Indicate by check mark whether the registrant is a large accelerated filer, an 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 (Check One):
At November 16, 2012, the registrant had outstanding 335,527 shares of common stock.
ZEVOTEK, INC.
The accompanying notes are an integral part of these consolidated financial statements.
ZEVOTEK, INC.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.
Business and Basis of Presentation
ZEVOTEK, INC. (“Company” or “Registrant”) was organized on March 19, 2005 under the state laws of Delaware with an original name of “The Diet Coffee Company.” On March 1, 2006, we amended our Certificate of Incorporation and changed our name from “The Diet Coffee Company, Inc to Diet Coffee, Inc. On June 25, 2008, Zevotek changed its name to Zevotek, Inc.
Zevotek’s wholly owned subsidiary is Ionic Bulb.com, Inc., a Delaware corporation formed on August 21, 2007, through which it had sold the Ionic Bulb, a patented air purifier that silently emits negative ions using a microchip placed inside a 10,000-hour energy saving compact fluorescent light bulb (CFL). The Ionic Bulb was an eco-easy maintenance-free inexpensive alternative that is designed to clean the air in a 100 square foot area of unpleasant odors and indoor air pollutants that you breathe. Zevotek sold the Ionic Bulb through specialty retail shops, TV commercials, Amazon.com and newionicbulb.com, and it marketed the Ionic Bulb to major U.S. retail stores. It had acquired exclusive worldwide sales and manufacturing rights to a U.S. patented new product named Gung H2O that reduces water use in the home.
Zevotek has currently stopped working on the sales of the Ionic bulb. It is upgrading the bulb. The new ionic bulb will be made using LED light. The new Ionic Bulb will not no longer be using florescent light.
Zevotek plans to sell Gung H20 to major U.S. retail stores and directly to American consumers using TV ads and Internet marketing. After Zevotek tried to market the Gung H2O, it went back to the inventors to make changes due to feedback from the public. After the inventors make the changes Zevotek hopes to market the product sometime in the second to third quarter of 2013.
Our chief executive officer, Mr. Ryu has a history of being an innovator. We expect that he will bring a number of products on board in the upcoming year and believe Zevotek will make instant revenue from these products. We expect to release some of these products in the very near future. We are either waiting to put the finishing touches or most importantly file the proper patents in order to bring the greatest value to our stockholders.
General
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
The consolidated financial statements include the accounts of the Registrant and its wholly-owned subsidiary, Ionic Bulb.com, Inc. The Registrant formed its Ionic Bulb.com, Inc. subsidiary on August 21, 2007 and started its operations during the fiscal year ended June 30, 2008. All significant inter-company transactions and balances have been eliminated in consolidation.
Zevotek has adopted the fiscal year end of June 30.
Reverse Stock Split
On September 26, 2011, Zevotek filed a certificate of amendment to our Certificate of Incorporation with the Secretary of State of Delaware to effectuate a reverse stock split on a 1 to 5,000 basis. The Financial Industry Regulatory Authority (“FINRA”) effected the reverse stock split on October 27, 2011. Each holder of common stock received 1 share of Zevotek’s common stock in exchange for each 5,000 shares of Zevotek’s common stock they owned. Zevotek did not issue fractional shares in connection with the foregoing split. Fractional shares were rounded up to the nearest whole share. All per share numbers quoted herein are reflective of the 1:5,000 reverse split. All references in the accompanying consolidated financial statements and notes there to have been retroactively restated to reflect the stock split.
Revenue Recognition
For revenue from product sales, Zevotek recognizes revenue in accordance with Accounting Standards Codification 605, “Revenue Recognition SEC Staff Accounting Bulletin Topic 13” (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. Zevotek defers any revenue for which the product has not been delivered or is subject to refund until such time that Zevotek and the customer jointly determine that the product has been delivered or no refund will be required.
ASC 605 incorporates Accounting Standards Codification 605-25, “Revenue Recognition Multiple Element Arrangements”. ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Zevotek does not have any multiple element arrangements.
Consideration Paid to Customers
Zevotek offers our customers certain incentives in the form of cooperative advertising arrangements, product markdown allowances, trade discounts, cash discounts, and slotting fees. Markdown allowances, trade discounts, cooperative advertising program participation and cash discounts are all recorded as reductions of net sales. No customer incentives are included in sales for the years ended September 30, 2012 and 2011.
Use of Estimates
The preparation of the financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the accompanying consolidated financial statements, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. Zevotek had no cash equivalents as of September 30, 2012 and June 30, 2012, respectively.
Inventories / Cost of Goods Sold
Zevotek has adopted a policy to record inventory at the lower of cost or market determined by the first-in-first-out method. The elements of cost that comprise inventory and cost good sold are FOB shipping point costs, freight and destination charges, customs and importation fees and taxes, customer broker fees (if any) and other related costs. Warehousing costs are charged to cost of goods in the period the costs are incurred. Zevotek provides inventory allowances based on estimates of obsolete inventories.
Inventories consist of finished products available for sale to distributors and customers. At September 30, 2012 and June 30, Zevotek had no inventory.
Allowance for doubtful accounts
Zevotek maintains an allowance for doubtful accounts to reduce amounts to their estimated realizable value, including reserves for customer and other receivable allowances and incentives. In estimating the provision for doubtful accounts, Zevotek considers a number of factors including age of the accounts receivable, trends and ratios involving the age of the accounts receivable and the customer mix of each aging categories. As of September 30, 2012 and June 30, 2012, the allowance for doubtful accounts was $0.
Impairment of long lived assets
Zevotek has adopted Accounting Standards Codification 360 "Property, Plant and Equipment" (“ASC 360”). The Statement requires that long-lived assets and certain identifiable intangibles held and used by Zevotek be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. Zevotek evaluates the recoverability of long-lived assets based upon forecasted undercounted cash flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.
Advertising
Zevotek charges the costs of advertising to expenses as incurred. Zevotek charged $0 and $580 to operations for the three months ended September 30, 2012 and 2011, respectively.
Income Taxes
Zevotek has adopted Accounting Standards Codification 740, “Income Taxes” (“ASC 740”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference
between financial statements and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant, except basis difference related to certain debts.
Effective January 1, 2007 Zevotek adopted an amendment to the requirements of ASC 740. The amended standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
ASC 740-10-25-5 “Income Taxes—Overall—Recognition—Basis Recognition Threshold”, (“Tax Position Topic”) provides guidance to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold, i.e. “more-likely-than-not”, that the income tax positions must achieve before being recognized in the financial statements. In addition, the Tax Position Topic requires expanded annual disclosures, including a roll forward of the beginning and ending aggregate unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within twelve months.
As a result of implementing ASC 740, there has been no adjustment to Zevotek’s financial statements and the adoption of ASC 740 did not have a material effect on Zevotek’s consolidated financial statements for the years ended June 30, 2012 and 2011.
Research and Development
Zevotek accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standards Codification 730 "Research and Development" (“ASC 730”). Under ASC 730, all research and development costs must be charged to expense as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Zevotek had no expenditures on research and product development for the three months ended September 30, 2012 and 2011.
Stock Based Compensation
Effective January 1, 2006, Zevotek adopted the requirements of ASC 505 “Equity” and ASC 718-10 “Stock Compensation”, under the modified prospective transition method. The standards require the measurement of compensation cost at the grant date, based upon the estimated fair value of the award, and requires amortization of the related expense over the employee’s requisite service period.
Under ASC 718-10, stock based compensation cost will be recognized over the period during which an employee is required to provide service in exchange for the award. ASC 718-10 also requires an entity to calculate the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to adoption of ASC 718-10 (the “APIC pool”). Zevotek has evaluated its APIC pool and has determined that it was immaterial as of January 1, 2006. ASC 718-10 also amends ASC 230 “Cash Flows”, to require that excess tax benefits that had been reflected as operating cash flows be reflected as financing cash flows.
Loss per Share
Zevotek has adopted Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares outstanding. Potentially dilutive shares of common stock realizable from the conversion of our convertible debentures of 150,982,468 and 4,139,729,900 shares, respectively at September 30, 2012 and 2011, are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.
Concentration of Credit Risk
Financial instruments and related items, which potentially subject Zevotek to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. Zevotek places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
Recent Accounting Pronouncements
Zevotek has reviewed all recently issued , but not yet effective accounting pronouncements and does not believe the future apoption of any such pronouncements will have a material impact on its consolidated financial condition or the results of its operations.
NOTE B - GOING CONCERN MATTERS
The accompanying consolidated 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. As shown in the accompanying consolidated financial statements for the three months ended September 30, 2012 and 2011, Zevotek incurred net losses of $102,708 and $393,122 respectively. At September 30, 2012, Zevotek had a working capital deficit of $2,575,059 and accumulated losses of $8,314,013. Zevotek is in default of payment and interest on certain convertible notes payable.
Zevotek is actively pursuing additional convertible debt financing through discussions with its current lenders. Zevotek cannot predict whether the additional financing will be in the form of equity or debt, or be in another form. Zevotek may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, Zevotek may be unable to implement its current plans for expansion, repay its debt obligations as they become due, or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial conditions and result of operations. These factors, among others, may indicate that Zevotek will be unable to continue as a going concern for a reasonable period of time.
Zevotek has discontinued sales of one its major products, the Ionic Bulb and has re-entered the Development Stage after the year ended June 30, 2012. Zevotek has chosen to no longer sell the fluorescent version of the Ionic Bulb and to develop a next generation bulb utilizing “LEDs” Light Emitting Diodes.
Zevotek's existence is dependent upon management's ability to develop profitable operations. Management anticipates Zevotek may attain profitable status and improve its liquidity through the continued developing, marketing and selling of its products and additional investment in Zevotek. The accompanying consolidated financial statements do not include any adjustments that might result should Zevotek be unable to continue as a going concern.
NOTE C – LICENSING AGREEMENT AND DISTRIBUTION AGREEMENT
On February 24, 2009, Zevotek entered into an Exclusive License and Sales Agreement whereby Zevotek has worldwide exclusive rights to manufacture, market use, sell, distribute and advertise a patented ionic bulb.
In exchange for the exclusive license, Zevotek issued 500 shares of its common stock. The license was valued at the market price of the underlying security.
On March 2, 2011, Zevotek and the Ionic Bulb patent holder entered into a non-exclusive Purchasing Representative Agreement whereby the patent holder shall introduce Zevotek to a new third party manufacturer that will produce a next generation version of the Ionic Bulb with new features and improved manufacturing cost. Additionally, the patent holder affirms his obligation to defend against patent infringement. Zevotek shall pay patent holder a fixed amount per Ionic Bulb ordered from the new manufacturer. Zevotek agreed to make an advance fee payment by issuance of 5,000 shares of Zevotek’s restricted stock. The value of the restricted shares applied to payment of the fees is to be based upon the average closing price of Zevotek's common stock for the ten trading days proceeding the date on which the restrictive stock legend may be removed. The term of the agreement is three years with one-year automatic renewals that are subject to minimum fee payments to the patent holder for the first and second renewal term, respectively. The related shares were issued and expensed during fiscal 2012 for a value of $35,000 based on the grant date fair value of the shares issued.
On December 10, 2010, Zevotek entered into an Exclusive License and Sales Agreement whereby Zevotek has worldwide exclusive rights to develop, manufacture, market, use, sell, distribute and advertise a U.S. patented new product named Gung H2O that reduces water use in the home. The license has a five-year initial term with automatic annual renewals and is not subject to minimum payments to the licensor.
NOTE D- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are as follows:
| | | September 30, 2012 | | | June 30, 2012 | |
| Accounts payable | | $ | 1,591 | | | $ | 2,389 | |
| Accrued professional fees | | | 226,482 | | | | 217,262 | |
| Accrued payroll and payroll taxes | | | 166,868 | | | | 165,372 | |
| Old disputed accounts payable | | | 136,505 | | | | 136,505 | |
| Accrued interest | | | 373,286 | | | | 333,598 | |
| Other accrued liabilities | | | 85,415 | | | | 83,875 | |
| Total | | $ | 990,147 | | | $ | 939,001 | |
NOTE E – ADVANCES PAYABLE
As of September 30, 2012 and June 30, 2012, Zevotek owed $199,183 and $199,183, respectively, to a note holder for cash advanced to Zevotek for operating purposes. The advances accrue interest at 10% per annum and are repayable on demand.
NOTE F - CONVERTIBLE NOTES PAYABLE AND DEMAND NOTES
| | | September 30, 2012 | | | June 30, 2012 | |
| Notes Payable: | | | | | | |
| Convertible term note (a) | | $ | 923 | | | $ | 923 | |
| Convertible term note (b) | | | 1,923 | | | | 1,923 | |
| Convertible term note (c) | | | 50,000 | | | | 50,000 | |
| Convertible term note (d) | | | 2,497 | | | | 2,497 | |
| Convertible term note (e) | | | 224 | | | | 224 | |
| Convertible term note (f) | | | 11,132 | | | | 11,132 | |
| Convertible term note (g) | | | 26,420 | | | | 26,420 | |
| Convertible term note (h) | | | 190,757 | | | | 190,757 | |
| Convertible term note (i) | | | 34,141 | | | | 34,141 | |
| Convertible term note (j) | | | 22,350 | | | | 22,350 | |
| Convertible term note (k) | | | 945,565 | | | | 945,565 | |
| Convertible term note (l) | | | 10,000 | | | | 10,000 | |
| Convertible term note (m) | | | 30,000 | | | | 30,000 | |
| Convertible term note (n) | | | 10,000 | | | | 10,000 | |
| Convertible term note (o) | | | 20,000 | | | | - | |
| Convertible term note (p) | | | 10,000 | | | | - | |
| Convertible term note (q) | | | 10,000 | | | | - | |
| Convertible term note (r) | | | 10,000 | | | | - | |
| Debt discount | | | (28,466 | ) | | | - | |
| | | | 1,357,466 | ) | | | 1,335,932 | |
| Less: current portion | | | (1,285,932 | ) | | | (1,285,932 | ) |
| Long term debt | | $ | 71,534 | | | $ | 50,000 | |
| | a) | On May 14, 2008, Zevotek entered into convertible term notes bearing interest at 10% per annum with a maturity date of May 14, 2010. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.0001 per share (see below). Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holders about amending the conversion terms to cure the default. |
| | b) | On May 27, 2008, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of May 27, 2010. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.0001 per share (see below). Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. |
| | c) | On January 1, 2008, Zevotek entered into a convertible term note for the principal amount of $50,000 bearing interest at 7% per annum with a maturity date of June 30, 2008. This note is convertible into common stock at 90% of the common stock closing price at June 30, 2008, which is $7,200. Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. |
| | d) | On January 8, 2009, Zevotek entered into convertible term notes bearing interest at 10% per annum with a maturity date of January 8, 2011. Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.0001 per share (see below). |
| | e) | On March 9, 2009, Zevotek entered into convertible term notes bearing interest at 10% per annum with a maturity date of March 9, 2011. The notes were amended on January 8, 2011 to extend the maturity date to January 8, 2012. Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | f) | Of the convertible term notes entered into on May 14, 2008, certain notes having a principal amount of $11,132 as of June 30, 2012 and 2011 were not amended with respect to their conversion price and, at any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.001 per share. Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. |
| | g) | On July 28, 2009, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of July 28, 2011. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | h) | On August 6, 2010, Zevotek converted $192,430 of advances payable into a convertible term note bearing interest at 10% per annum with a maturity date of August 6, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | i) | On January 8, 2009, Zevotek entered into convertible term notes bearing interest at 10% per annum with a maturity date of January 8, 2011. The notes were amended on January 8, 2011 to extend the maturity date to January 8, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | j) | On March 9, 2009, Zevotek entered into convertible term notes bearing interest at 10% per annum with a maturity date of March 9, 2011. Zevotek is in default of payment of principal and interest on the note and Zevotek is in discussions with the note holder about amending the conversion terms to cure the default. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | k) | On May 10, 2011, Zevotek converted $945,527 of advances payable into a convertible term note bearing interest at 10% per annum with a maturity date of May 10, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | l) | On March 19, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of March 19, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | m) | On May 15, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of May 15, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). 12 |
| | n) | On May 18, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of May 18, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | o) | On July 18, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of July 18, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | p) | On August 8, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of August 8, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). |
| | q) | On August 13, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of August 13, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). This note was fully discounted upon issuance due to a beneficial conversion feature, see below. |
| | r) | On September 14, 2012, Zevotek entered into a convertible term note bearing interest at 10% per annum with a maturity date of September 14, 2014. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.1 per share (see below). This note was fully discounted upon issuance due to a beneficial conversion feature, see below. |
In accordance with Accounting Standards Codification 470-20-65, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (“ASC 470-20-65”), Zevotek recognized an imbedded beneficial conversion feature present in the notes. Zevotek allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid in capital. Zevotek recognized and measured an aggregate of $30,000 of the proceeds, which was equal to the intrinsic value of the imbedded beneficial conversion feature at the time, to additional paid in capital and a debt discount against the Notes issued during the period ended September 30, 2012. The debt discount attributed to the beneficial conversion feature was originally amortized over the Notes maturity period (two years) as interest expense, adjusted for conversion of debt to common stock. Amortization was $1,534 during the period ended September 30, 2012.
On July 28, 2009, Zevotek issued a $44,000 convertible note having the same terms as the amended outstanding convertible notes. Zevotek recognized and measured an aggregate of $44,000 of the proceeds, which is equal to the intrinsic value of the imbedded amended beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over the note’s two-year term.
On August 6, 2010, Zevotek converted $192,430 of advances payable into a convertible note. Zevotek recognized and measured an aggregate of $192,430 of the advances payable, which is equal to the intrinsic value of the imbedded amended beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over the note’s two-year term.
On May 10, 2011, Zevotek converted $945,527 of advances payable into a convertible note. Zevotek recognized and measured an aggregate of $945,527 of the advances payable, which is equal to the intrinsic value of the imbedded amended beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over the note’s one-year term.
During the three months ended September 30, 2011, amortization related to the beneficial conversion feature on the convertible notes was $263,140.
NOTE G – STOCKHOLDERS EQUITY
Preferred Stock
Zevotek has authorized 10,000,000 shares of Preferred Stock of which 50,000 shares have been designated as Series A Preferred Stock, par value $0.00001, and 1,000,000 shares have been designated as Series B Preferred Stock, par value $0.00001 within the limitations and restrictions stated in the Certificate of Incorporation of Zevotek.
Zevotek issued 50,000 shares of Series A Preferred Stock. Each share of the Series A Preferred Stock is entitled to 10,000 votes on all matters submitted to the stockholders of Zevotek. The holders of the Series A Preferred Stock are not granted any preference upon the liquidation, dissolution or winding up of the business of Zevotek. The Series A Preferred Stock is not convertible into Common Stock.
Zevotek designated and issued 1,000,000 shares of Series B Preferred Stock. On May 14, 2008, Zevotek and a third party note holder entered into an exchange agreement under which the third party note holder exchanged a $21,026 promissory note for 1,000,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock is entitled to 5,000 votes on all matters submitted to the stockholders of Zevotek. Subsequently, the third party note holder, Anthony Intrieri, became Chairman of the Board of Directors. On September 12, 2011, the Estate of Anthony Intrieri ("Estate") sold 1,000,000 shares of Zevotek's Series B Preferred Stock to an unrelated third party. The Estate obtained the shares following the passing of Mr. Intrieri, Zevotek's former Chairman of the Board of Directors and sole Series B Preferred stockholder.
Common Stock
On September 26, 2011, Zevotek filed a certificate of amendment to our Certificate of Incorporation with the Secretary of State of Delaware to effectuate a reverse stock split on a 1 to 5,000 basis. On October 27, 2011, Financial Industry Regulatory Authority (“FINRA”) approved the Reverse Split and each holder of common stock received 1 share of Zevotek’s common stock for each 5,000 shares of Zevotek’s common stock they owned. Zevotek did not issue fractional shares in connection with the foregoing stock split. Fractional shares were rounded up to the nearest whole share. All per share numbers quoted herein are reflective of the Reverse Split.
During the three months ended September 30, 2011, Zevotek issued 7,500 shares of common stock, valued at $11,743 for services and accrued expenses. Shares were valued according to the closing price of the common stock on the date it was granted.
During the three months ended September 30, 2011, Zevotek issued 5,000 shares of common stock, valued at $5,500 for a non-exclusive Purchasing Representative Agreement. Shares were valued according to the closing price of the common stock on the date it was granted.
During the three months ended September 30, 2011, Zevotek converted debt and accrued interest of $30,561 into 61,121 shares of common stock. The conversion was in accordance with the original note agreement, therefore no gain or loss was recorded for this transaction.
Treasury Stock
As of September 30, 2012 and June 30, 2012, Zevotek had 1 share of common stock held in treasury, which carried at $0 based on cost.
NOTE H - STOCK OPTIONS AND WARRANTS
During the three months ended September 30, 2012 and 2011, Zevotek did not issue any stock warrants or options. As of September 30, 2012, there are no outstanding stock warrants or options.
NOTE I - COMMITMENTS AND CONTINGENCIES
U.S. Federal Trade Commission Settlement
On March 26, 2007, Zevotek received a letter from the U.S. Federal Trade Commission (“FTC”) whereby former management was informed that the FTC was conducting an investigation into advertising claims made for weight loss product known as “Slim Coffee.” The purpose of the investigation was to determine whether former management, in connection with its sales of Slim Coffee, engaged in unfair or deceptive acts or practices and false advertising. A negotiated settlement was reached with the FTC under which Zevotek, its former management did not admit any wrongdoing. On January 10, 2008, pursuant to a stipulated final judgment and order, the United States District Court, Southern District of New York, entered a final judgment and order against Zevotek in the amount of $923,910. The full amount of the judgment, and payment of any portion of it is suspended and cannot be reinstated so long as (a) Zevotek abides by the reporting and monitoring requirements of the judgment, (b) does not make false advertising claims in connection with any of its products in the future, and (c) its past financial disclosures to the FTC were materially accurate. Zevotek plans to comply with the terms of the stipulation and do not anticipate incurring a liability for the judgment, however there can be no assurance of compliance. Should Zevotek fail to comply with the FTC’s final judgment, this could have a material adverse effect on Zevotek’s business, financial condition and results of operations.
Licenses
On February 24, 2009, Zevotek entered into an Exclusive License and Sales Agreement whereby Zevotek obtained worldwide exclusive rights to manufacture, market use, sell, distribute and advertise certain licensed products. The license is on a year to year basis with automatic renewal and is subject to becoming non-exclusive should Zevotek fail to files all quarterly and annual reports by due dates, inclusive of allowable extensions. In exchange for the exclusive license, Zevotek issued 500 shares of its common stock.
On March 2, 2011, Zevotek and the Ionic Bulb patent holder entered into a non-exclusive Purchasing Representative Agreement whereby the patent holder shall introduce Zevotek to a new third party manufacturer that will produce a next generation version of the Ionic Bulb with new features and improved manufacturing cost. Additionally, the patent holder affirms his obligation to defend against patent infringement. Zevotek shall pay patent holder a fixed amount per Ionic Bulb ordered from the new manufacturer. Zevotek agreed to make an advance fee payment by issuance of 5,000 shares of Zevotek’s restricted stock. The value of the restricted shares applied to payment of the fees is to be based upon the average closing price of Zevotek's common stock for the ten trading days preceding the date on which the restrictive stock legend may be removed. The term of the agreement is three years with one-year automatic renewals that are subject to minimum fee payments to the patent holder for the first and second renewal term, respectively.
Gung H2O License
On December 10, 2010, Zevotek entered into an Exclusive License and Sales Agreement whereby Zevotek has worldwide exclusive rights to develop, manufacture, market, use, sell, distribute and advertise a U.S. patented new product named Gung H2O that reduces water use in the home. The license has a five-year initial term with automatic annual renewals and is not subject to minimum payments to the licensor.
Payroll Taxes
At September 30, 2012, Zevotek is delinquent with filing and remitting payroll taxes of approximately $93,000 including estimated penalties and interest related to payroll taxes withheld since April 2007. Zevotek has recorded the delinquent payroll taxes, which are included in accrued expenses on the balance sheet. Although Zevotek has not entered into any formal repayment agreements with the respective tax authorities, management plans to make payment as funds become available. Penalties and interest amounts are subject to increase based on a number of factors that can cause the estimated liability to increase further. Interest and penalties were accrued in an amount estimated to cover the ultimate liability.
Sales Taxes
At September 30, 2012, Zevotek is delinquent with remitting sales taxes of approximately $47,840, including related estimated penalties and interest related to sales taxes withheld since 2006 in the state of New York. Zevotek has recorded the delinquent sales taxes, which are included in accrued expenses on the balance sheet. Although Zevotek has not entered into any formal repayment agreements with the respective tax authorities, management plans to make payment as funds become available. Penalties and interest amounts are subject to increase based on a number of factors that can cause the estimated liability to increase further. Interest and penalties were accrued in an amount estimated to cover the ultimate liability.
NOTE J - FAIR VALUE MEASUREMENT
Fair Value Measurements under GAAP clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
The carrying value of Zevotek’s cash, accounts receivable, prepayments, accounts payable, advances payable, convertible notes payable, and other current assets and liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of Zevotek are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
As of September 30, 2012, there were no financial assets or liabilities that were measured at fair value on a recurring basis.
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General
The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our unaudited condensed consolidated financial statements and related notes included elsewhere in this Report. Historical results and percentage relationships among any amounts in these financial statements are not necessarily indicative of trends in operating results for any future period. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements, which are not historical facts contained in this Report, including this Management’s discussion and analysis of financial condition and results of operation, and notes to our unaudited condensed consolidated financial statements, particularly those that utilize terminology such as “may” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements. Such statements are based on currently available operating, financial and competitive information, and are subject to various risks and uncertainties. Future events and our actual results may differ materially from the results reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on existing and future key strategic and strategic end-user customers, limited ability to establish new strategic relationships, ability to sustain and manage growth, variability of operating results, our expansion and development of new service lines, marketing and other business development initiatives, the commencement of new engagements, competition in the industry, general economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our clients, the potential liability with respect to actions taken by our existing and past employees, risks associated with international sales, and other risks described herein and in our other filings with the Securities and Exchange Commission.
All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Company History
We were organized on March 19, 2005 under the state laws of Delaware with an original name of “The Diet Coffee Company.” On March 1, 2006, we amended our Certificate of Incorporation and changed our name from “The Diet Coffee Company, Inc.” to “Diet Coffee, Inc.” On June 25, 2008, we changed our name to “Zevotek, Inc.” Our principal executive offices are located at 19 Sylvan Avenue, Second Floor, Englewood Cliffs, NJ 07632. Our telephone number is (201) 820-0357.
Company Overview
We market and sell innovative personal and home care items. We are engaged in the direct marketing and distribution of consumer products. On February 24, 2009, we entered into an Exclusive License and Sales Agreement giving us the worldwide rights to manufacture, market, use, sell, distribute and advertise an air purifier that is contained in an energy saving compact fluorescent light bulb named the Ionic Bulb. We market the Ionic Bulb through TV infomercials, our website newionicbulb.com and Amazon.com. We plan to sell through catalogs and major U.S. retail and specialty stores.
On December 10, 2010, we entered into an Exclusive License and Sales Agreement giving us the worldwide rights to develop, manufacture, market, use, sell, distribute and advertise a U.S. patented new product named “Gung H2O” that reduces water use in the home. Gung H2O is a patented plumbing valve that is installed in the traditional gravity toilet tank of a non-low flow toilet. The Gung H2O valve regulates the amount of water used to fill and flush a toilet. The valve is adjustable to enable the toilet to use more or less water as desired. The Gung H2O valve enables a traditional non-low flow toilet to use less water to achieve the equivalent level of flushing power of a non-low flow toilet. We plan to sell Gung H20 to major U.S. retail stores and directly to American consumers using TV ads and Internet marketing.
We are currently seeking new products to sell.
Products
Ionic Bulb. The Ionic Bulb is an air-purifying product. The air-purifying component of the Ionic Bulb is placed in the base of a compact fluorescent light “CFL” bulb and consists of electronics and a spout through which negative ions produced by the air-purifying component are dispersed into the air. The electricity used to operate the air-purifying component also lights the CFL bulb to illuminate a room in the same manner as ordinary CFL bulbs.
We sold the Ionic Bulb through our wholly owned subsidiary Ionicbulb.com, Inc. The Ionic Bulb combined the performance features of ionic air cleaning technology with those of a 10,000 hour reduced energy use compact fluorescent light bulb (CFL). The Ionic Bulb contained an air purifying microchip ion emitter that is powered by the bulb’s own energy. The Ionic Bulb was designed for use in any U.S. home. When illuminated, the Ionic Bulb via silent emission of negative ions had helped to eliminate smoke, dust, pollen, pet dander and odors from the air within a surrounding 100 square foot area. The Ionic Bulb was designed for consumer use. We had believed the Ionic Bulb product to be a less expensive and space saving alternative to air purifiers.
We have currently stopped working on the sales of the Ionic Bulb. At present, we are working on upgrading the bulb. The new ionic bulb will be made with a LED light, and will no longer use fluorescent light.
Gung H20. Gung H20 was a patented plumbing valve that is installed in the traditional gravity toilet tank of a non-low flow toilet. The Gung H20 valve regulated the amount of water used to fill and flush a toilet. The valve was adjustable to enable the toilet to use more or less water as desired. The Gung H20 valve enabled a traditional non-low flow toilet to use less water to achieve the equivalent level of flushing power of a non-low flow toilet.
After we tried to market the Gung H2O, we went back to the inventors to make changes due to feedback from the public. After the inventors make the desired changes we hope to market the product sometime in the second to third quarter of 2013.
Our chief executive officer, Jason Ryu has a history of being an innovator. We expect that he will bring a number of products on board in the upcoming year and believe Zevotek will be able to garner revenue from these products. We expect to release some of these products in the very near future. We are either waiting to put the finishing touches or most importantly file the proper patents in order to bring the greatest value to our stockholders.
Comparison of Three Months Ended September 30, 2012 to September 30, 2011
Results of Operations
Revenue
Our sales were $0 for the three months ended September 30, 2012 and $374 for the three months ended September 30, 2011, a decrease of $374 or 100.0%. Sales for the three months ended September 30, 2011 are comprised of Ionic Bulb sold directly to individual consumers who bought the Ionic Bulb on the Internet.
We have currently stopped working on the sales of the Ionic Bulb. At present, we are working on upgrading the bulb. The new ionic bulb will be made with a LED light, and will no longer use fluorescent light.
Gross Profit
Our gross profit was $0 for the three months ended September 30, 2012 and $128 for the three months ended September 30, 2011, a decrease of $128 or 100.0% which was primarily due to the decrease in sales. We anticipate improving our gross profit margin through the introduction of a next generation Ionic Bulb.
Operating Expenses
Operating expenses were $61,486 for the three months ended September 30, 2012 and $90,904 for the three months ended September 30, 2011, a decrease of $29,418 or 32.4% which was primarily due to reductions in fulfillment and warehousing costs, salaries, advertising, professional fees and consulting fees. We incurred $0 and $14,985 in selling expenses during the three months ended September 30, 2012 and 2011, respectively. Selling expenses for the three months ended September 30, 2011 were comprised of marketing expenses.
Net Loss
Our net loss for the three months ended September 30, 2012 was $102,708 as compared to our net loss of $393,122 for the three months ended September 30, 2011. The decrease was primarily due to our reductions in operating expenses and interest expenses.
Our net loss per common share was $0.31 (basic and diluted) for the three months ended September 30, 2012 as compared to our net loss per common share of $1.42 for the three months ended September 30, 2011.
The weighted average number of outstanding shares was 335,527 (basic and diluted) for the three months ended September 30, 2012 as compared to 277,504 (basic and diluted) for the three months ended September 30, 2011.
Liquidity and Capital Resources
Overview
As of September 30, 2012, we had a working capital deficit of $2,575,059. As of June 30, 2012, we had a working capital deficit of $2,423,885. Our cash position at September 30, 2012 was $203 as compared to $231 at June 30, 2012.
Cash provided by financing activities for the three months ended September 30, 2012 and 2011 totaled $50,000 and $79,100, respectively, consisting of proceeds from issuance of convertible notes payable and advances from a note holder.
Financing Needs
Since our inception on December 19, 2005 to June 30, 2012, we have generated revenues of $1,413,825 and have incurred a net loss of $8,314,013. It is hoped that we will begin to achieve sustainable revenues within the next 12 months, of which there can be no guarantee. Our ability to achieve profitability is dependent on several factors, including but not limited to, our ability to: generate liquidity from operations and satisfy our ongoing operating costs on a timely basis. We still need additional investments in order to continue operations to cash flow break even. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and conditions in the U.S. stock and debt markets make it more difficult to obtain financing through the issuance of equity or debt securities.
Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations again, attempt to further restructure financial obligations and/or seek a strategic merger, acquisition or a sale of assets.
At present, we do not have sufficient capital on hand to fund our proposed operations for the next 12 months. We estimate that we will need at least $500,000 to fund our operations over the next 12 months. These funds will be spent for merchandising products, accommodating sales orders and paying our operating expenses.
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
Financial Reporting Release No. 60, recently released by the Securities and Exchange Commission (the “SEC”), requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The notes to the unaudited condensed consolidated financial statements include a summary of significant accounting policies and methods used in the preparation of our unaudited condensed consolidated financial statements. In addition, Financial Reporting Release No. 61 was recently released by the SEC requires all companies to include a discussion which addresses, among other things, liquidity, off-balance sheet arrangements, contractual obligations and commercial commitments. The following is a brief discussion of the more significant accounting policies and methods used by us.
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period.
On an on-going basis, we evaluate our estimates. The most significant estimates relate to our recognition of revenue, the allowance for doubtful accounts receivable and inventory valuation reserves.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements.
Reverse Stock Split
On September 26, 2011, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect a reverse split on the outstanding shares of the Company’s common stock on a 1 for 5,000 basis (the “Reverse Split”). All per share numbers in this quarterly report are reflective of the Reverse Split. The Financial Industry Regulatory Authority (“FINRA”) effected the Reverse Split on October 27, 2011.
Revenue Recognition
The Company recognizes revenue from product sales based on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. The Company does not have any multiple element arrangements.
Inventories / Cost of Goods Sold
The Company has adopted a policy to record inventory at the lower of cost or market determined by the first-in-first-out method. The elements of cost that comprise inventory and cost of goods sold are FOB shipping point costs, freight and destination charges, customs and importation fees and taxes, customer broker fees (if any) and other related costs. Warehousing costs are charged to cost of goods in the period the costs are incurred. The Company provides inventory allowances based on estimates of obsolete inventories.
Allowance for doubtful accounts
The Company maintains an allowance for doubtful accounts to reduce amounts to their estimated realizable value, including reserves for customer and other receivable allowances and incentives. In estimating the provision for doubtful accounts, the Company considers a number of factors including age of the accounts receivable, trends and ratios involving the age of the accounts receivable and the customer mix of each aging categories.
Advertising
The Company charges the costs of advertising to expenses as incurred.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4 – CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management, under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2012. Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting, the Chief Executive Officer/Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.
The reason for the ineffectiveness of our disclosure controls and procedures was the result of having limited number of employees and not having proper segregation of duties based on the cost benefit of hiring additional employees solely to address the segregation of duties issue. We compensate for the lack of segregation of duties by employing close involvement of management day-to-day operations and outsourcing to financial consultants.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2012 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
None
ITEM 1A – RISK FACTORS
Not applicable.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2012 and through the date of filing, the Company did not issue any shares of common stock.
ITEM 3 – DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4 – REMOVED AND RESERVED .
ITEM 5 – OTHER INFORMATION
On October 12, 2011, the Company entered into amendment agreements with certain holders of its outstanding convertible promissory notes in order to amend certain terms contained therein. The Company amended its (i) 10% convertible promissory note in the principal amount of $192,431 dated as of August 6, 2010 and (ii) its 10% convertible promissory note in the principal amount of $945,527 dated as of May 10, 2011, in order to (a) amend the conversion price to $0.10, (b) add a “Most Favored Nations Provision” to allow for adjustment of such conversion price in the event of certain lower priced issuances of the Company’s securities and (c) include a provision prohibiting the conversion of such note in the event conversion would require the Company to issue shares of common stock in excess of its then authorized but unissued shares. The Company amended its (i) 10% convertible promissory note in the principal amount of $26,225 dated as of January 8, 2009, (ii) its 10% convertible promissory note in the principal amount of $41,728 dated as of January 8, 2009; (iii) its 10% convertible promissory note in the principal amount of $72,471 dated as of March 9, 2009, (iv) its 10% convertible promissory note in the principal amount of $41,500 dated as of March 9, 2009 and (v) its 10% convertible promissory note in the principal amount of $44,000 dated as of July 28, 2009 in order to (a) amend the conversion price to $0.10 and (b) add a “Most Favored Nations Provision” to allow for adjustment of such conversion price in the event of certain lower priced issuances of the Company’s securities. Forms of the foregoing amendments were filed as exhibits to our Annual Report of Form 10-K for the fiscal year ended June 30, 2011.
ITEM 6 – EXHIBITS
Item No. | | Description |
| | | |
| | Certification of Jason Ryu, Chief Executive Officer and Chief Financial Officer of Zevotek, Inc. pursuant to Rule 13a-14(a) |
| | | |
| | Certification of Jason Ryu, Chief Executive Officer and Chief Financial Officer of Zevotek, Inc. pursuant to 18 U.S.C. § 1350 adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
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.
| | ZEVOTEK, INC. |
| | |
| November 19, 2012 | /s/ Jason Ryu | |
| | Jason Ryu |
| | President, Chief Executive Officer and Chief Financial Officer |
| | (Principal Executive and Principal Financial and Accounting Officer) |
24
