UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 of principal executive offices)

(702) 989-5262

(Registrant’s telephone number, including area code)

Copies of Communications to:

Stoecklein Law Group

Emerald Plaza

402 West Broadway

Suite 690

San Diego, CA 92101

(619) 704-1310

Fax (619) 704-0556

Indicate by check mark whether the registrant (1) 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 x 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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares of Common Stock, $0.001 par value, outstanding on February 12, 2009, was 20,035,156 shares.

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

Gamma Pharmaceuticals, Inc.

Consolidated Balance Sheets

	December 31,			March 31,
	2008			2008
	(Unaudited)
Assets

Current assets:
Cash	$	2,845		$	71,209
Accounts receivable		9,908			47,451
Inventory		145,334			128,131
Prepaid expenses		-			37,773
Total current assets		158,087			284,564

Fixed assets, net		18,474			18,180
Website, net		37,966			-
Intangible assets, net		6,157,015			6,604,634

Total assets	$	6,371,542		$	6,907,378

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expense	$	337,513		$	224,770
Accrued compensation		817,178			492,156
Accrued payroll taxes		61,744			30,575
Current portion of long term notes payable, net		276,344			197,091
Total current liabilities		1,492,779			944,592

Long-term liabilities
Notes payable, net		507,507			580,350
Total long-term liabilities		507,507			580,350

Total liabilities		2,000,286			1,524,942

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.001 par value, 2,000,000 shares
authorized, no shares issued or outstanding		-			-
Common stock, $0.001 par value, 100,000,000 shares
authorized, 19,109,545 issued and 18,564,485 outstanding
and 16,759,399 shares issued and outstanding
at December 31, 2008 and March 31, 2008, respectively		19,110			16,759
Additional paid in capital		13,856,725			11,900,452
Stock payable		150,000			95,001
Prepaid stock compensation		(140,625	)		(225,000	)
Accumulated deficit		(9,513,954	)		(6,404,776	)
Total stockholders' equity		4,371,256			5,382,436

Total liabilities and stockholders' equity	$	6,371,542		$	6,907,378

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

Gamma Pharmaceuticals

Consolidated Statements of Operations

(Unaudited)

	For the three months ended						For the nine months ended
	December 31,						December 31,
	2008			2007			2008			2007

Revenues	$	24,606		$	96,407		$	56,141		$	99,066

Cost of goods sold:
Materials		5,630			92,509			23,323			101,862
Labor		2,260			-			8,932			-
Freight		4,041			-			6,066			-
Consignment fees		2,535			-			2,535			-
Total cost of goods sold		14,466			92,509			40,856			101,862


Gross profit (loss)		10,140			3,898			15,285			(2,796	)

Expenses:
Consulting - stock-based		198,575			375,000			381,008			642,699
Consulting		23,700			65,517			306,635			797,626
Executive compensation - stock-based		-			273,437			232,874			273,437
Executive compensation - shares to be issued		16,875			84,375			118,125			84,375
Executive compensation		196,625			42,099			578,666			433,494
General and administrative expenses - stock-based		21,000			187,500			75,500			187,500
General and administrative expenses		495,608			225,998			1,366,341			41,545
Total expenses		952,383			1,253,926			3,059,149			2,460,676

(Loss) from operations		(942,243	)		(1,250,028	)		(3,043,864	)		(2,463,472	)

Other income (expense):
Interest income		-			669			692			2,007
Interest expense		(21,645	)		(5,739	)		(66,013	)		(17,216	)
Foreign currency transaction gain (loss)		7			-			7			-
Total other income (expense)		(21,638	)		(5,070	)		(65,314	)		(15,209	)

(Loss) before provision for income taxes		(963,881	)		(1,255,098	)		(3,109,178	)		(2,478,681	)

Provision for income taxes		-			-			-			-

Net (loss)	$	(963,881	)	$	(1,255,098	)	$	(3,109,178	)	$	(2,478,681	)

Weighted average number of common
shares outstanding - basic and fully diluted		18,923,389			14,443,045			18,066,021			13,121,753

Net (loss) per share - basic and fully diluted	$	(0.05	)	$	(0.09	)	$	(0.17	)	$	(0.19	)

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

Gamma Pharmaceuticals

Consolidated Statements of Cash Flows

(Unaudited)

	For the nine months ended
	December 31,
	2008			2007
Cash flows from operating activities
Net (loss)	$	(3,109,178	)	$	(2,478,681	)
Adjustments to reconcile net (loss) to
net cash (used) by operating activities:
Depreciation and amortization		454,679			153,926
Shares issued for services		348,636			940,136
Shares issued for charitable donation		-			187,500
Shares issued for executive compensation		345,375			-
Amortization of debt discount		65,693			17,217
Amortization of prepaid stock compensation		340,875			-
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		37,543			(45,695	)
(Increase) in inventory		(17,203	)		(4,102	)
Decrease in prepaid expenses		37,773			1,026
Increase in accounts payable and related party payable		112,743			21,952
Increase in accrued compensation		325,022			210,877
Increase in accrued payroll taxes		31,169			26,188
Net cash (used) by operating activities		(1,026,873	)		(969,656	)

Cash flows from investing activities
Purchase of fixed assets		(7,354	)		(22,673	)
Purchase of website		(37,965	)		-
Purchase of intangible assets		-			(32,000	)
Net cash (used) by investing activities		(45,319	)		(54,673	)

Cash flows from financing activities
Proceeds from sale of common stock		1,050,000			926,725
Principal payments on notes payable		(46,172	)		(37,500	)
Net cash provided by financing activities		1,003,828			889,225

Net (decrease) in cash		(68,364	)		(135,104	)
Cash - beginning		71,209			160,664
Cash - ending	$	2,845		$	25,560

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

Non-cash transactions:
Minimum guaranteed payments for intangible assets:
Issuance of common stock	$	13,111		$	91,186
Issuance of shares for stock payable	$	-		$	827,225
Issuance of shares for prepaid stock compensation	$	256,500		$	-

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

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(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, 2008.

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. The Company aims to channel its commercial arrangements for greater China through its 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.

Prior Year in Development Stage

The Company reentered the development stage during the year ended March 31, 2007. The year ended March 31, 2008 is the first year which the Company is considered an operating company and is no longer in the development stage.

Inventory

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

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

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 December 31, 2008.

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.

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 December 31, 2008, 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 nine months ended December 31, 2008, three customers accounted for 100% of sales. Of the total sales, 56% was generated from sales in the U.S. and 44% from sales in China. During the nine months ended December 31, 2007, one customer accounted for 100% of sales. Of the total sales, 100%

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

was generated from sales in the U.S. As of December 31, 2008 and March 31, 2008, one customer accounted for 100% and 100% of accounts receivable, respectively.

The Company was advised by its sole U.S. 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 three months ended December 31, 2008 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.

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.

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:

SFAS 161: In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities", an amendment of SFAS No. 133. SFAS 161 applies to all derivative instruments and non-derivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161 requires entities to provide greater transparency through additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity's financial position, results of operations, and cash flows. SFAS 161 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2008. The Company does not expect the adoption of SFAS 161 will have a material impact on its financial condition or results of operation.

SFAS 162: In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS 162 will provide framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. SFAS 162 will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411. The Company does not expect the adoption of SFAS 162 will have a material impact on its financial condition or results of operation.

SFAS 163: In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60.” SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on its financial condition or results of operation.

FSP FAS 142-3

In April 2008, the FASB issued Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”) which amends the factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, “Goodwill and Other Intangible Assets” (“FAS No. 142”). FSP FAS 142-3 applies to intangible assets that are acquired individually or with a group of assets and intangible assets acquired in both business combinations and asset acquisitions. It removes a provision under FAS No. 142, requiring an entity to consider whether a contractual renewal or extension clause can be accomplished without substantial cost or material modifications of the existing terms and conditions associated with the asset. Instead, FSP FAS 142-3 requires that an entity consider its own experience in renewing similar arrangements. An entity would consider market participant assumptions regarding renewal if no such relevant experience exists. FSP FAS 142-3 is effective for year ends beginning after December 15, 2008 with early adoption prohibited. The Company does not expect the adoption of FSP FAS 142-3 will have a material impact on its financial condition or results of operation.

EITF 03-6-1

In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application of EITF 03-6-1 is prohibited. It also requires that all prior-period EPS data be adjusted retrospectively. The Company does not expect the adoption of EITF 03-6-1 will have a material impact on its financial condition or results of operation.

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 $3,109,178 for the nine months ended December 31, 2008, with an accumulated loss of $9,513,954. The Company’s current liabilities exceed its current assets by $1,334,692 as of December 31, 2008.

These conditions give rise to 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 Company’s growth targets and continuing corporate development. However, there is no assurance that the Company will be successful in raising such financing.

Note 5: Inventory

Inventories consisted of the following:

	December 31,
	2008
Finished goods	$	111,961
Work-in-process		17,266
Raw materials		16,107
Total	$	145,334

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Note 6: Fixed Assets

Fixed assets as of consisted of the following:

	December 31,
	2008
Computer equipment	$	18,868
Equipment		12,825
Furniture and fixtures		1,087
Accumulated depreciation		(14,306	)
	$	18,474

During the nine months ended December 31, 2008 and 2007, the Company recorded depreciation expense of $7,060 and $4,720, 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 December 31, 2008.

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.

During the nine months ended December 31, 2008 and 2007, the Company recorded amortization expense of $447,619 and $0, respectively.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Note 8: 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.

The Company raised funds via private placement (the “August 2006 Private Placement”). Each unit consists of one share of common stock, one Series A warrant, one Series B warrant and one Series C warrant and is sold at $0.75 per unit. The warrants were sold in three series and expire in 5 years. The Series A warrants are exercisable for cash at an exercise price of $0.75 per share. The Series B warrants are exercisable for cash at an exercise price of $1.00 per share. The Series C warrants are exercisable for cash at an exercise price of $1.25 per share. The warrants vest immediately upon issuance. The exercise prices of the warrants are subject to adjustment in certain circumstances, including downward adjustment upon issuance by the Company of common stock at a per share price less than the exercise price of the warrants. The Company anticipates using these proceeds to commence implementation of the Company’s growth strategy and for general working capital purposes.

The Company has agreed to file a registration statement with the SEC, within 180 days following the final Closing of the August 2006 Private Placement, using its best efforts, a registration statement on Form S-1 (or such other form as applicable) registering the resale of the shares of Common Stock and the shares of Common Stock issuable upon the exercise of the Investor Warrants. In addition, the Company has agreed, to the best of its abilities, to keep such registration statement current and effective. At present, the shares and warrants are not registered and the Company can settle in unregistered shares and warrants. The Company is not obligated under any restrictions related to this effort.

The offer and sale of the shares of common stock, the warrants and the shares of common stock underlying the warrants were not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, as transactions not involving any public offering.

This offering was formally closed on June 30, 2008.

During the three months ended June 30, 2008, the Company sold 533,333 shares of our common stock and 1,599,999 common stock purchase warrants to several accredited investors in a private placement. The terms of the private placement are the same as the August 2006 Private Placement (see above). The gross proceeds from the sale were $400,000 for the common stock and up to $1,599,999 should all of the warrants be exercised for cash. As of September 30, 2008, the shares and warrants have been issued.

On May 1, 2008, the Company issued 3,529 shares of common stock to Jugular, Inc. as part of the guaranteed quarterly payments. The shares were valued at the fair market value of the stock at $4,411.

On May 1, 2008, the Company issued 34,000 shares of common stock to an entity for legal services rendered. The shares were valued at the fair market value of the stock at $42,500.

On May 1, 2008, the Company issued a total of 5,000 shares of common stock to individuals for consulting services rendered. The shares were valued at the fair market value of the stock at $6,250.

During the three months ended September 30, 2008, the Company sold 799,999 shares of our common stock and 2,399,997 common stock purchase warrants an accredited investor in a private placement. The terms of the private placement are the same as the August 2006 Private Placement (see above). The gross proceeds from the sale were $600,000 for the common stock and up to $2,399,997 should all of the

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

warrants be exercised for cash. As of September 30, 2008, only 666,666 shares have been issued and the remaining 133,333 shares have not been issued and are recorded in stock payable for $100,000. The warrant certificates have been issued and are reflected in the warrant disclosures.

On July 14, 2008, the Company issued 56,251 shares of common stock to the executives as part of the variable compensation award. The shares were valued at the fair market value of the stock at $112,502. Additionally, the executives received 56,249 shares of common stock as a bonus. The shares were valued at the fair market value of the stock at $79,499.

On July 14, 2008, the Company issued a total of 333,390 shares of common stock to individuals for consulting and accounting services rendered. The shares were valued at the fair market value of the stock at $111,686.

During the three months ended December 31, 2008, the Company sold 26,667 shares of our common stock and 80,001 common stock purchase warrants to an accredited investor in a private placement. The terms of the private placement are the same as the August 2006 Private Placement (see above). The gross proceeds from the sale were $20,000 for the common stock and up to $80,001 should all of the warrants be exercised for cash. As of December 31, 2008, no shares have been issued and are recorded in stock payable for $20,000. The warrant certificates have been issued and are reflected in the warrant disclosures.

During the three months ended December 31, 2008, the Company sold 75,000 shares of our common stock and 225,000 common stock purchase warrants to an accredited investor in a private placement. The gross proceeds from the sale were $30,000 for the common stock and up to $225,000 should all of the warrants be exercised for cash. As of December 31, 2008, no shares have been issued and are recorded in stock payable for $30,000. The warrant certificates have been issued and are reflected in the warrant disclosures.

On October 24, 2008, the Company issued 112,455 shares of common stock to the executives as part of the variable compensation award that was accrued in executive compensation. The shares were valued at the fair market value of the stock at $156,375.

On October 24, 2008, the Company issued a total of 163,105 shares of common stock to individuals for consulting, public relations and accounting services rendered. The shares were valued at the fair market value of the stock at $103,300.

On October 24, 2008, the Company issued 14,500 shares of common stock to Jugular, Inc. as part of the guaranteed quarterly payments. The shares were valued at the fair market value of the stock at $8,700.

On November 11, 2008, the Company issued a total of 255,000 shares of common stock to individuals for consulting and public relations services rendered. The shares were valued at the fair market value of the stock at $135,150.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

Note 9: Stock Warrants

The following is a summary of the status of all of the Company’s stock warrants as of December 31, 2008 and changes during the nine months ended on that date:

	Number Of Warrants		Weighted-Average Exercise Price
Outstanding at March 31, 2008		8,194,396	$	1.00
Granted		3,944,997	$	1.00
Exercised		-	$	0.00
Cancelled		-	$	0.00
Outstanding at December 31, 2008		12,139,393	$	1.00
Warrants exercisable at March 31, 2008		8,194,396	$	1.00
Warrants exercisable at December 31, 2008		12,139,393	$	1.00

The following tables summarize information about stock warrants outstanding and exercisable at December 31, 2008:

		STOCK WARRANTS OUTSTANDING
Exercise Price		Number of Warrants Outstanding		Weighted-Average Remaining Contractual Life in Years		Weighted- Average Exercise Price
$	0.75		4,046,491		3.75	$	0.75
$	1.00		4,054,951		3.75	$	1.00
$	1.25		4,037,951		3.75	$	1.25
			12,139,393		3.75	$	1.00

		STOCK WARRANTS EXERCISABLE
Exercise Prices		Number of Shares Exercisable		Weighted- Average Exercise Price
$	0.75		4,046,491	$	0.75
$	1.00		4,054,951	$	1.00
$	1.25		4,037,951	$	1.25
			12,139,393	$	1.00

Note 10: Agreements

On April 1, 2008, the Company entered into a marketing support agreement with an unrelated third party for a period of two years. The individual will receive commissions of 1% based on collection of receivables for a period of six months from the start of a referred buyer and 1% upon achievement of the sales forecast for each quarter. The individual will receive a 5% commission on collection of receivables from buyers in their territory. The total commissions are not to exceed $4,000 per month. During the year ended March 31, 2008, the Company has issued a total of 100,000 shares of common stock to this individual and has recorded the value of $225,000 as prepaid stock compensation. During the nine months ended December 31, 2008, the Company recorded consulting expense of $84,375.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

On May 7, 2008, the Company entered into a finder agreement with an individual for equity financing. For each $100,000 this individual raises, he will receive 20,000 shares of common stock. During the three months ended September 30, 2008, he raised a total of $50,000 for the Company and earned 10,000 shares of common stock valued at $16,000. As of September 30, 2008, the shares have been issued.

On June 2, 2008, the Company entered into a consulting agreement with an entity for a six month term. The consultant will receive a monthly payment of $6,000 for the first three months and $9,000 for the last three months of the agreement. Additionally, the consultant will receive 150,000 shares of common stock valued at $256,500. The shares were valued at the fair market value of the stock. During the nine months ended December 31, 2008, the Company recorded consulting expense of $45,000 for the cash portion and $256,500 for the equity portion of the agreement. As of December 31, 2008, the shares have been issued.

On October 1, 2008, the Company executed a consulting agreement for investor relations services with an entity for a period of six months. The Company agreed to pay the consultant $25,000 in cash and 250,000 shares of common stock. On October 30, 2008, the Company and the consultant mutually terminated this agreement and the Company compensated the consultant $0 in cash and 24,000 shares of common stock. The shares were issued on October 24, 2008 and November 11, 2008.

On October 15, 2008, the Company entered into a finder agreement with Cody Camarote, wherein Mr. Camarote agreed to introduce the Company to certain financing sources known to or identified by Mr. Camarote relating to potential financing (“transaction”) involving the Company. If the Company closed on a transaction wherein Mr. Camarote identified the source of financing, we agreed to pay Mr. Camarote, upon closing of the transaction, 8% cash fee and 10,000 shares of our restricted common stock per $100,000 raised through a direct equity investment and a 2% cash fee if an introduction results in the successful closing of a transaction. The agreement may be terminated at any time by either party. Subsequent to December 31, 2008, Mr. Camarote assisted the Company in raising $25,000.

On November 3, 2008, the Company executed a consulting agreement for investor relations services with an entity for a period of six months. The Company has agreed to issue 250,000 shares of common stock which will vest at 42,000 shares per month beginning May 1, 2009 and will be 100% vested by October 1, 2009. The shares were issued on November 11, 2008.

On November 19, 2008, the Company entered into a professional advisory agreement with a consultant for a period of one year. Upon completion of a funding from a directly introduced source, the Company has agreed to pay no more than 5% of the gross proceeds. For introductions to other financial intermediary and successful closing of funding, the Company shall pay a one-time finders’ fee of 2% in cash. If the consultant assists the Company with securing an equity line of credit, then the Company will pay the consultant a one-time fee equal to 1.30% in cash and 1.30% in shares of common stock. As of December 31, 2008, the agreement was mutually terminated by both parties.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

On November 19, 2008, the Company signed a term sheet for an accounts receivable financing agreement with Bibby Financial Services (“Bibby”) whereby the Company can finance up to a maximum of $500,000 of its eligible accounts receivables with an 85% advance rate. Under the financing agreement, the Company is required to repay advances upon the earlier of its receipt of payment on the financed accounts receivables from its customers, or the financed accounts receivable being aged greater than 90 days from the invoice date. The financing agreement has a one year term and bears an annual interest rate of prime rate plus 3%. There is a factoring discount fee of 1.25% for the first 30 days and an additional 0.50% for each additional 15 days thereafter. There is a one time fee of 1% of the credit facility that will be deducted from the initial funding plus a $500 due diligence fee. The financing agreement is secured by substantially all the assets of the Company. The financing agreement was for a one year term but during the period ended December 31, 2008, the Company and Bibby terminated their agreement.

On November 20, 2008, the Company signed a term sheet for a purchase order financing agreement with Bibby Financial Services whereby the Company can finance up to a maximum of $250,000 of its eligible purchase orders with a 65% advance rate. Bibby will be the consignee of the goods until they are fully paid by the Company. There is a purchase order discount fee of 1.25% for the first 15 days and an additional 1.25% for each additional 15 days thereafter with a minimum discount fee of $750 per funding request. There is a one time fee a $250 due diligence fee. The financing agreement is secured by substantially all the assets of the Company. The Company and Bibby did not make any final decisions concerning the term sheet or entered into any definitive and/or binding agreement.

On November 21, 2008, the Company signed a term sheet for a $5,000,000 equity line of credit with Southridge for a period of two years. The purchase price of the common stock shall equal 94% of the average on the three low closing bid prices during the ten trading days commencing on the first trading day following delivery of the Company of a draw down notice. The Company has also agreed to issue 100,000 warrants at 120% of the closing stock price on the date of closing. The warrants will have a five year term and will have a cashless exercise option. The Company did not make any final decisions concerning the term sheet or entered into any definitive and/or binding agreement.

On December 1, 2008, the Company entered into an inventory consignment agreement with Bridgeland Trading Ltd., wherein the Company granted to Bridgeland, upon and subject to the terms and conditions of the agreement, an exclusive license under the rights to develop, manufacture, market, distribute and sell, and have manufactured, marketed, distributed and sold, certain products. Pursuant to the agreement the Company and Bridgeland desire that Bridgeland sell the consigned merchandise pursuant to a consignment arrangement, the terms of which are set forth in the agreement. The consignment payment shall be equal to 10% of Bridgeland’s net sales of consigned merchandise, plus such additional amount, if any, as may be necessary for Bridgeland to pay the minimum consignment payment.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

In connection with the consignment agreement mentioned above between the Company and Bridgeland, on December 1, 2008, Bridgeland entered into an inventory consignment agreement with Parco Sino-Can Science Technology Inc. Parco is a corporation that is owned and controlled by an officer, director and shareholder of the Company. Bridgeland is engaged in the supply of pharmaceutical products as a result of its inventory consignment agreement with the Company and wishes to provide Parco with rights to package, promote, sell and distribute certain of its products in the Territory on a Consignment basis. Parco is in the business of packaging, marketing and distributing a number of products, for companies doing business in China and elsewhere, including pharmaceutical products. Pursuant to the agreement, Parco will market and sell certain of Bridgeland's products as consigned to Bridgeland pursuant to the terms and conditions of the Company’s agreement, on a consignment basis, the “Consigned Merchandise,” which includes, but is not limited to various pharmaceutical products including but not limited to Multi-Flavored Gumdrops, Swirl Gummy Bears, Multi-Flavored gummy Bears, and Orange Gumdrops. The consignment payment shall be equal to 10% of Parco’s net sales of consigned merchandise, plus such additional amount, if any, as may be necessary for Parco to pay the minimum consignment payment.

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, 2008, the maximum amount that can be awarded was $312,500. The CEO has declared an award of $156,375 to be paid in shares of common stock and $75,000 in cash to the executives. The difference of $81,125 will be rolled over to the variable compensation pool plan for the next quarter. As of December 31, 2008, the shares have been issued, but the cash was not paid and are recorded as accrued executive compensation.

During the quarter ended September 30, 2008, the maximum amount that can be awarded was $312,500. The CEO has declared an award of $156,375 to be paid in shares of common stock and $75,000 in cash to the executives. The difference of $81,125 will be rolled over to the variable compensation pool plan for the next quarter. As of December 31, 2008, the shares have not been issued and the cash was not paid and are recorded as accrued executive compensation.

During the quarter ended December 31, 2008, the maximum amount that can be awarded was $312,500. The CEO has declared an award of $16,875 to be paid in shares of common stock and $75,000 in cash to the executives. The difference of $220,625 will be rolled over to the variable compensation pool plan for the next quarter. As of December 31, 2008, the shares have not been issued and 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. Effective September 1, 2008, the 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. Effective September 1, 2008, the 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. Effective September 1, 2008, the annual salary was increased to $159,000.

Gamma Pharmaceuticals Inc.

Notes To Consolidated Financial Statements

(Unaudited)

As of December 31, 2008, the Company owed a total of $817,178 to the officers of the Company for accrued salaries.

As of December 31, 2008, the Company had accounts payable due to related parties totaling $94,997.

Note 12: Subsequent Events

On January 21, 2009, the Company entered into an investor relations agreement for a period of thirty days with an automatic renewal of additional forty-five day periods up to one year. The Company agreed to issue 1,000,000 shares as the compensation for this agreement. As of February 20, 2009, the shares are unissued.

In February 2009, the Company sold 200,000 shares of common stock for cash of $25,000.

On February 3, 2009, the Company issued a total of 737,188 shares of common stock for legal and accounting fees that were accrued in accounts payable.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Additionally, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 most likely do not apply to our forward-looking statements as a result of being a penny stock issuer. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

o	increased competitive pressures from existing competitors and new entrants;

o	increases in interest rates or our cost of borrowing or a default under any material debt agreements;

o	our ability to efficiently and effectively finance our operations, and/or purchase orders;

o	deterioration in general or regional economic conditions;

o	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

o	inability to achieve future sales levels or other operating results;

o	the unavailability of funds for capital expenditures and/or general working capital;

o	operational inefficiencies in distribution or other systems;

o	the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;

o	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

o	changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;

o	inability to efficiently manage our operations;

o	the inability of management to effectively implement our strategies and business plans; and

o	the other risks and uncertainties detailed in this report.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended March 31, 2008.

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

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.

We have copyrights, trademarks, trade secrets and knowhow for product lines of vitamins and nutriceuticals, energy products and personal care products spread across 4 major brands. The products have been 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. Products based on our “Gel Delivery Technology” offer, management believes, a highly desirable innovation over the typical tablets and capsules to which consumers have grown accustomed. We believe that Gel based products are the latest product forms consumers are seeking in the healthcare and supplement industries. Our Gel Delivery Technology will be a significant part of our marketing strategy.

We have a license agreement with Jugular, Inc., an established brand development and management company. Jugular granted us the exclusive right to use the Licensor Marks (all Trademarks for the mark JUGULAR owned by Jugular, Inc.) on or in association with certain products as well as on packaging, promotional, and advertising material.

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 of introducing its own brands of products manufactured utilizing the Gamma Gel Delivery Technology, internationally.

In the second quarter ended September 30, 2008, we were advised by the major national retail chain account with whom we launched the test product as a private label brand for the national retail chain, that the FTC found them to be in violation of certain regulations because of their choice of graphic elements on the packaging were in violation of certain regulations of the Federal Trade Commission. In the private label contract with the national retail chain, Gamma was required to use the graphic elements provided by the national retail chain. Gamma’s management recommended graphics we knew to be compliant with the FTC regulations. The national retail chain rejected Gamma’s proposed packaging graphics. The experience confirms the maturity of Gamma’s management and processes, and confirmed it is in Gamma’s best interest to pursue commercialization of its own brands retaining greater control of the product packaging, claims and marketing.

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.OB.

We have incurred losses since inception. For the third quarter ended December 31, 2008, we had a net loss of $963,881 as compared to a net loss of $1,255,098 for the quarter ended December 31, 2007. 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

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 share. 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. The warrants have a five year exercise right. In the 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”). Of the 799,999 shares, 666,666 shares were issued on July 14, 2008 and the remaining 133,333 shares remain issued as of the date of this filing. 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 and the Company expects Kenridge to make good on its obligation in the calendar quarter ahead.

On May 15, 2008, we issued a press release announcing that we have commenced our export program with China.

On May 19, 2008, we issued a press release announcing that the Western United States Agricultural Trade Association has approved the Company for up to $300,000 in annual reimbursement for eligible marketing and promotional activities in China.

On June 10, 2008, we issued a press release announcing that we started national distribution of our Brilliant Choice® and Savvy® brands.

On June 13, 2008, we issued a press release announcing that our Brilliant Choice® and Savvy® brands have been selected for distribution by DPI Midwest, a distributor of nutritional products.

On July 16, 2008, we issued a press release announcing that we will exhibit our nutritional supplements at the 8th Annual Fashion Baby Maternal Infant-Children Products Expo in China from July 17-19th in Shanghai, China.

On August 14, 2008, we amended our articles of incorporation increasing our authorized capital from 20,000,000 shares of $0.001 par value common stock to 100,000,000 shares of $0.001 par value common stock and from 500,000 shares of $0.001 par value preferred stock to 2,000,000 shares of $0.001 par value common stock.

On September 3, 2008, we issued a press release announcing that the Company’s China-based operation has received its Certificate of Hygience from the Customs Office in the People’s Republic of China. The Certificate of Hygiene is a requirement for any imported food grade product, and will allow the Company to sell product in the country.

On September 25, 2008, we issued a press release announcing the signing of contracts with three distribution companies in China.

On November 17, 2008, we issued a press release announcing the launch of our annual private label program for 2008-2009. Our 2008-2009 program is a continuation and expansion of our 2007 rollout of a gum drop based immune booster with a national retail pharmacy chain.

On December 18, 2008, we issued a press release announcing the receipt of purchase orders for our Jugular® brand energy products by a large convenience store chain in Nevada.

Our Strengths

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

·	Fully integrated platform for sustainable growth

·	Diverse product categories that provide operating flexibility

·	Recognizable brand names that can be leveraged for additional growth

·	Geographic diversity to mitigate market risk concentration

·	Demonstrated ability to identify and commercialize opportunities

·	Experience and results oriented management team

·	Retail account presents with major US retail pharmacy chain.

Results of Operations

The following table summarizes selected items from the statement of operations for the three and nine months ended December 31, 2008 and the comparable periods ended December 31, 2007.

SALES AND COST OF GOODS SOLD:

	Three Months Ended December 31,						%			Nine Months Ended December 31,						%
	2008			2007			Change			2008			2007			Change
Sales		24,606			96,407			(74	%)		56,141			99,066			(43	%)

Cost of Goods Sold		14,466			92,509			(84	%)		40,856			101,862			(60	%)

Gross Profit (loss)		10,140			3,898			160	%		15,285			(2,796	)		647	%

Gross Profit (loss) Percentage of Sales		41	%		4	%					27	%		(3	%)

	Three Months Ended December 31,										Nine Months Ended December 31,
	2008		%			2007		%			2008		%			2007		%
Sales – U.S.		-		0	%		96,407		100	%		31,535		56	%		99,066		100	%
Sales – China		24,606		100	%		-		0	%		24,606		44	%		-		0	%
Total Sales		24,606		100	%		96,407		100	%		56,141		100	%		99,066		100	%

Sales

Our sales for the three months ended December 31, 2008 were $24,606 compared to $96,407 sales during the same three month period in 2007. During the nine months our sales decreased by 43%. The decrease in our sales during the nine month period ended December 31, 2008 is a result of the decrease in the amount of orders we have from one of our major customers. The sales to date are influenced significantly by our customer’s citation by the Federal Trade Commission for certain acts that are 100% independent of Gamma, but did affect their performance and their decisions to implement certain corrections so to be in compliance. During the nine months ended December 31, 2008, 100% of our revenue was generated from three major customers. During the nine months ended December 31, 2007, 100% of our revenue was generated from one customer.

Cost of goods sold / Gross profit percentage of sales

Our cost of goods sold decreased 84% during the third fiscal quarter of 2008 and 60% during the nine months ended December 31, 2008. The decrease in our cost of goods sold is a result of a decrease in sales relative to the cost to produce our products. Gross profit margins increased from the prior second fiscal quarter because the Company has begun to commercialize its product line and manufacturing products to meet demand. Additionally, the packaging materials and costs have decreased since the Company outsourced those services to China.

EXPENSES:

	Three Months Ended December 31,						%			Nine Months Ended September 30,						%
	2008			2007			Change			2008			2007			Change
Expenses:
Consulting – stock-based		198,575			375,000			(47	%)		381,008			642,699			(41	%)
Consulting		23,700			65,517			(64	%)		306,635			797,626			(62	%)
Executive compensation – stock based		-			273,437			(100	%)		232,874			273,437			(15	%)
Executive compensation – shares to be issued		16,875			84,375			(80	%)		118,125			84,375			40	%
Executive compensation		196,625			42,099			367	%		578,666			433,494			33	%
General and administrative – stock based		21,000			187,500			(89	%)		75,500			187,500			(60	%)
General and administrative		495,608			225,998			119	%		1,366,341			41,545			3,189	%
Total operating expenses		952,383			1,253,926			(24	%)		3,059,149			2,460,676			24	%

(Loss) from operations		(942,243	)		(1,250,028	)		(25	%)		(3,043,864	)		(2,463,472	)		24	%

Other income (expense):
Interest income		-			669			(100	%)		692			2,007			(66	%)
Interest expense		(21,645	)		(5,739	)		277	%		(66,013	)		(17,216	)		283	%
Foreign currency transaction gain (loss)		7			-			-			7			-			-
Total other income (expense)		(21,638	)		(5,070	)		327	%		(65,314	)		(15,209	)		329	%

Net (loss)		(963,881	)		(1,255,098	)		(23	%)		(3,109,178	)		(2,478,681	)		25	%

Consulting Expenses

Our consulting expenses have decreased from 2007 for the three and nine month periods ended December 31, 2008, respectively. The decrease in consulting expenses was the result of 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 months ended December 31, 2008, executive compensation increased by 187% from the same period a year ago. During the nine months our executive compensation increased by 59%. The increase in our executive compensation in the period ended December 31, 2008 is a result of the variable compensation pool awards that were declared during the first, second and third quarters and an increase in the base salaries of the executives by 5%.

General and Administrative Expenses

General and administrative expenses have increased from 2007 for the three and nine month periods ended December 31, 2008, respectively. There was an increase of 30% for the three month period ended December 31, 2008 as compared to an increase of 3,129% for the nine month period ended December 31, 2008 in our general and administrative expenses. The increase in expenses for both the three month and nine month period was the result of increase in use of independent contractors for marketing support services, product development and investor relations. The amortization of our intangible assets had increased significantly from 2007 to 2008 because production commenced in the quarter ended December 31, 2007 and we started to amortize the value of the intangibles.

(Loss) from Operations

The loss from operations for the three months ended December 31, 2008 was ($942,243), versus a loss from operations of ($1,250,028) for the three months ended December 31, 2007, a change in loss from operations of 24%. During the nine month period in 2008 our loss from operations increased by 24% compared to the same period a year ago. The increase in the loss from operations in the three months and nine months ended December 31, 2008 resulted from the increase in executive compensation and amortization expense from the intangible assets.

Interest Income and Interest Expense

Interest income decreased by 100% and 66% in the three and nine months ended December 31, 2008. The decrease of interest income was as a result of greater use of non-interest bearing accounts and lower account balances. Interest expense increased 277% during the third fiscal quarter of 2008 and 283% during the nine months ended December 31, 2008. Our interest expense in 2008 was higher because the Company has capitalized their agreement with Jugular and therefore amortized the gross capitalized amount at a 12% interest rate.

Foreign Currency Transaction Gain (Loss)

During the three month period ended December 31, 2008, the Company commenced product sales in China. There was a foreign currency transaction gain of $7 and $0 for the three and nine months ended December 31, 2008 and 2007, respectively.

Net (Loss)

Our net loss for the three months ended December 31, 2008 was $963,881, a decrease of $291,217, or 23%, from $1,255,098 for the three months ended December 31, 2007. For the nine month period ended December 31, 2008, our net loss was $3,109,178, an increase of $630,497, or 25%, from $2,478,661 for the nine month period ended December 31, 2007. We continue to have a net loss and believe the loss will be reduced and profitability will be attained in future quarters as the sales of our products increase.

Operation Plan

Since completion of some of our product lines we are in the process of commencing product sales of these product lines both in the United States and in China. Our initial focus is on selling products in the Lifestyle of Health & Sustainability ("LOHAS") marketplace and in the Energy Supplement Market. Our operations to date have been largely limited to product and process development and assembling our overall marketing profile for our master brands. We have successfully 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.

During the quarter ended December 31, 2007, we completed the development of certain product lines and began shipping products to a major U.S. based retail chain account.

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 greater China and the United States. 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, in both Greater China and the United States. We further believe that the 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. According to the 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 July 14, 2008, we amended our license agreement with Jugular, Inc. The purpose of the amendment is to clarify ambiguities which were created through the various amendments. The July 14, 2008 amendment is intended to supersede and replace the previous Licensor/Licensee Agreement, the Amended License Agreement, and the Second Amendment to License Agreement. Jugular granted us the exclusive right to use the Licensor Marks (all Trademarks for the mark JUGULAR owned by Jugular, Inc.) on or in association with certain products as well as on packaging, promotional, and advertising material. The initial term of the agreement shall extend from the effective date of August 5, 2007 until the expiration date of August 5, 2021. The intitial term shall automatically renew for a subsequent 5 year period, if certain requirements are met, as set forth in the agreement.

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 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:

·	High incidence and high growth of targeted medical conditions and lifestyle objectives;

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

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

·	Low cost manufacturing or repacking mainly from China but also located in the United States;

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

·	Branded consumer product preferences.

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 China or the United States 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 brands 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 December 31, 2008 and March 31, 2008.

	December 31, 2008			March 31, 2008			Increase / (Decrease)
	December 31, 2008			March 31, 2008			$			%

Current Assets	$	158,087		$	284,564		$	(126,477	)	(44	%)

Current Liabilities	$	1,492,779		$	944,592		$	548,187		58	%

Working Capital (deficit)	$	(1,334,692	)	$	(660,028	)	$	674,664		102	%

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 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.”

As of December 31, 2008, 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. In the first quarter in 2008, we successfully raised $400,000 by way of a private placement. In the three month period ended December 31, 2008, we raised $50,000 and subsequently raised $25,000. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

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.

On November 19, 2008, we executed a term sheet for an accounts receivable financing agreement with Bibby Financial Services (“Bibby”) whereby the Company can finance up to a maximum of $500,000 of its eligible accounts receivables with an 85% advance rate. Under the financing agreement, the Company would be required to repay advances upon the earlier of its receipt of payment on the financed accounts receivables from its customers, or the financed accounts receivable being aged greater than 90 days from the invoice date. The financing agreement was for a one year term but during the period ended December 31, 2008, the Company and Bibby terminated their agreement..

On November 20, 2008, we executed a term sheet for a purchase order financing agreement with Bibby Financial Services whereby the Company can finance up to a maximum of $250,000 of its eligible purchase orders with a 65% advance rate. Bibby will be the consignee of the goods until they are fully paid by the Company. There will be a purchase order discount fee of 1.25% for the first 15 days and an additional 1.25% for each additional 15 days thereafter with a minimum discount fee of $750 per funding request. There will be a one-time fee a $250 due diligence fee. The financing agreement will be secured by substantially all the assets of the Company. The Company and Bibby did not make any final decisions concerning the term sheet or entered into any definitive and/or binding agreement.

On November 21, 2008, we executed a term sheet for an Equity Line of Credit (ELC), in which the Purchaser will commit to purchase up to $5,000,000 (the “Facility”) of our common stock for a price equal to 94% of the average of the three low closing bid prices during the Valuation Period (the “Purchase Price”). The shares of common stock will be registered with the SEC before they are purchased. The term of the agreement will be for two years. We may draw upon the Facility periodically during the Term by delivering to the Purchaser a written notice (a “Draw Down Notice”) requiring the Purchaser to purchase a dollar amount in shares of common stock. In no event may the shares issuable pursuant to a Draw Down Notice, when aggregated with the shares then held by the Purchaser on the date of the Draw Down, exceed 4.99% of our outstanding common stock. In lieu of legal fees, we will issue to the Purchaser, 100,000 warrants at 120% of the closing bid price on the day of closing. The warrants will have a five year term and cashless exercise option. The term sheet reflects the present intentions of the parties as to the principal terms of the proposed transactions referenced in the term sheet and is subject to execution of a definitive agreement. The Company and ELC did not make any final decisions concerning the term sheet or entered into any definitive and/or binding agreement.

Satisfaction of our cash obligations for the next 12 months.

As of December 31, 2008, our cash balance was $2,845. Our plan for satisfying our cash requirements for the next twelve months is from our agreement with Kenridge, 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 in conformity with generally accepted accounting principles that contemplate the continuance of Gamma as a going concern. Gamma may not have a sufficient amount of cash required to pay all of the costs associated with operating, production and marketing of products. Management intends to use borrowings and security sales to mitigate the effects of cash flow deficits, however no assurance can be given that debt or equity financing, if and when required, will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should Gamma be unable to continue existence.

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 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.

Consulting Agreements

CEOcast, Inc. On June 2, 2008, we entered into a Consulting Agreement with CEOcast, Inc., wherein CEOcast agreed to provide the Company with investor relations services. We agreed to pay CEOcast $6,000 for first month’s payment and 150,000 shares of restricted common stock (issued on July 14, 2008). In addition, we agreed to pay CEOcast $6,000 on or before the 2nd day of each of July and August and commencing on September 2, 2008, we will pay CEOcast $9,000 per month for September, October and November. The term of the agreement was for six (6) months terminating on December 2, 2008. As of December 31, 2008, the Company owes CEOcast $33,000 in compensation.

Black Cat Consulting, Inc. On July 1, 2008, we entered into a Consulting Agreement with Black Cat Consulting, Inc., wherein Black Cat agreed to provide the Company with strategic and financial consulting services. We agreed to compensate Black Cat 150,499 shares of our restricted common stock (issued on July 14, 2008). The term of the agreement was for six (6) months terminating on January 1, 2009.

Affiliated Business Services, Inc. On September 10, 2008, we entered into a Consulting Agreement with Affiliated Services, Inc., wherein Affiliated Business agreed to provide the Company with management consultant and senior advisor services on a non-exclusive basis. The term of the agreement is for one (1) year commencing on September 10, 2008 and shall continue on a month-to-month basis until terminated by either party with a notice of thirty days. We agreed to compensate the Consultant as follows: 1) a fee of 10 percent (10%) of any direct introduction which leads to an equity related investment; 2) a fee of five percent (5%) of any funds raised in cashless warrants in the same terms as those negotiated and agreed to by the Company and the Investor for any funds raised for the Company by an investor directly introduced by Consultant; 3) a fee of two percent (2%) of the aggregate consideration paid in a transaction and capped at $500,000 for any merger or acquisition directly introduced by Consultant; 4) a fee of five percent (5%), paid in arrears, of the total value of any contracts brought to the Company by Consultant for a period of not more than one year; and 5) a fee of three percent (3%) for any debt financing arranged by a direct introduced party.

HNO Management LLC. On October 1, 2008, we entered into a Consulting Agreement with HNO Management LLC, wherein HNO agreed to provide investor relations services to the Company for a term of six (6) months commencing on October 1, 2008. We agreed to compensate the HNO with $25,000 due upon execution of the agreement, 50,000 shares of free trading common stock due ten (10) days from the signing of the agreement and 200,000 shares of common stock due ten (10) days from the signing of the agreement. On October 30, 2008, the Company and HNO mutually terminated the agreement and we compensated the consultant $0 in cash and 24,000 shares of common stock (19,000 shares issued on October 24, 2008 and 5,000 shares issued on November 11, 2008).

New Castle Consulting, LLC. On November 3, 2008, we entered into a consulting agreement with New Castle Consulting for investor relations services for a period of six months commencing on November 3, 2008. We agreed to issue 250,000 shares of common stock to New Castle Consulting as a commencement bonus which will vest at 42,000 shares per month beginning May 1, 2009 and will be 100% vested by October 1, 2009. The shares were issued on November 11, 2008.

Sandy Lang/Marty Goldrod. On January 21, 2009, we entered into an investor relations and representation agreement with Sandy Lang/Marty Goldrod (the “Consultant”), wherein the Consultant agreed to provide investor relations services to the Company for a period of thirty days with an automatic renewal of additional forty-five day periods up to one year. We agreed to compensate the Consultant with 1,000,000 shares of our restricted common stock.

Marketing Support Agreement

On October 11, 2007, we entered into a Marketing Support Agreement with Innovative Health Solutions, Inc. (the “Consultants”), wherein the Consultants agreed to provide the Company with services sufficient to achieve our target sales by selling certain of our products within the Territory (which includes all military connected installations and activities including all U.S. military ports and ships at sea). Pursuant to the agreement we agreed to pay the Consultants: (1) 5% commission payable on collection of receivables from the buyers in the Territory, payable quarterly; (2) 1% commission (finders fee) payable on collection of receivables from referred buyers in the Territory for a period of no more than 6 months from the start of sales to the referred buyers; and (3) 1% commission payable upon achievement of the sales forecast for each quarter, payable quarterly. The 1% finders fee may be replaced with 100,000 shares of common stock (100,000 shares were issued to the Consultants on April 9, 2008 and were registered on Form S-8 filed with the SEC on June 16, 2008). Additionally, the Consultants have the option of receiving payment of the 5% commission and the 1% performance bonus in cash or as shares or as a combination of cash and shares up to the value of 5% plus 1% of quarterly sales value. The term of the agreement is for 2 years, beginning on October 11, 2007 and terminating on October 10, 2010.

Brokerage Agreement

On October 1, 2007, we entered into a Brokerage Agreement with Business World Management, Inc., wherein Mr. Ezra Cummings, President of Business World (the “Broker”), agreed to provide the Company with broker services to achieve our target sales by selling certain of our products within the Territory (which includes all military connected installations and activities including all U.S. military ports and ships at sea). Pursuant to the agreement we agreed to pay the Broker: (1) 5% commission payable on collection of receivables from the buyers in the Territory, payable quarterly; (2) 1% commission (finders fee) payable on collection of receivables from referred buyers in the Territory for a period of no more than 6 months from the start of sales to the referred buyers; and (3) 1% commission payable upon achievement of the sales forecast for each quarter, payable quarterly. The 1% finders fee may be replaced with 80,000 shares of common stock (the 80,000 shares were issued to the Broker on April 9, 2008 and were registered on Form S-8 filed with the SEC on June 16, 2008). Additionally, the Broker has the option of receiving payment of the 5% commission and the 1% performance bonus in cash or as shares or as a combination of cash and shares up to the value of 5% plus 1% of quarterly sales value. The term of the agreement was for 2 years, beginning on October 1, 2007 and terminating on September 30, 2010. As of December 31, 2008, the brokerage agreement was mutually terminated by both parties.

Advisory Agreements

On May 30, 2007, we entered into an Advisory Agreement with Ezra Cummings, wherein Mr. Cummings agreed to be a member of the Company’s Corporate Advisory Board. Pursuant to the agreement we agreed to issue 20,000 shares of our common stock and an option to purchase 20,000 shares of our common stock to Mr. Cummings as compensation for his services. The 20,000 shares of common stock were issued to Mr. Cummings on April 9, 2008 and were registered on Form S-8 filed with the SEC on June 16, 2008. As of September 30, 2008, the 20,000 options have not been granted to Mr. Cummings. The term of the agreement began on May 30, 2007 and will terminate on May 29, 2009.

On June 30, 2008, the Company entered into a professional advisory agreement with a John Cunningham for the period commencing on June 30, 2008 and concluding on September 15, 2008. We agreed to compensate Mr. John Cunningham with a performance bonus of 20,000 shares of common stock (issued on October 24, 2008) and $5,000 a month.

On November 19, 2008, we entered into a professional advisory agreement with Sherman Lazrus, wherein Mr. Lazrus agreed to introduce the Company to new financing sources that directly fund

transactions including debt, equity, and equity related. Upon completion of a funding from a directly introduced source, the Company has agreed to pay no more than 5% of the gross proceeds. For introductions to other financial intermediary and successful closing of funding, the Company shall pay a one-time finders’ fee of 2% in cash. If the consultant assists the Company with securing an equity line of credit, then the Company will pay the consultant a one-time fee equal to 1.30% in cash and 1.30% in shares of common stock. The term of the agreement was for one year from the date of November 19, 2008. As of December 31, 2008, the agreement was mutually terminated by both parties.

Finder Agreement

On May 7, 2008, we entered into a Finder Agreement with Knute Alger, wherein Mr. Alger agreed to introduce the Company to certain financing sources known to or identified by Mr. Alger relating to a potential financing (“transaction”) involving the Company. If we close on a Transaction wherein Mr. Alger identified the source of financing, we will pay Mr. Alger, upon closing of the Transaction, 20,000 shares of our restricted common stock per $100,000 raised. The agreement may be terminated at any time by either party. During the three months ended June 30, 2008, Mr. Alger earned 10,000 shares of our common stock. The 10,000 shares were issued to Mr. Alger on July 14, 2008.

On October 15, 2008, we entered into a Finder Agreement with Cody Camarote, wherein Mr. Camarote agreed to introduce the Company to certain financing sources known to or identified by Mr. Camarote relating to potential financing (“transaction”) involving the Company. If we close on a transaction wherein Mr. Camarote identified the source of financing, we will pay Mr. Camarote, upon closing of the transaction, 8% cash fee and 10,000 shares of our restricted common stock per $100,000 raised through a direct equity investment and a 2% cash fee if an introduction results in the successful closing of a transaction. The agreement may be terminated at any time by either party. Subsequent to December 31, 2008, Mr. Camarote assisted the Company in raising $25,000.

Marketing Support Agreement

On April 1, 2008, we entered into a Marketing Support Agreement with Gary Reeves, wherein Mr. Reeves agreed to provide the Company with services to achieve our target sales by selling certain of our products within the Territory (territory to be agreed between the parties from time to time). Pursuant to the agreement we agreed to pay Mr. Reeves: (1) 5% commission payable on collection of receivables from the buyers in the Territory, payable quarterly; (2) 1% commission (finders fee) payable on collection of receivables from referred buyers in the Territory for a period of no more than 6 months from the start of sales to the referred buyers; and (3) 1% commission payable upon achievement of the sales forecast for each quarter, payable quarterly. The 1% finders fee may be replaced with 100,000 shares of common stock (issued to Mr. Reeves on April 9, 2008 and were registered on Form S-8 filed with the SEC on June 16, 2008). We will pay Mr. Reeves on a limited basis as follows: (a) not to exceed $4,000 monthly, (b) monthly payments will be made until commission structure on the incremental net sales generates a payment to Mr. Reeves of $4,000 in a period first day of month until last day of month, and (c) As incremental net sales generate commission higher than zero but not yet achieving $4,000, compensation will be paid using the formula $4,000 less commission earned and or attributable to a month defined as a period first day of month until last day of month = compensation due and payable. Additionally, Mr. Reeves has the option of receiving payment of the 5% commission and the 1% performance bonus in cash or as shares or as a combination of cash and shares up to the value of 5% plus 1% of quarterly sales value. The term of the agreement is for 2 years, beginning on April 1, 2008 and terminating on March 30, 2010.

Consignment Agreements

On December 1, 2008, we entered into an inventory consignment agreement with Bridgeland Trading Ltd., wherein Gamma hereby grants to Bridgeland, upon and subject to the terms and conditions of the agreement, an exclusive license under the rights to develop, manufacture, market, distribute and

sell, and have manufactured, marketed, distributed and sold, certain products. Pursuant to the agreement Gamma and Bridgeland desire that Bridgeland sell the consigned merchandise pursuant to a consignment arrangement, the terms of which are set forth in the agreement. The consignment payment shall be equal to 10% of Bridgeland’s net sales of consigned merchandise, plus such additional amount, if any, as may be necessary for Bridgeland to pay the minimum consignment payment.

In connection with the consignment agreement mentioned above between Gamma and Bridgeland, on December 1, 2008, Bridgeland entered into an inventory consignment agreement with Parco Sino-Can Science Technology Inc. Bridgeland is engaged in the supply of pharmaceutical products as a result of its inventory consignment agreement with Gamma (mentioned above) and wishes to provide Parco with rights to package, promote, sell and distribute certain of its products in the Territory on a Consignment basis. Parco is in the business of packaging, marketing and distributing a number of products, for companies doing business in China and elsewhere, including pharmaceutical products. Pursuant to the agreement, Parco will market and sell certain of Bridgeland's products as consigned to Bridgeland pursuant to the terms and conditions of the Gamma Agreement, on a consignment basis, the “Consigned Merchandise,” which includes, but is not limited to various pharmaceutical products including but not limited to Multi-Flavored Gumdrops, Swirl Gummy Bears, Multi-Flavored gummy Bears, and Orange Gumdrops. The consignment payment shall be equal to 10% of Parco’s net sales of consigned merchandise, plus such additional amount, if any, as may be necessary for Parco to pay the minimum consignment payment.

Copies of the consignment agreements mentioned above are attached hereto as Exhibit 10.17 and Exhibit 10.18.

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 June 30, 2008, 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 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

Stock Based Compensation

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 effective 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 December 31, 2008, 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 management 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 December 31, 2008, we had $2,845 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 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 conducts on 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.

There are risks associated with the Chinese economy that is in transition from a command economy to a market economy.

A substantial amount of our business will be located in the PRC, and much of our revenue will likely be sourced from the PRC. Accordingly, our results of operations and financial position are subject to a significant degree to economic, political and legal developments in the PRC, including the following risks:

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

·	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.

Our certificate of incorporation has authorized issuance of up to 2,000,000 shares of preferred stock ("Preferred Stock") in the discretion of its 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.

If we fail to remain current on our reporting requirements, we could be 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 us, 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.

Our principal stockholders, current executive officers and directors own a significant percentage of our company and will be able to exercise significant influence over our company.

Our principal stockholders, current executive officers and directors together beneficially own approximately 57% of our common stock. Accordingly, if acting together, these stockholders will be able to determine the composition of our board of directors, will retain the effective voting power to approve all matters requiring stockholder approval, will prevail in matters requiring stockholder approval, including, in particular the election and removal of directors, and will continue to have significant influence over our business. As a result of their ownership and positions, our directors and executive officers collectively are able to influence all matters requiring stockholder action, including approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. See "Security Ownership of Certain Beneficial Owners and Management" for information about the ownership of common stock by our current executive officers, directors and principal stockholders.

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.

On October 24, 2008, we issued a total of 271,060 shares of our common stock to the following:

Name	No. of Shares	Reason
Peter Cunningham	56,205	Executive variable compensation pool plan
Joseph Cunningham	28,125	Executive variable compensation pool plan
Hao Zhang	28,125	Executive variable compensation pool plan
Ronald Balducci	15,000	Services
John Cunningham	20,000	Services
Richard Fielder	20,000	Services
Jugular Inc.	14,500	License Fee
Paul Cohen	35,000	Services
Syver Norderhang	20,000	Services
TKM Accounting Services	9,105	Services
Gary Reeves	25,000	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 34 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.

On October 24, 2008, we issued 181,000 shares and 19,000 shares of our common stock to HNO Management LLC pursuant to a consulting agreement dated October 1, 2008. On October 30, 2008, the Company and HNO Management mutually terminated the agreement and agreed to cancel the 181,000 shares and HNO Management would keep the 19,000 shares of common stock. In addition, we issued an additional 5,000 shares of common stock on November 11, 2008 for separation. We are currently in the process of cancelling the 181,000 shares of common stock with the transfer agent. 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 34 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.

On November 11, 2008, we issued 250,000 shares of our common stock to New Castle Consulting pursuant to a consulting agreement dated November 3, 2008. We believe that the issuances of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Company’s financial statements and 34 Act reports. We reasonably believe that the recipient, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that it was capable of evaluating the merits and risks of its investment. The recipient had the opportunity to speak with our president and directors on several occasions prior to its investment decision.

Subsequent Issuances

On February 3, 2009, we issued 399,688 shares of our common stock to Stoecklein Law Group and 337,500 shares of our common stock to TKM Accounting for services rendered to the Company. The shares issued were registered in a Registration Statement on Form S-8 filed on January 30, 2009.

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.

None

Item 6. Exhibits.

Incorporated by reference

Exhibit

number

Exhibit description

Filed

herewith

Form

Period

ending

Exhibit No.

Filing

date

10.17

Inventory Consignment Agreement between Gamma and Bridgeland, dated 12/01/08

10.18

Inventory Consignment Agreement between Bridgeland and Parco, dated 12/31/08

31.1

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

31.2

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

32.1

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

32.2

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

99.5

Press Release dated May 15, 2008

10-Q

6/30/08

99.5

8/14/08

99.6

Press Release dated May 19, 2008

10-Q

6/30/08

99.6

8/14/08

99.7

Press Release dated June 10, 2008

10-Q

6/30/08

99.7

8/14/08

99.8

Press Release dated June 13, 2008

10-Q

6/30/08

99.8

8/14/08

99.9

Press Release dated July 16, 2008

10-Q

6/30/08

99.9

8/14/08

99.10

Press Release dated September 3, 2008

10-Q

9/30/08

99.10

11/26/08

99.11

Press Release dated September 25, 2008

10-Q

9/30/08

99.11

11/26/08

99.12

Press Release dated November 17, 2008

10-Q

9/30/08

99.12

11/26/08

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)

By: /s/ Joseph Cunningham

Joseph Cunningham, Chief Financial Officer

(On behalf of the registrant and as

principal financial officer)

Date: February 23, 2009

Gamma Pharmaceuticals Inc 10-Q