Certain statements contained in this report and the information incorporated by reference herein may contain “forward-looking statements” (as such term is defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended). These statements, which involve risks and uncertainties, reflect our current expectations, intentions, or strategies regarding our possible future results of operations, performance, and achievements. Forward-looking statements include, without limitation: statements regarding future products or product development; statements regarding future selling, general and administrative costs and research and development spending; statements regarding our product development strategy; statements regarding the future performance of our network marketing sales channel; and statements regarding future financial performance, results of operations, capital expenditures and sufficiency of capital resources to fund our operating requirements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and applicable rules of the Securities and Exchange Commission and common law.

     These forward-looking statements may be identified in this report and the information incorporated by reference by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “plan”, “predict”, “project”, “should” and similar terms and expressions, including references to assumptions and strategies. These statements reflect our current beliefs and are based on information currently available to us. Accordingly, these statements are subject to certain risks, uncertainties, and contingencies, which could cause our actual results, performance, or achievements to differ materially from those expressed in, or implied by, such statements.

     The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

When considering these forward-looking statements, you should keep in mind the cautionary statements in this report and the documents incorporated by reference. We have no obligation and do not undertake to update or revise any such forward-looking statements to reflect events or circumstances after the date of this report.

     These unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the audited financial statements and notes of LifeVantage Corporation as of and for the year ended June 30, 2010 included in our annual report on Form 10-K.

     The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the management of LifeVantage Corporation (“LifeVantage” or the “Company”), these interim Financial Statements include all adjustments, consisting of normal recurring adjustments, that are considered necessary for a fair presentation of our financial position as of September 30,December 31, 2010, and the results of operations for the three and six month periods ended September 30,December 31, 2010 and 2009 and the cash flows for the threesix month periods ended September 30,December 31, 2010 and 2009. Interim results are not necessarily indicative of results for a full year or for any future period. Certain prior period amounts have been reclassified to conform to our current period presentation.

     The condensed consolidated financial statements and notes included herein are presented as required by Form 10-Q, and do not contain certain information included in our audited financial statements and notes for the fiscal year ended June 30, 2010 pursuant to the rules and regulations of the SEC. For further information, refer to the financial statements and notes thereto as of and for the year ended June 30, 2010, and included in the Annual report on Form 10-K on file with the SEC.

     The accompanying financial statements include the accounts of the Lifevantage Inc.LifeVantage Corporation and our wholly-owned subsidiaries Lifeline Nutraceuticals Corporation (“LNC”), LifeVantage de México, S. de R.L. de C.V. (Limited Liability Company), Importadora LifeVantage, S. de R.L. de C.V. (Limited Liability Company), and Servicios Administrativos para la Importación de Productos Body & Skin, S.C. All inter-company accounts and transactions between the entities have been eliminated in consolidation.

     We translate the financial statements of our foreign entities by using the current exchange rate. For assets and liabilities, the exchange rate at the balance sheet date is used. For any investment in subsidiaries and retained earnings, the historical exchange rate is used. For revenue, expenses, gains, and losses, an appropriately weighted average exchange rate for the period is used.

     Fair value hierarchy:

     (1) Level 1 inputs are quoted prices in active markets for identical assets and liabilities.

     (2) Level 2 inputs are inputs which include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instrument.

     (3) Level 3 inputs are unobservable inputs and significant to the fair value measurement.

The financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

     The summary of fair values of financial instruments is as follows at September 30,December 31, 2010:

     Inventory is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. We have capitalized payments to our contract product manufacturer for the acquisition of raw materials and commencement of the manufacturing, bottling and labeling of our product. As of September 30,December 31, 2010 and June 30, 2010, inventory consisted of:

     Our operations are aggregated into a single reportable operating segment based upon similar economic and operating characteristics as well as similar markets. Our operations are also subject to similar regulatory environments. We conduct our operations in the U.S., Japan and Mexico. Substantially all long-lived assets are located in the U.S. Revenues by geographic area are as follows:

     We issued convertible debt in September and October 2007, November and December 2009 and January and February 2010. We review the terms of convertible debt and equity instruments that we issue to determine whether there are embedded derivative instruments, including the embedded conversion options that are required to be bifurcated and accounted for separately as derivative instrument liabilities. Also, in connection with the sale of convertible debt and equity instruments, we may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. For option-based derivative financial instruments, we use the Black-Scholes option pricing model to value the derivative instruments. For embedded conversion derivatives we use a lattice model to value the derivative.

     ARPS have historically have been liquid but have been adversely affected by the broader national liquidity crisis. We entered into an agreement with our investment advisor, Stifel Nicolaus, to repurchase 100% of the remaining ARPS at par on or prior to June 30, 2012. The schedule for repurchase of remaining ARPS by Stifel Nicolaus over the next three years is as follows:

     We have established a line of credit to borrow against 80% of these investments so that sales of these securities would not have to occur in order to fund our operating needs. The interest on amounts borrowed has been approximately the same as the interest being earned from the underlying securities. Management classified 80% or $340,000$300,000 of our investments as short term. The remaining 20% or $85,000$75,000 of our investments that may not be available in the current year are classified as long-term.

     As of September 30,December 31, 2010, in light of the plan for repurchase and the repurchases made during the year, management has determined that there has not been a change in the fair value of the securities owned. We have not recorded any impairment related to these investments, as management does not believe that the underlying credit quality of the assets has been impacted by the reduced liquidity of these investments. In addition, no unrealized gain or loss has been recorded on these assets. We consider the inputs to valuation of these securities as level 2 inputs in the fair value hierarchy.

     On September 26, 2007 and October 31, 2007, we issued convertible debentures in a private placement offering that bearhad an interest atrate of 8 percent per annum and havehad a term of three years. The convertible debentures arewere convertible into common stock at $0.20 per share during their term and at maturity, at our option, may be repaidwere repayable in full or convertedconvertible into common stock at the lower of $0.20 per share or the average trading price for the 10 days immediately prior to the maturity date on September 26, 2010 and October 31, 2010. We intend to convert the remaining debentures upon maturity. We also issued warrants to purchase shares of our common stock at $0.30 per share in the private placement offering. We allocated the proceeds received in the private placement to the convertible debentures and warrants to purchase common stock based on their relative estimated fair values. The discount from the face amount of the convertible debentures represented by the value initially assigned to any associated warrants and derivative liabilities iswas amortized over the period to the due date of each convertible debenture, using the effective interest method. We redeemed all warrants issued in the offering in fiscal 2009. As of September 30, 2010 all amounts are classified as current and all amounts are due in fiscal 2011.

     Effective interest associated with the convertible debentures totaled $224,052$16,632 and $103,453$240,684 for the three and six months ended September 30,December 31, 2010, respectively. Effective interest associated with the convertible debentures totaled $147,955 and $306,703 for the three and six months ended December 31, 2009, respectively. Effective interest is accreted to the balance of convertible debt until maturity. Simple interest paid totaled $16,943$1,102 and $23,409$18,046 for the three and six months ended September 30,December 31, 2010, respectively. Simple interest paid totaled $22,795 and $46,204 for the three and six months ended December 31, 2009, respectively. A total of $256,568 was paid for commissions and expenses incurred in the 2007 private placement offering which is beingwas amortized into interest expensesexpense over the term of the convertible debentures on a straight-line basis. As of September 30,December 31, 2010 we have recorded accumulated amortization of 2007 deferred offering costs of $230,734.$231,552.

     Between November 2009 and February 2010, we issued convertible debentures with an aggregate principal amount of $4,995,000 that bear interest at 8 percent per annum and have a term of two years. Accordingly, as of September 30,December 31, 2010, these amounts are recorded as long-term convertible debt on the accompanying balance sheet. We received aggregate net cash proceeds of $4,035,687, after deducting placement fees of $464,313 and taking into account the conversion of an outstanding note payable as described below. The convertible debentures are convertible into common stock at $0.20 per share during their term. Subject to meeting certain equity conditions, we have the option to redeem the outstanding principal plus accrued interest for cash at any time during the term of the debentures. In conjunction with these convertible debentures we issued warrants to purchase an aggregate of 14,997,449 shares of common stock with an exercise price of $0.50 per share and warrants to purchase an

     We established a line of credit to borrow up to 80% of our investments. As of September 30,December 31, 2010, we can borrow up to $600,000. The line is collateralized by our auction rate securities. The interest rate charged through September 30,December 31, 2010, 3.00 percent, is 0.25 percentage points below the published Wall Street Journal Prime Rate, which was 3.25%3.25 percent as of September 30,December 31, 2010. At September 30,December 31, 2010, we have borrowed approximately $433,985,$434,093, including accrued interest, from the line.

     On October 31,In January 2011 we granted 919,500 options under our 2007 and 2010 Long-Term Incentive plans. Between January 1, 2011 and February 1, 2011 we issued an aggregate of 800,0001,570,943 shares of our common stock as a result of the conversionoption and warrant exercises and conversions of our remaining outstanding October 31, 2007 convertible debentures.

     This management’s discussion and analysis reviews the financial condition and results of operations of LifeVantage Corporation (the “Company”, “LifeVantage”, or “we”, “us” or “our”) and its wholly-owned subsidiaries Lifeline Nutraceuticals Corporation (“LNC”), LifeVantage de México, S. de R.L. de C.V. (Limited Liability Company), Importadora LifeVantage, S. de R.L. de C.V. (Limited Liability Company), and Servicios Administrativos para la Importación de Productos Body & Skin, S.C.

     We are a dietary supplement company that manufactures, markets, distributes, and sells Protandim, a patented dietary supplement intended to increase the body’s natural antioxidant protection by inducing multiple protective enzymes including superoxide dismustase (SOD) and catalase (CAT) through network marketing and direct-to-consumer sales channels. We also sell our LifeVantage TrueScience Anti-Aging Cream, a skin care product, through the same channel.

     Our revenue depends significantly upon the number and productivity of our independent distributors. Independent distributors market and sell our products and recruit new distributors based on the distinguishing benefits and innovative characteristics of our products. We have developed a distributor compensation plan and other incentives designed to motivate our independent distributors to market and sell our products and to build sales organizations. If we experience delays or difficulties in introducing compelling products or attractive initiatives to independent distributors, this can have a negative impact on our revenue and harm our business.

     Ongoing research and development projects involving Protandim are currently in various stages of completion with several institutions including the University of Colorado at Denver Health Science Center, University of Minnesota’s Masonic Cancer Center, Ohio State University, University Hospital in Brno, Czech Republic, University of Michigan and Louisiana State University. The studies relate to various conditions including pulmonary hypertension, non-alcoholic fatty liver disease, Duchenne muscular dystrophy, coronary artery bypass graft failure, renal failure, diabetes, and photoaging of the skin. The recently completed and published peer-reviewed mouse study at Louisiana State University found a significant increase in the expression levels of SOD and catalase enzymes and tumor incidence and multiplicity were reduced in mice fed a Protandim^® diet by 33% and 57%, respectively, compared with mice on a basal diet. Another study, conducted by a prominent dermatologist using Protandim^®, is examining the relationship between anti-aging and the skin’s natural ability to rejuvenate at the cellular level.

     Net revenue from Protandim^®, TrueScience^®and related marketing materials totaled $6,443,349$7,460,089 and $13,903,438, respectively, for the three and six months ended September 30,December 31, 2010, and $1,857,997$2,455,646 and $4,313,643, respectively, for the three and six months ended September 30, 2009, respectively.December 31, 2009.

     Revenue We generated net revenue of $6,443,349$7,460,089 during the three months ended September 30,December 31, 2010, and generated net revenue of $1,857,997$2,455,646 during the three months ended September 30,December 31, 2009. We generated net revenue of $13,903,438 during the six months ended December 31, 2010 and $4,313,643 during the six months ended December 31, 2009. The increase in revenue is due to continuing growth in ourincreased sales volume through the network marketing channelsor multi-level marketing sales channel. Our sales in Japan contributed $1,589,466 and $2,830,797 of this increase for the U.S.three and Japan with no substantial change in Mexico sales.six months ended December 31, 2010, respectively. During the three and six month periods ended December 31, 2010, substantially all of our sales and marketing effort was directed toward building this channel.

     Gross Margin Our gross profit percentage for the three month periods ended September 30,December 31, 2010 and 2009 was 84% and 83%, respectively. Our gross profit percentage for the six months ended December 31, 2010 and 2009 was 84% and 83%, respectively. The slightly higher gross margin in 2010 wasmargins we have experienced are primarily due to continuing focus on efficiencies and cost reduction measures.reductions obtained through our contract manufacturer. We believe that ourexpect the gross margin should be fairly stablepercentages for this sales channel to remain in this range however, as we increase sales into our international markets and/or changefor the mix of our product offerings, the margin could vary.foreseeable future.

     Sales and Marketing Expenses Sales and marketing expense increased from $2,012,166$1,962,590 for the three months ended September 30,December 31, 2009 to $3,410,843$4,020,603 for the three months ended September 30,December 31, 2010. Sales and marketing expenses increased from approximately $3,975,195 for the six months ended December 31, 2009 to $7,431,446 for the six months ended December 31, 2010. This increase was due primarily to commissions paid to distributors due to the higher sales volumevolume. The increase also reflects expenses associated with sales events, such as our Elite Academy, which took place in the quarter ended December 31, 2010. We expect continued increases in sales and othermarketing expenses related toas our sales incentives and our entry into the Japan market.increase.

     General and Administrative Expenses Our general and administrative expense decreased from $2,381,156$2,548,891 for the three months ended September 30,December 31, 2009 to $1,507,093$1,496,069 for the three months ended September 30,December 31, 2010. General and administrative expense decreased from $4,929,608 for the six months ended December 31, 2009 to $3,003,162 for the six months ended December 31, 2010. The decrease for the three months ended September 30, 2010 wasdecreases are primarily due primarily to decreased legal and personnel related costs associated with headcount and decreased legal fees. This decrease wasare partially offset by increased bonus accruals professional fees and benefitbenefits costs. We expect general and administrative expenses to remain relatively stable, however there will be some periodic increases associated with additional personnel required to support our growth.

     Research and Development Our research and development expenses decreased from $106,892$118,522 for the three months ended September 30,December 31, 2009 to $109,793$89,717 for the three months ended September 30,December 31, 2010. The decrease was primarilyResearch and development expenses decreased from $225,414 for the six months ended December 31, 2009 to $199,510 for the six months ended December 31, 2010. These decreases are a result of decreased lab fees paida decrease in spending on contract research in the first half of our fiscal 2011. While research and development expenses were only $89,717 for the three months ended December 31, 2010 continued investment in research and development is a company priority and we have ensured that sufficient cash is available for the remainder of this fiscal year to fund research and development efforts amounting to approximately 2% of our total net revenue. The recognition and timing of these expenses will be dependent upon entry into specific research and development projects, which are still in the University of Colorado.planning stages.

     Depreciation and Amortization Expense Depreciation and amortization expense decreased from $53,298$93,475 during the three months ended September 30,December 31, 2009 to $50,716$53,184 during the three months ended September 30,December 31, 2010. The decrease wasDepreciation and amortization expense decreased from $146,773 for the six months ended December 31, 2009 to $103,900 for the six months ended December 31, 2010. These decreases were due primarily to assets becomingbeing fully depreciated and are partially offset by depreciation associated with capital acquisitions made in the quarter.quarter ended December 31, 2010.

     Net Other Income and Expense We recognized net other income of $370,424$4,933,642 during the three months ended September 30,December 31, 2010 as compared to net other income of $5,874,035$1,998,993 during the three months ended September 30,December 31, 2009. During the six months ended December 31, 2010 we recognized net other income of $5,304,066 as compared to net other income of $7,873,029 for the six months ended December 31, 2009. These fluctuations between periods are primarily the result of a decrease in the gain recognized due to the change in fair value of the derivative liabilities during the three and six months ended September 30,December 31, 2010 of $4,192,689 as compared to the three months ended September 30, 2009, as well as an increase in$5,477,924 and $7,312,971, respectively. This income was partially offset by interest expense related to convertible debentures and income tax expense.

Income Tax Expense We recognized income tax expense of $1,310,922$95,000 for the three and six months ended September 30,December 31, 2010 as compared to none for the three and six months ended September 30,December 31, 2009. The income tax expense reflects our estimated liability for state income taxes for the six months ended December 31, 2010.

     Net Income/Loss We recorded net income of $715,193$5,447,624 for the three month period ended September 30,December 31, 2010 compared to a net loss of $680,663 for the three month period ended December 31 2009. We recorded net income of $6,162,817 for the six month period ended December 31, 2010 compared to net income of $2,865,546$2,184,884 for the threesix month period ended September 30December 31, 2009. The decrease in net income of $2,150,353 for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009 is due to a decrease of $5,503,611 in other income offset by an increase in operating income of $3,353,258.

     Our primary liquidity and capital resource requirements are to finance our continued expansion into the cost ofnetwork marketing sales channel. This includes the costs associated with additional support personnel, compensating our planned sales and marketing efforts,distributors, the manufacture and sale of Protandimour products, and our LifeVantage TrueScience Anti-Aging Skin Cream, and to pay our general and administrative expenses. In order to remain cash flow positive from operations, we must maintain or continue to increase sales and maintain or limit expense increases, which we may be unable to do.

     Our primary sources of liquidity are cash flow generated from the sales of our product and funds raised from our 2009 private placement financing transactions which closed in2007, 2009 and 2010.

     During the threesix months ended September 30,December 31, 2010, our net cash used by investing activities was $7,939$6,341, due to purchasesthe redemption of intangiblemarketable securities less the purchase of fixed and fixedintangible assets. During the threesix months ended September 30,December 31, 2009, our net cash provided by investing activities was $37,096$52,166 primarily due to the redemption of investments offset bymarketable securities less the purchase of equipment.intangible assets.

     We did not have any cashCash provided by financing activities during the threesix months ended September 30,December 31, 2010 was none compared to $1,592,081cash provided by financing activities of $2,882,255 during the threesix months ended September 30,December 31, 2009. Cash provided by financing activities during the six month period ended December 31, 2010 was related solely to net proceeds from the revolving line of credit. Cash provided from financing activities during the threesix months ended September 30,December 31, 2009 was relateddue to proceeds from the issuancean equity offering of common stock and warrants and notes payable from related parties.the issuance of convertible debentures and warrants.

     We maintain an investment portfolio of marketable securities that is managed by a professional financial institution. ThisThe portfolio ofincludes auction rate private securities, or ARPS, of AA and AAA rated closed-end funds,funds. These marketable securities which historically have been extremely liquid hashave been adversely affected by the broader national liquidity crisis. We have negotiated a repurchases plan with the financial institution holding these securities.

     We have a line of credit that is secured by ourthe marketable securities that we hold, which allows us to borrow up toagainst 80% of the par value of these marketable securities. Based upon thatthis line of credit, management haswe have classified 80% or $340,000$300,000 of our investmentsmarketable securities as short term. The remaining 20% or $85,000$75,000 of our investmentmarketable securities that may not be available in the current yearnext twelve months is classified as long-term. However, future economic events could change the portionsportion of these classified as short term and long term.

     At September 30,December 31, 2010, we had negative working capital (current assets minus current liabilities) of $29,077$(818,406), compared to negative working capital of $(2,103,899) at June 30, 2010. The increase innegative working capital was primarilyat December 31, 2010 is due to being cash flow positive duringthe classification of certain derivative liabilities related to the 2009 convertible debentures as short-term in the quarter and the reduction of the current derivative liabilities.ended December 31, 2010.

     We intendOur ability to convert our remaining short-term debentures and related derivative liabilities into 800,000 shares of our common stock during the second quarter of our fiscal 2011. These conversions should have a further positive effectfinance future operations will depend on our working capital. Basedexisting liquidity and on our forecasted cash flow for fiscal 2011 we have determinedability to generate continued revenues and profits from operations. We believe that existing cash on hand and future cash flow will be sufficient to fundallow us to continue operations for at least the next 12 months. A shortfall from projected sales levels would likely result in expense reductions, which could have a material adverse effect on our ability to continue operations at current levels. If we are unable to generate cash from operations at projected or otherwise sufficient levels, we may be required to seek additional funds through September 30, 2011 anddebt, equity or equity-based financing (such as convertible debt); however financing may not be available on favorable terms or at all. If we raise additional funds by selling additional shares of our capital stock, or securities convertible into shares of our capital stock, the foreseeable future thereafter.ownership interest of our existing shareholders will be diluted. The amount of dilution could be increased by the issuance of warrants or securities with other dilutive characteristics, such as anti-dilution clauses or price resets.

     As of September 30,December 31, 2010, we did not have any off-balance sheet arrangements.

     We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments, and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Our significant accounting policies are described in Note 2 to our financial statements. Certain of these significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. We consider an accounting estimate to be critical if (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

     Allowances for Product Returns We record allowances for product returns at the time we ship the product based on estimated return rates of 1% to 4%. We base these accruals on the historical return rate since the inception of our selling activities, and the specific historical return patterns of the product.

     We offer a 30-day, money back unconditional guarantee to all direct customers. As of September 30,December 31, 2010, our September 2010 direct and network marketing sales shipments of approximately $2,270,000$2,377,000 were subject to the money back guarantee. We replace product returned due to damage during shipment wholly at our cost, the total of which historically has been negligible. In addition, we allow terminating distributors to return 30% of unopened unexpired product that they purchased during the prior twelve months, subject to certain consumption limitations.

     We monitor our return estimate on an ongoing basis and may revise the allowances to reflect our experience. Our allowance for product returns was $447,434$625,730 on September 30,December 31, 2010, compared with a $343,900 on June 30, 2010. To date, product expiration dates have not played any role in product returns, and we do not expect product expiration dates to affect product returns in the foreseeable future because it is unlikely that we will ship product with an expiration date earlier than the latest allowable product return date.

     Inventory Valuation We state inventories at the lower of cost or market on a first-in first-out basis. From time to time we maintain a reserve for inventory obsolescence and we base this reserve on assumptions about current and future product demand, inventory whose shelf life has expired and market conditions. From time to time, we may be required to make additional reserves in the event there is a change in any of these variables. We have recorded a$103,359 of reserve for obsolete inventory as of September 30,December 31, 2010 of approximately $48,000 related to certainprimarily for obsolete marketing materials held in inventory.materials.

     Revenue Recognition We ship the majority of our product directly to the consumer through the direct to consumer and network marketing sales channels via United Parcel Service, (“UPS”), and receive substantially all payment for these shipments in the form of credit card charges. We recognize revenue from direct product sales to customers upon passage of title and risk of loss to customers when product is shipped from the fulfillment facility. Sales revenue and estimated returns are recorded when product is shipped.

     Derivative Instruments In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

     Under the rules and regulations of the SEC, as a smaller reporting company we are not required to provide the information required by this Item.

     Evaluation of Disclosure Controls and Procedures

     As of September 30,December 31, 2010, we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30,December 31, 2010 at the reasonable assurance level due to the material weaknesses in our internal control over financial reporting discussed immediately below.

     Conclusion

     The above identified material weaknesses resulted in material audit adjustments to our 2010 financial statements. If the identified material weaknesses are not remediated, one or more of the identified material weaknesses noted above could result in a material misstatement in our reported financial statements in a future interim or annual period.

None.

     In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in “Part I. Item 1A—Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010. The risks and uncertainties described in such risk factors and elsewhere in this report have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results and future prospects. As of the date of this report, we do not believe that there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

     Information required by Item 701 of Regulation S-K as to equity securities we sold duringDuring the period covered by this report, thatwe issued 800,000 unregistered shares of our common stock upon the conversion of convertible debentures originally acquired from us in September and October 2007. The shares issued were not registeredexempt from registration under the Securities Act of 1933 has been previously reported (aspursuant to Section 3(a)(9) thereof. The shares were exchanged for outstanding debentures exclusively with the holder thereof and no commission or other remuneration was paid or given directly or indirectly for soliciting such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934).exchange.

     None.

     None.

See the exhibit index immediately following the signature page of this report.