to mitigate the impact of this volatility on its operations, but its strategies are short-term in nature and may not adequately protect its operating results from the full effects of exchange rate fluctuations.

RISKS RELATING TO THE PEOPLE'S REPUBLIC OF CHINA

There could be changes in government regulations towards the pharmaceutical, health supplement and food industries that may adversely affect our business.

The import, manufacture and sale of food products, supplements, and personal care products in the PRC is heavily regulated by many state, provincial and local authorities. These regulations significantly increase the difficulty and costs involved in obtaining and maintaining regulatory approvals for marketing new and existing products. Our future growth and profitability will depend to a large extent on our ability to obtain regulatory approvals.

The State Food and Drug Administration of China recently implemented new guidelines for licensing of food and supplement products. All manufacturers, importers and marketers are subject to business license approval and achievement of quality standards for consumer protection as outlined in the regulations.

Moreover, the laws and regulations regarding acquisitions of any of food, personal care, supplement or pharmaceutical industries in the PRC may also change and may significantly impact our ability to grow through acquisitions.

Economic, political and social conditions and government policies in China could have a material adverse effect on our business, financial condition and results of operations.

The economy of China differs from the economies of most developed countries in many respects, including, but not limited to:

structure;

capital re-investment;

government involvement;

allocation of resources;

level of development;

control of foreign exchange;

growth rate; and

rate of inflation.

The economy of China has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industries by imposing industrial policies. It also exercises significant control over Chinese economic growth through allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Policies and other measures taken by the PRC government to regulate the economy could have a significant negative impact on economic conditions in China, with a resulting negative impact on our business. For example, our financial condition and results of operations may be materially and adversely affected by:

new laws and regulations and the interpretation of those laws and regulations;

the introduction of measures to control inflation or stimulate growth;

changes in the rate or method of taxation;

the imposition of additional restrictions on currency conversion and remittances abroad; or

any actions which limit our ability to develop, produce, import or sell our products in China, or to finance and operate our business in China.

Further movements in exchange rates may have a material adverse effect on our financial condition and results of operations.

We expect that the majority of our China sales will be denominated in Renminbi and our domestic sales will be denominated primarily in U.S. dollars. In addition, we expect to incur a portion of our cost of sales in Euros, U.S. dollars, Australian Dollars and Canadian Dollars in the course of our purchase of imported production equipment and raw materials. Since 1994, the conversion of the Renminbi into foreign currencies has been based on rates set by the People's Bank of China, and the exchange rate for the conversion of the Renminbi to U.S. dollars had generally been stable. However, starting from July 21, 2005, the PRC government moved the Renminbi to a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. As a result, the Renminbi is no longer directly pegged to the U.S. dollar. The exchange rate of the U.S. dollar against the Renminbi was adjusted from approximately RMB8.28 per U.S. dollar on July 20, 2005 to RMB6.83 per U.S. dollar on November 22, 2008. The exchange rate may become volatile, the Renminbi may be revalued further against the U.S. dollar or other currencies or the Renminbi may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the Renminbi against the U.S. dollar or other currencies, any of which could have a material adverse effect on our financial condition and results of operations.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency outside of China. We expect to receive the majority of our revenues in Renminbi. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy its foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required in those cases in which Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at is discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our stockholders.

We will be subject to restrictions on making payments from China.

We are incorporated in the State of Delaware and at present do not have any assets or conduct any business operations, but our plan is for our initial business to be conducted in China. As a result, we will rely on payments or dividends from our China cash flow to fund our corporate overhead and regulatory obligations. The PRC government also imposes controls on the conversion of Renminibi into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. If we are unable to receive all of the revenues from our operations through contractual or dividend arrangements, we may be unable to pay dividends on our shares of common stock.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business in China primarily through a representative office in the PRC. A representative office in China is limited in its commercial activities. We use our representative office for marketing and sales administration for sales conducted between China and our parent company or designate. Our operations in China will be governed by PRC laws and regulations. We are generally subject to laws and regulations applicable to foreign investments in China. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully-integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

It may be difficult to effect service of process upon us or our directors or senior management who live in the PRC or to enforce any judgments obtained from non-PRC courts.

Initially, the majority of our operations will be conducted within the PRC. In addition, one of our Directors and executive officers resides in China. You may experience difficulties in effecting service of process upon us, our Director or our senior management as it may not be possible to effect such service of process inside China. In addition, we are advised that China does not have treaties with the United States and many other countries providing for reciprocal recognition and enforcement of court judgments. Therefore, recognition and enforcement in China of judgments of a court in the United States or certain other jurisdictions may be difficult or impossible.

RISKS RELATING TO OUR STOCK

Our Certificate of Incorporation authorizes the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the board of directors which may include certain anti-takeover provisions. This could limit the price investors might be willing to pay in the future for our common stock.

Our certificate of incorporation has authorized issuance of up to 2,000,000 shares of preferred stock ("Preferred Stock") in the discretion of our board of directors. Any undesignated shares of Preferred Stock may be issued by our board of directors; no further stockholder action is required. If issued, the rights, preferences, designations and limitations of such Preferred Stock would be set by the board of directors and could operate to the disadvantage of the outstanding common stock. Such terms could include, among others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers.

Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

Deliver to the customer, and obtain a written receipt for, a disclosure document;

Disclose certain price information about the stock;

Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

Send monthly statements to customers with market and price information about the penny stock; and

In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

As a result of not being current on our reporting requirements, we were removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as we were, generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period, then we will be ineligible for quotation on the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Effective July 24, 2009, our common stock is quoted on the Pink Sheets and ceased being quoted on the OTCBB, as a result of a notice of OTCBB ineligibility received from FINRA due to the Company filing our Annual Report, Form 10-K seven minutes late.

As the Company’s stock has already been quoted on the Pink Sheet exchange since going public in January 2008, we do not anticipate any disruption for current stockholders or the investing public.

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Gamma; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Gamma are being made only in accordance with authorizations of management and directors of Gamma, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Gamma's assets that could have a material effect on the financial statements.

We have a limited number of personnel that are required to perform various roles and duties as well as be responsible for monitoring and ensuring compliance with our internal control procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In May 2009, we issued a total of 1,435,099 shares of our common stock to the following:

Name	No. of Shares	Reason
Peter Cunningham	112,545	Executive variable compensation pool plan
Joseph Cunningham	56,250	Executive variable compensation pool plan
Hao Zhang	56,250	Executive variable compensation pool plan
Allen Campbell	43,000	Services
TKM Accounting Services	110,954	Services
SPC Consultants	800,000	Services
Jugular	93,600	License Fee
Eugene Richards	71,250	Services
Gary Reeves	71,250	Services
John Cunningham	20,000	Services

We believe that the issuances of the shares were exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) . The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the Company’s financial statements and Exchange Act reports. We reasonably believe that the recipients, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our president and directors on several occasions prior to their investment decision.

As of the quarter ended June 30, 2009, we issued a total of 3,040,000 shares of our restricted common stock to 6 accredited investors (for a total purchase price of $304,000, all of which was paid in cash). We believe that the issuances of the shares were exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the Company’s financial statements and Exchange Act reports. We reasonably believe that the recipients, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our president and directors on several occasions prior to their investment decision.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter covered by this report.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

On July 23, 2009, we issued a press release announcing that effective at the open of business on July 24, 2009, the Company’s common stock would be quoted on the Pink Sheets and it would cease being quoted on the OTCBB, as a result of a notice of OTCBB ineligibility received from FINRA due to the Company filing its Annual Report, Form 10-K, seven minutes late. A copy of the press release is attached hereto as Exhibit 99.13.

On April 6, 2009, we entered into a Non Exclusive Corporate Advisory Agreement with Atlanta Capital Partners, LLC (“ACP”), wherein we engaged ACP as our Strategic Corporate Advisor. In the event ACP is involved in advising, introducing and/or consulting to the Company on any financing accepted by the Company, we will compensate ACP as follows: 1) a bonus consulting fee equal to 4% of any non-subordinated debt financing; 2) a bonus consulting fee equal to 10% of any subordinated debt financing; and 3) a $500 an hour consulting fee will be paid to ACP if an equity financing or any other type of financing that is handled by a broker/dealer and where ACP assists in the coordination of such activity. The term of the agreement will last until the Company provides ACP a written notification of termination of the agreement. This agreement has since been terminated.

On May 10, 2009 , we entered into an advisory agreement with Euro Trend Trader, Inc. ("EuroTrend"), which provided that EuroTrend would provide non-exclusive consulting services to us including: (i) the introduction of Gamma to: potential funding sources, market makers and new strategic relationships and (ii) investor relations support. In return for these services, we agreed to pay EuroTrend: (i) a cash fee of $10,000, (ii) a $3,000 monthly retainer, (iii) 500,000 shares of our restricted stock and (iv) a finder's fee, upon the closing a financing based upon a funding source introduced by EuroTrend, consisting of a 2% cash fee and, for direct equity investments – a 10% cash fee form monies raised up to $100,000 and 15% for monies raised from $100,000 to $1,000,000 and 10% again on monies raised above 1,000,000. The agreement with EuroTrend had a term of six (6) months.

On or about April 29, 2009 and subsequently modified on May 15, 2009, we entered a consulting agreement with SPC Consultants LLC ("SPC"), whereby SPC was to provide certain investor relation services to the Company. As consideration for its services, we agree to issue SPC 800,000 restricted shares upon signing the agreement and the Company would endeavor to make available 100,000 shares of freely tradeable common stock on the first day of each month following the third month of the agreement. The agreement had a term of six months. However, beginning in July of 2009, the Company disputed certain activities claimed by SPC resulting in the agreement being terminated on September 15, 2009. Currently, the Company is considering its options under the advisement of it legal counsel.

Item 6. Exhibits.

The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated, Exhibits that were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indicated in parentheses.

2.1(a)	Amended and Restated Certificate of Incorporation, incorporated by reference to Form SB-2 (File No. 33-61890-FW).

2.1(b)	Certificate of Amendment to Certificate of Incorporation, incorporated by reference to Form 8-K filed on April 13, 2006 (File No. 33-61890, Exhibit 3.2).

2.1(c)	Certificate of Amendment to Certificate of Incorporation, incorporated by reference to Form 10-KSB for the fiscal year ended March 31, 2006 (File No. 033-61890, Exhibit 3.3).

2.1(d)	Certificate of Amendment to Certificate of Incorporation, incorporated by reference to Form 10-KSB of the Registration for the fiscal year ended March 31, 2006 (File No. 033-61890, Exhibit 3.4).

3.1	By-laws, incorporated by reference to Form SB-2 (File No. 33-61890-FW, Exhibit 3.2).

10.17	Inventory Consignment Agreement between Gamma and Bridgeland, incorporated by reference to Form 10-Q of the Registrant for the quarter ended December 31, 2008 (File No. 0-53355, Exhibit 10.17).

10.18	Inventory Consignment Agreement between Bridgeland and Parco, incorporated by reference to Form 10-Q of the Registrant for the quarter ended December 31, 2008 (File No. 0-53355, Exhibit 10.18).

31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.13	Press Release dated July 23, 2009 – GMPM Announces Change in Trading Venue.

SIGNATURES

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

	GAMMA PHARMACEUTICALS INC.
	(Registrant)



Date: July, 28 2010
	By: /s/ Joseph Cunningham
	Joseph Cunningham, Chief Financial Officer
	(On behalf of the registrant and as
	principal financial officer)

Gamma Pharmaceuticals Inc - FORM 10-Q - July 28, 2010

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