Innolog 10Q 2009 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

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

Commission File No. 333-140633

UKARMA CORPORATION

(Exact name of registrant as specified in it charter)

Nevada		68-048-2472
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

499 North Canon Drive, Suite 308

Beverly Hills, CA 90210

(Address of principal executive offices)

(310) 998-8909

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files).
Yes ¨ No ¨

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.

Large Accelerated filer ¨		Non-Accelerated Filer ¨
Accelerated Filer ¨		Smaller Reporting Company x

Indicate by check market whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each issuer's classes of common stock, as of the latest practicable date: 52,794,482 issued and outstanding as of November 20, 2009.

UKARMA CORPORATION

TABLE OF CONTENTS

TO QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2009

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4.	Controls and Procedures	8

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3.	Defaults Upon Senior Securities	9
Item 4.	Submission of Matters to a Vote of Security Holders	9
Item 5.	Other Information	9
Item 6.	Exhibits	10

Signatures		11

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Our financial statements start on the following page, beginning with page F-1.

UKARMA CORPORATION

BALANCE SHEETS

	As of
	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash	$	2,412		$	1,781
Accounts receivable		-			309
Due from stockholder		13,906
Other receivable		-			26,691
Prepaid expenses		67,380			70,863
Inventory		18,475			22,327
Total Current Assets		102,173			121,971

Property and equipment, net of accumulated depreciation of $8,464 for 2009, and $4,689 for 2008		19,520			391,514

Other Assets
Production costs, net of accumulated amortization of $304,910 for 2009, and $212,047 for 2008		314,175			407,038
Deposit		-			28,380
Patent		10,358			10,358
Total Other Assets		324,533			445,776

TOTAL ASSETS	$	446,226		$	959,261

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	304,585			196,161
Accrued expenses		113,940			66,677
Refundable good faith deposit		75,000			-
Notes payable to unrelated parties, including accrued interest of $161 for 2009		10,661			-
Notes payable to related party, including accrued interest of $22,637 for 2008		-			207,768
Total Current Liabilities		504,186			470,606

Stockholders' Equity
Common stock, $0.001 par value; 100,000,000 shares authorized; 52,794,482 and 29,768,292 shares issued and outstanding in 2009 and 2008, respectively		52,795			29,768
Preferred stock, $0.001 par value; 20,000,000 shares authorized, none issued		-			-
Paid-in capital		7,484,723			6,548,088
Accumulated deficit		(7,595,478	)		(6,089,201	)
Total Stockholders' Equity (Deficit)		(57,960	)		488,655

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	446,226		$	959,261

See notes to interim unaudited financial statements

F-1

UKARMA CORPORATION

STATEMENTS OF OPERATIONS (Unaudited)

For the three months and nine months ended September 30, 2009 and 2008

	For three months ended						For nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Sales	$	2,796		$	70,215		$	20,619		$	75,637

Cost of Sale		82			3,340			1,226			3,614
Gross Profit		2,714			66,875			19,393			72,023
Selling, General and Administrative Expenses		751,631			511,023			1,505,698			2,079,374

Operating Loss		(748,917	)		(444,148	)		(1,486,305	)		(2,007,351	)

Other Income (Expenses)
Interest Expense		(4,605	)		(2,769	)		(19,172	)		(9,182	)
Total Other Income (Expense)		(4,605	)		(2,769	)		(19,172	)		(9,182	)

Net Loss before Income Taxes		(753,522	)		(446,917	)		(1,505,477	)		(2,016,533	)
Provision for Income Taxes		-			-			800			800
Net Loss	$	(753,522	)	$	(446,917	)	$	(1,506,277	)	$	(2,017,333	)

Loss Per Share-Basic and Diluted	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.09	)

Weighted Average Number of Shares		52,475,461			25,395,786			40,662,031			22,999,257

See notes to interim unaudited financial statements

F-2

UKARMA CORPORATION

STATEMENTS OF CASH FLOWS (Unaudited)

For the nine months ended September 30, 2009, and 2008

	For nine months ended
	September 30,
	2009			2008
Cash Flow from Operating Activities:
Net loss	$	(1,506,277	)	$	(2,017,333	)
Adjustment to reconcile net loss to
net cash used by operating activities:
Depreciation		3,775			1,841
Amortization of production costs		92,863			81,700
Abandonment of leasehold improvements		492,119
Issuance of stock for services		304,791			486,704
Issuance of stock for loan fee		21,500			-
Stock option expenses		147,405			180,604
Stock warrant expenses		-			14,440
(Increase) Decrease in:
Trade accounts receivable		309			(1,965	)
Payroll tax refund receivable		7,159			(7,159	)
Employee advances		-			-
Prepaid expenses		3,483			(24,211	)
Inventory		3,852			3,614
Capitalized production costs		-			75,017
Deposit		28,380			(28,057	)
Increase (Decrease) in:
Accounts payable		108,424			152,022
Accrued expenses		196,767			1,771
Refundable good faith deposit		75,000			-
Net Cash Used by Operating Activities		(20,450	)		(1,081,012	)

Cash Flow from Investing Activities:
Due from stockholder		5,626			-
Purchase of property and equipment		(123,900	)		(130,730	)
Net Cash Used by Investing Activities		(118,274	)		(130,730	)

Cash Flow from Financing Activities:
Proceeds from notes payable		30,854			-
Repayments to notes payable		(30,499	)		(35,001	)
Proceeds from sale of stock		139,000			859,750
Net Cash Provided by Financing Activities		139,355			824,749

Net Increase (Decrease) in Cash		631			(386,993	)

Cash Balance at Beginning of Year		1,781			483,564

Cash Balance at End of Year	$	2,412		$	96,571

Supplemental Disclosures:
Interest Paid	$	44,473		$	-
Taxes Paid	$	800		$	800
Noncash Investment and Financing Activities:
Conversion of notes payable and accrued interest into common stock	$	202,735		$	-
Conversion of accrued compensation into common stock	$	144,231		$	-

See notes to interim unaudited financial statements

F-3

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF OPERATIONS

uKarma Corporation (“the Company”) was incorporated under the name of OM Capital Corporation in the State of Nevada on June 26, 2001. On April 30, 2004, the Company changed its name to uKarma Corporation. In 2006, the Company relocated its headquarter to the State of California and became a California foreign corporation.

The Company develops and markets proprietary branded personal health and wellness products, including fitness DVDs, nutraceuticals, and mind, body, and spirit goods and services, for fitness and health-conscious consumers. The Company’s product lines target the rapidly growing tens of millions that are seeking to enrich their physical, spiritual, and mental wellness.

Through infomercials and other marketing initiatives, the Company launched its initial products. The goal of the infomercials is to generate initial working capital, and build a community of loyal customers. From there, the Company will expand its product offerings into proprietary branded products primarily within the fitness and wellbeing multimedia and nutraceutical markets. As the brand image builds, the Company intends to extend its brand systematically to other complementary consumer products that meet its stringent product guidelines and are consistent with its message of “total health and happiness for oneself and others.”

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Presentation of Interim Information: The financial information at September 30, 2009 and for the three and nine months ended September 30, 2009 and 2008 is unaudited but includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial information set forth herein, in accordance with U.S. GAAP for interim financial information. Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information, please refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

The balance sheet as of December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The results for the nine months ended September 30, 2009 may not be indicative of results for the year ending December 31, 2009 or any future periods.

Use of Estimates: The preparation of the accompanying financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.

F-4

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition: The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. In instances where the final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Customers’ prepayments are deferred until products are shipped and accepted by the customers. No provisions were established for estimated product returns and allowances based on the Company’s historical experience.

Cash Equivalents: For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

Concentration of Cash: The Company places its cash and cash equivalents with high quality financial institutions. At times, cash balances may be in excess of the FDIC’s insurance limits. Management considers the risk to be minimal.

Inventories: Inventories consist of finished goods and are stated at the lower of cost or market, using the first-in, first-out method.

Property and Equipment: Property and equipment are valued at cost. Maintenance and repair costs are charged to expenses as incurred. Depreciation is computed on the straight-line method based on the estimated useful lives of the assets, generally 5 to 7 years. Depreciation expense for the three months ended September 30, 2009 and 2008 was $1,277 and $809, respectively. Depreciation expense for the nine months ended September 30, 2009 and 2008 was $3,775 and $1,841, respectively.

Patents: The Company capitalizes patent costs as incurred, excluding costs associated with Company personnel, relating to patenting its technology. The majority of capitalized costs represent legal fees related to a patent application. If the Company elects to stop pursuing a particular patent application or determines that a patent application is not likely to be awarded or elects to discontinue payment of required maintenance fees for a particular patent, the Company, at that time, records as expense the capitalized amount of such patent application or patent. Awarded patents will be amortized over the shorter of the economic or legal life of the patent.

Fair Value of Financial Instruments: All financial instruments are carried at amounts that approximate estimated fair value.

Income Taxes: Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts.

Advertising Costs: All costs associated with advertising and promoting the Company’s products and services are expensed as incurred. Advertising expense for the three months ended September 30, 2009 was a negligible amount, and for the three months ended September 30, 2008 was $8,025. Advertising expense for the nine months ended September 30, 2009 and 2008 was $15,987 and $312,011, respectively.

F-5

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Loss Per Share: Basic net loss per share includes no dilution and is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted net loss per share does not differ from basic net loss per share since potential shares of common stock are anti-dilutive for all periods presented. Potential shares consist of restricted common stock, stock warrants, and stock options.

The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123R and the EITF Issue No. 00-18, “Accounting For Equity Instruments That Are Issued To Other Than Employees for Acquiring, Or In Conjunction With Selling, Goods Or Services.” SFAS No. 123R states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Under the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).

New Accounting Pronouncements: In April 2009, the FASB issued three Staff Positions (FSPs): (i) FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, (ii) FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Statements,” and (iii) FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” The pronouncements are intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities, but they will not be applicable to the current operations of the Company. Therefore a description and the impact on the Company’s operations and financial position for each of the pronouncements above have not been disclosed.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statements No. 162”. The statement establishes the Accounting Standards Codification TM (Codification) as the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Under the Codification, all of its content will carry the same level of authority. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this statement did not have a material impact on the Company’s financial position or results of operations.

F-6

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In June 2009, the FASB issued SFAS No.167, “Amendments to FASB Interpretation No. 46(R).” The statement changes the approach to determining the primary beneficiary of a variable interest entity (VIE) and requires companies to more frequently assess whether they must consolidate VIEs. This new standard is effective for fiscal years beginning after November 15, 2009. The Company is currently assessing the potential impacts, if any, on its financial statements.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140.” The statement improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This new standard is effective for fiscal years beginning after November 15, 2009. The Company is currently assessing the potential impacts, if any, on its financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” The statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This new standard is effective for fiscal years or interim periods after June 15, 2009. The adoption of this statement did not have a material impact on the Company’s financial position or results of operations.

NOTE 3 – GOING CONCERN

The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. In the near term, the Company expects operating costs to continue to exceed funds generated from operations. As a result, the Company expects to continue to incur operating losses, and the operations in the near future are expected to continue to use working capital.

Management of the Company is actively increasing marketing efforts to increase revenues. The ability of the Company to continue as a going concern is dependent on its ability to meet its financing arrangement and the success of its future operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

F-7

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 4 – PREPAID EXPENSES

Prepaid expenses consisted of the following:

	September 30,		December 31,
	2009		2008
	(Unaudited)		(Audited)
Prepaid Royalty	$	67,380	$	68,581
Prepaid Legal		-		2,282
Total Prepaid Expenses	$	67,380	$	70,863

On April 25, 2008, the Company entered into an agreement with a coauthor for its diet and nutrition book that it is self-publishing and plans to market directly to customers. Pursuant to this agreement, the Company paid the coauthor a $10,000 advance against future royalties. The Company will pay the coauthor a 5% royalty if uKarma acts as the publisher or a 2 ½% royalty if uKarma engages a third party publisher after the $10,000 advance is recouped.

On March 26, 2008, the Company entered into an agreement with an author to write a book related to diet and nutrition that the Company plans to self-publish and market directly to consumers. Pursuant to the agreement, the author will be paid a $40,000 advance on royalties with the following arrangement: $15,000 payable upon execution of the agreement; $15,000 payable on or before the completion and delivery of the first 50% of the book; and $10,000 on full completion, delivery, and acceptance of the book. The $40,000 advance on royalties is based on the first 50,000 books sold. The author will receive a 5% royalty on sales above 50,000 books sold where the Company acts as the publisher and 2 1/2% royalty on sales above 50,0000 books sold if the Company engages a third party publisher. As of September 30, 2009, no advance payment has been paid.

On April 19, 2006, the Company entered into an agreement with a consultant to provide consulting and advisory services for the Company, to appear in the Company’s yoga, health, and wellness film productions, to assist in scriptwriting for the projects such as classes, interviews and introductions, to participate in the projects rehearsals, and to assist in marketing and promoting the projects. Accordingly, the Company will pay a royalty of 8% on the first $300,000 and 10% on above $300,000 on all gross revenue, net of returns, refunds, chargebacks, taxes, and shipping and handling charges. As of September 30, 2009, there is a balance of $57,380 after advancing $70,000 and deducting royalties on the 2009 sales. Future royalty obligations will be deducted from the current balance.

F-8

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
Furniture & Fixtures	$	15,459		$	13,721
Machinery & Equipment		12,525			12,525
Studio Leasehold Improvements		-			369,957
		27,984			396,203
Accumulated Depreciation		(8,464	)		(4,689	)

Property and Equipment, net	$	19,520		$	391,514

NOTE 6 – PRODUCTION COSTS

The Company capitalized costs incurred for recording seven fitness videos’ master copies. As of September 30, 2009, total costs of $619,085 were capitalized. All costs consisted of in-production costs only.

Starting in the second quarter of 2007, the costs were amortized on a straight-line method over the estimated life of the recorded performances, which is five years. The Company recorded an amortization expense of $30,954 and $30,955 for the three months ended September 30, 2009 and 2008, respectively. The Company recorded an amortization expense of $92,863 and $81,700 for the nine months ended September 30, 2009 and 2008, respectively.

NOTE 7 – PATENT

The Company filed for a patent for three proprietary yoga mats, which it believes provide unique functions and benefits compared to yoga mats currently in the market. Through to date, the patent is still pending for approval.

NOTE 8 – GOOD FAITH DEPOSIT FOR MERGER AND ACQUISITION

On October 19, 2009, the Company and its wholly owned subsidiary, GCC Merger Sub Corporation (“Merger Sub”), entered into a Merger Agreement with Galen Capital Corporation (“GCC”) dated as of October 15, 2009 (“Agreement”). This followed a previously executed Letter of Intent between the Company and GCC dated June 11, 2009.

Under the Agreement, Merger Sub would merge with GCC such that following the merger (“Merger” or “Transaction”), GCC would be a wholly owned subsidiary of the Company. As consideration for the transaction, the Company would issue to GCC security holders that number of shares of common stock on a fully diluted basis (“Common Shares”) such that following such issuance, GCC security holders would hold 95% of the outstanding Company Common Shares on a fully diluted basis. GCC common stock would be exchanged for Company Common Shares. GCC convertible preferred stock, options, and warrants would be exchanged for equivalent Company preferred stock, options, and warrants.

In addition, GCC has agreed to pay Company an amount equal to $275,000 (“Cash Payment”). Through date of this report, $150,000 of the Cash Payment has already been paid to uKarma as a non-refundable deposit along with an $11,000 advance for the Company’s third quarter accounting fees.

F-9

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 9 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

	September 30,		December 31,
	2009		2008
	(Unaudited)		(Audited)
Accrued Professional Fees	$	28,200	$	15,000
Accrued Salaries		84,140		41,404
Employee Reimbursable		-		6,955
Accrued Sales Tax		-		18
Accrued Income Tax		1,600		800
Others		-		2,500
Total Accrued Expenses	$	113,940	$	66,677

NOTE 10 – NOTES PAYABLE

The notes payable to unrelated parties bear interest at 6% per annum and are due on their one year anniversaries in May 2010 and September 2010. As of September 30, 2009, the balance was $10,661 including accrued interest of $161.

During the nine months ended September 30, 2009, a notes payable to a related party of $202,735, including accrued interest of $27,749, was converted into shares of the Company’s common stock. As of December 31, 2008, the balance was $207,768, including accrued interest of $22,637.

NOTE 11 – STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2009, the Board of Directors of the Company approved the issuance of an aggregate 3,639,653 shares of Company’s common stock to various providers in consideration of their services to the Company. The shares were valued and charged to operations based on the opening trading price on the grant date, or $304,791 in the aggregate.

During the nine months ended September 30, 2009, the Board of Directors of the Company approved the issuance of an aggregate 17,348,271 restricted shares of common stock to its Chief Executive Officer in consideration for cancellation of debt and deferred and accrued compensation owed by the Company to the CEO pursuant to a Conversion Agreement entered into between the Company and the CEO on June 11, 2009. The shares were valued based on the opening bid price on the grant date, or $346,966 in the aggregate.

Through September 30, 2009, the Company received $139,000 and sold 1,288,266 shares of the Company’s common stock at a price of $0.06 to $0.15 per share in a private placement offering.

On September 17, 2009, the Board of Directors of the Company approved the issuance of an aggregate 250,000 restricted shares of common stock to an individual in connection with a loan made by him to the Company. The shares were valued based on the opening bid price on the grant date, or $7,500 in the aggregate.

F-10

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 11 – STOCKHOLDERS’ EQUITY (continued)

On August 17, 2009, the Board of Directors of the Company approved the issuance of an aggregate 200,000 restricted shares of common stock to an individual in connection with a loan made by him to the Company. The shares were valued based on the opening bid price on the grant date, or $8,000 in the aggregate.

On June 11, 2009, the Board of Directors of the Company approved the issuance of an aggregate 300,000 restricted shares of common stock to an individual in connection with a loan made by him to the Company. The shares were valued based on the opening bid price on the grant date, or $6,000 in the aggregate.

During the nine months ended September 30, 2008, the Company received $859,750 and sold 2,456,428 shares of the Company’s common stock pursuant to the August 6, 2007 offering at a price of $0.35 per share.

On September 18, 2008, the Board of Directors approved to issue 90,000 shares of common stock, valued at $0.20 per share or $18,000, to an outside consultant in consideration of legal services rendered to the Company. As of September 30, 2008, the shares were not issued by the Company and it was accrued as professional fees.

NOTE 12 – NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share:

	For three months ended						For nine months ended
	September 30,						September 30,
Numerator:	2009			2008			2009			2008
Net Loss	$	(753,522	)	$	(446,917	)	$	(1,506,277	)	$	(2,017,333	)
Denominator:
Weighted Average of Common Shares		52,475,461			25,395,786			40,662,031			22,999,257

Basic and Diluted Net Loss per Share	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.09	)

As a result of our net loss for the three and nine months ended September 30, 2009 and 2008, all common share equivalents would have been anti-dilutive and therefore, have been excluded from the diluted net loss per share calculation. The weighted average securities, consisting of stock options and warrants, that were either out of the money or anti-dilutive from our calculation of diluted net loss per share were approximately 11,777,000 and 11,777,000 for three months ended September 30, 2009 and 2008, respectively. The weighted average securities, consisting of stock options and warrants, that were either out of the money or anti-dilutive from our calculation of diluted net loss per share were approximately 11,777,000 and 11,747,000 for nine months ended September 30, 2009 and 2008, respectively.

F-11

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 13 – 2006 STOCK OPTION PLAN

On January 1, 2006, the Board of Directors approved and adopted the 2006 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) to provide the issuance of non-qualified and/or incentive stock options to employees, officers, directors, and consultants and other service providers. Generally, all options granted expire ten years from the date of grant. All options have an exercise price equal to or higher than the fair market value of the Company’s stock on the date the options were granted. It is the policy of the Company to issue new shares for stock option exercised and restricted stock, rather than issued treasury shares. Options generally vest over ten years. The Plan reserves 7,500,000 shares of common stock under the Plan and is effective through December 31, 2015.

A summary of the status of stock options issued by the Company as of September 30, 2009 and 2008 is presented in the following table:

	2009				2008
			Weighted				Weighted
	Number		Average		Number		Average
	of		Exercise		of		Exercise
	Shares		Price		Shares		Price
Outstanding at beginning of year		5,295,000	$	0.20		5,250,000	$	0.20
Granted		-		-		45,000		0.35
Exercised/Expired/Cancelled		-		-		-		-
Outstanding at end of period		5,295,000	$	0.20		5,295,000	$	0.20

Exercisable at end of period		4,265,000	$	0.20		3,166,667	$	0.20

The fair value of the stock option granted is estimated on the date of grant using the Black-Scholes option valuation model. This model uses the assumptions listed in the table below. Expected volatilities are based on the estimated volatility of the Company’s stock. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	2009	2008
Weighted average fair value per option granted	N/A	N/A
Risk-free interest rate	N/A	N/A
Expected dividend yield	N/A	N/A
Expected lives	N/A	N/A
Expected volatility	N/A	N/A

The following table sets forth additional information about stock options outstanding at September 30, 2009:

			Weighted
			Average		Weighted
Range of			Remaining		Average
Exercise	Options		Contractual		Exercise		Options
Prices	Outstanding		Life		Price		Exercisable
$0.20-$0.35		5,295,000		6.01	$	0.20		4,265,000
		5,295,000		6.01	$	0.20		4,265,000

F-12

UKARMA CORPORATION

NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

NOTE 13 – 2008 STOCK OPTION PLAN (continued)

As of September 30, 2009, there was $145,521 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 0.77 years.

As of September 30, 2008, there was $344,437 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.72 years.

NOTE 14 – RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2008, the Company paid $23,500 to a director for his consulting services to the Company. During the nine months ended September 30, 2009, the Company paid $14,285 in 714,250 shares of the Company’s common stock for his services to the Company.

NOTE 15 – LEGAL DISPUTE

On June 17, 2009, Jeffrey Fischer (the “Landlord”) filed a compliant against the Company and Bill Glaser in the Los Angeles Superior Court in Los Angeles, California. The Landlord claims that the Company owes back rent on the lease of its yoga and fitness studio in Sherman Oaks, California and seeks to recover $222,859.97 and evict the Company from the subject property. The Company denies liability and contends that the Landlord never reimbursed the Company for a tenant improvement allowance of $165,000 pursuant to the lease along with other breaches by the Landlord. The judge in the case denied a writ of attachment motion that was submitted by the Landlord. A settlement could not be reached between the parties, and as such the Company vacated the property on September 30, 2009. The case is expected to be reassigned by the Court from an unlawful detainer to a breach of contract dispute. At such time, the Company plans to initiate legal action against the Landlord for full recovery of all tenant improvements it incurred to date along with other damages.

F-13

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

Certain statements in this Management’s Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

As used in this Form 10-Q, unless the context requires otherwise, “we” or “us” or the “Company” or “uKarma” means uKarma Corporation, a Nevada corporation.

Overview

We are an early stage company that develops and markets proprietary branded personal health and wellness products, including yoga and fitness DVDs, books and CDs, nutraceuticals, and other products targeting the mass market and MBS (Mind/Body/Spirit) consumers. We generated no revenues since inception through the first quarter of 2007. We began to generate revenue in the second quarter of 2007. Accordingly, we are no longer a development stage since April 1, 2007.

Since April 2004, we have dedicated our resources to developing our business plan and producing items that will appeal to the “wellness” conscious consumer, such as yoga and fitness DVDs. In May 2007, we began to market and sell our initial Xflowsion products. We believe that our success depends upon our ability to successfully produce, market, and distribute such products along with having the necessary capital to operate and grow our business. After test-marketing the initial version of our infomercial, we recognized the need to shoot additional footage and to reedit it before airing it again. Due to capital constraints, we had to wait until our registration statement was declared effective by the Securities and Exchange Commission in order to raise capital. Our registration statement was declared effective on August 9, 2007, and we focused the remainder of 2007 raising capital and preparing to update our infomercial and implement our marketing strategy in 2008.

We began airing the reedited version of our Xflowsion infomercial nationally on June 27, 2008. Infomercials typically go through a period of on-air testing and other means such as focus groups to obtain feedback that can be used to make edits designed to elicit the greatest consumer response. We had been going through such a process and conducted a focus group during the 3rd quarter of 2008. We had a very high percentage (approximately 80%) of participants who were interested in buying our Xflowsion DVD series. Overall, the focus group feedback revealed a strong interest in the Xflowsion workout and instructor Eric Paskel and confirmed our potential for Xflowsion to be a big seller. We used the feedback we received from the focus group and on-air infomercial testing to tweak our branding and edit our infomercial to maximize the potential response and sales by consumers. With the economic downturn and the fall season typically not being the best time to sell fitness-oriented products, we did not air our infomercial again during 2008 and have yet to do so in 2009 due to capital constraints.

The personality of our Xflowsion DVD series, Eric Paskel, appeared on this season of CBS’ reality show, The Amazing Race, which started airing in September 2009. Prior to the airing of the first episode of this season, we engaged an online marketing firm to market our Xflowsion DVD series on a CPA (Cost Per Acquisition) basis. We also explored and planned many other marketing initiatives in order to leverage the large audience that was going to be exposed to Eric Paskel. While it was possible that Mr. Paskel could have been eliminated on the first show, the audience of millions was a big opportunity to leverage into potential Xflowsion DVD sales. Unfortunately, Mr. Paskel was eliminated at the beginning of the first episode and, as such, our marketing initiatives relating to that exposure have been put on hold. We believe that Mr. Paskel was well received on a show that has several million viewers, and we are pursuing opportunities for other television appearances that can be a catalyst for awareness and marketing opportunities for our Xflowsion DVD series.

We also plan to increase our brand exposure and awareness of Xflowsion and drive sales via a public relations campaign. Toward that end, Xflowsion has already been profiled in People Magazine, People.com, Fitness Magazine, TMZ, The National Enquirer, and many other publications. The product was recently profiled on an E! Entertainment television show and is expected to be profiled in 17 Magazine and others in the coming months. We are encouraged by the response to our Xflowsion DVD series in the media and with consumers and via our marketing efforts and will continue to pursue opportunities that can be catalysts to additional press and media exposure.

Further to the Letter of Intent (LOI) to that we entered into with Galen Capital Corporation (“Galen”), we and our wholly owned subsidiary GCC Merger Corporation (“Merger Sub”) subsequently executed a merger agreement with Galen. Under the agreement, Merger Sub would merge with Galen such that following the merger (“Merger” or “Transaction”), Galen would be a wholly owned subsidiary of the Company. As consideration for the transaction, the Company will issue to the holders of Galen securities that number of shares of common stock on a fully diluted basis (“Common Shares”) such that following such issuance, GCC security holders would hold 95% of the outstanding Company Common Shares on a fully diluted basis. Galen common stock would be exchanged for Company Common Shares. Galen convertible preferred stock, options, and warrants would be exchanged for equivalent Company preferred stock, options, and warrants.

In addition, Galen has agreed to pay Company an amount equal to $275,000 (“Cash Payment”). As of the date of this report, $150,000 of the Cash Payment has already been paid to uKarma as a non-refundable deposit along with an $11,000 advance for the Company’s third quarter accounting fees.

The Company’s obligations to close the Transaction will be subject to certain conditions of the other party that must be satisfied or waived, including, among other things, Galen shall pay the remaining portion of the Cash Payment and Galen shareholders shall vote to approve the merger transaction. Galen’s obligations to close the Transaction will be subject to certain conditions of the other party that must be satisfied or waived, including, among other things, Galen shall have certain persons appointed as Company officers and directors. The Agreement may be terminated by any party if the Closing does not occur by December 31, 2009 provided such terminating party is not in breach of this Agreement. The Company has been informed by Galen’s management that the timing to close the Transaction is based on when their audit will be completed, which they expect to be completed by December 31, 2009.

Concurrent with the merger of Galen, uKarma’s operating business will be spun-off into a new entity that will be held by our current shareholders on a pro-rata basis. As such, we believe that this transaction is beneficial for our shareholders as we will be able to receive $275,000 without selling shares and without taking on debt. Our shareholders will also own the same pro-rata ownership in uKarma’s business while also retaining some ownership of Galen.

Along with previously loaning additional funds to the Company, our CEO, Bill Glaser, has deferred approximately $35,000 of his 2008 salary and will continue to defer his salary in 2009 until the Company can better afford to pay it. In the meantime, he has agreed to convert his loans to the Company along with his deferred compensation as of June 30, 2009 into shares of our common stock.

Critical Accounting Policies and Estimates

Our MD&A is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following accounting policies, which are also described in Note 2 to our financial statements, are critical to aid the reader in fully understanding and evaluating this discussion and analysis:

Use of Estimates: The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.

Cash Equivalents: For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

Inventories: Inventories consist of finished goods and are stated at the lower of cost or market, using the first-in, first-out method.

Fair Value of Financial Instruments: All financial instruments are carried at amounts that approximate estimated fair value.

Advertising Costs: All costs associated with advertising and promoting the Company’s products and services are expensed as incurred.

Stock Based Compensation: Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Shares-Based Payment” (SFAS 123R), using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of, January 1, 2006 based of the grant date fair value calculated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123R and the EITF Issue No. 00-18, “Accounting For Equity Instruments That Are Issued To Other Than Employees for Acquiring, Or In Conjunction With Selling, Goods Or Services.” SFAS No. 123R states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Under the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).

New Accounting Pronouncements

In April 2009, the FASB issued three Staff Positions (FSPs): (i) FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, (ii) FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Statements,” and (iii) FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” The pronouncements are intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities, but they will not be applicable to the current operations of the Company. Therefore a description and the impact on the Company’s operations and financial position for each of the pronouncements above have not been disclosed.

Results of Operations

Comparison of Nine Months ended September 30, 2009 and September 30, 2008

Net sales. For the nine months ended September 30, 2009, net sales decreased 73% relative to the nine months ended September 30, 2008, from $75,637 to $20,619. The decrease is primarily attributable to press coverage and infomercial airings in 2008 that did not occur in the same period of 2009.

Cost of sales. Cost of sales for the nine months ended September 30, 2009 was $1,226 as compared to $3,614 for the nine months ended September 30, 2008, a decrease of approximately 66%. The decrease in our cost of sales is attributable to a decrease in sales but a consistent product cost.

Gross profit. Gross profit for the nine months ended September 30, 2009 was $19,393 as compared to a gross profit of $72,023 for the nine months ended September 30, 2008, representing gross margins of approximately 94% and 95%, respectively.

Operating expenses. Our operating expenses consisted primarily of general and administrative expenses and expenses related to marketing our product and construction of our proposed yoga and fitness studio. For the nine months ended September 30, 2009, total operating expenses were $1,505,698, while total operating expenses for the nine months ended September 30, 2008 were $2,079,374, representing a decrease of approximately 28%. The decrease in operating expenses is primarily due to infomercial production costs incurred in 2008 and not in 2009.

Net income (loss). We had net loss of $1,506,277 for the nine months ended September 30, 2009 as compared to net loss of $2,017,333 for the nine months ended September 30, 2008.

Comparison of Three Months ended September 30, 2009 and September 30, 2008

Net sales. For the three months ended September 30, 2009, net sales decreased 96% relative to the three months ended September 30, 2008, from $70,215 to $2,796. The decrease from the third quarter of 2008 to the third quarter of 2009 is primarily attributable to press coverage in People Magazine and other outlets in 2008 that was not received in 2009.

Cost of sales. Cost of sales for the three months ended September 30, 2009 was $82 as compared to $3,340 for the three months ended September 30, 2008, a decrease of approximately 97.5%. The decrease in our cost of sales is attributable to a decrease in sales but consistent product cost.

Gross profit. Gross profit for the three months ended September 30, 2009 was $2,714 as compared to a gross profit of $66,875 for the three months ended September 30, 2008, representing gross margins of approximately 97% and 95%, respectively.

Operating expenses. Our operating expenses consisted primarily of general and administrative expenses and expenses related to marketing our product and construction of our proposed yoga and fitness studio. For the three months ended September 30, 2009, total operating expenses were $751,631, while total operating expenses for the three months ended September 30, 2008 were $511,023, representing an increase of approximately 47%.The increase in operating expenses is due to the write-off of leasehold improvements related to our proposed yoga and fitness studio.

Net income (loss). We had net loss of $753,522 for the three months ended September 30, 2009 as compared to net loss of $446,917 for the three months ended September 30, 2008.

LIQUIDITY

Cash Flows

Net cash used by operating activities was $20,450 for the nine months ended September 30, 2009, while net cash used by operating activities was $1,081,012 for the nine months ended September 30, 2008. The decrease in net cash used by operating activities between the periods was mainly due to the write-off of leasehold improvements, higher accrued expenses, and a deposit related to a pending merger transaction.

Net cash used by investing activities was $118,274 for the nine months ended September 30, 2009, while net cash used by investing activities was $130,730 for the nine months ended September 30, 2008. The decrease in net cash used by investing activities between the periods was due to a decrease in the purchase of equipment and property.

Net cash provided by financing activities was $139,355 for the nine months ended September 30, 2009, while net cash provided by financing activities was $824,749 for the nine months ended September 30, 2008. The decrease in net cash flow from financing activities between the periods was mainly due to the Company raising more capital in 2008 than in 2009 through the sale of its common stock.

Material Impact of Known Events on Liquidity

Although we no longer have the lease obligation of our proposed yoga and fitness studio and have limited our operations due to capital constraints, we do have ongoing legal expenses related to a contract dispute with the landlord of the studio along with other planned marketing initiatives of our Xflowsion DVD series. Due to our current liquidity, we must raise additional capital in order to meet the aforementioned obligations.

CAPITAL RESOURCES

As of September 30, 2009, we had working capital of $(402,013). To satisfy current working capital needs, our CEO, Bill Glaser, previously loaned funds to the Company along with raising capital through the sale of common stock and loans by other individuals. Until we raise sufficient capital via the sale of our common stock or via additional loans, there is no guarantee that we will be able to meet current working capital needs. We have fully incurred the production cost of our Xflowsion DVD series and last version of our infomercial. We plan to make financial investments in editing and airing our infomercial and marketing of our Xflowsion DVD series for the next six months. We expect to incur substantial losses over the next two years.

We estimate that our expenses over the next 12 months beginning on October 1, 2009 will be approximately $875,000 as follows:

General and Administrative	$	300,000
Infomercial Production		150,000
Inventory		50,000
Media (Airtime)		50,000
Marketing/Publicity		150,000
Legal		75,000
DVD/CD Production		50,000
Accounting		50,000

As of September 30, 2009, we had cash equivalents of $16,318, which will meet our capital requirements for approximately the next month. We believe that we need approximately an additional $860,000 to meet our capital requirements over the next 12 months. Our intention is to obtain this money through debt and/or equity financings.

We plan to engage outside contractors and consultants who are willing to be paid in stock rather than cash or a combination of stock and cash. Expenses incurred that cannot be paid in stock, such as auditors' fees, will be paid in cash. There are no assurances that we will be able to meet our capital requirements or that our capital requirements will not increase. If we are unable to raise necessary capital to meet our capital requirements, we may not be able to successfully market and sell our Xflowsion DVDs.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Contractual Obligations

We do not currently have fixed contractual obligations or commitments that include future estimated payments.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out 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, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On June 17, 2009, Jeffrey Fischer (the “Landlord”) filed a compliant against uKarma Corporation and Bill Glaser in the Los Angeles Superior Court in Los Angeles, California. The Landlord claimed that we owe back rent on the lease of our yoga and fitness studio in Sherman Oaks, California and sought to recover $222,859.97 and evict us from the subject property. We denied liability and contend that the Landlord never reimbursed us for a tenant improvement allowance of $165,000 pursuant to the lease along with other breaches by the Landlord. The judge in the case denied a writ of attachment motion that was submitted by the Landlord. A settlement could not be reached between the parties, and as such the Company vacated the property on September 30, 2009. The case is expected to be reassigned by the Court from an unlawful detainer to a breach of contract dispute. At such time, the Company plans to initiate legal action against the Landlord for full recovery of all tenant improvements it incurred to date along with other damages.

Other than the proceeding discussed above, there have been no material developments during the quarter ended September 30, 2009 in any material pending legal proceedings to which the Company is a party or of which any of our property is the subject

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 17, 2009, we issued 250,000 restricted shares of our common stock to Maher Khoury in connection with a loan made by him to the Company in the amount of $2,500. We relied on Section 4(2) of the Securities Act of 1933, as amended, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.

On August 17, 2009, we issued 200,000 restricted shares of our common stock to Leonard Panzer in connection with a loan made by him to the Company in the amount of $2,000. We relied on Section 4(2) of the Securities Act of 1933, as amended, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.

Other than the above, there are no unregistered sales of equity securities during the quarter ended September 30, 2009 to report that have not already been disclosed in a Current Report on Form 8-K.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.

OTHER INFORMATION

(a) None.

(b) There were no changes to the procedures by which security holders may recommend nominees to our board of directors

ITEM 6.

EXHIBITS

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation, as currently in effect (1)

3.2		Bylaws, as currently in effect (1)

4.1		Form of Warrant (1)

10.1		Merger Agreement between Galen Capital Corporation, GCC Merger Sub Corporation, and uKarma Corporation, dated October 15, 2009 *

31.1		Section 302 Certification by the Corporation’s Chief Executive Officer *

31.2		Section 302 Certification by the Corporation’s Chief Financial Officer *

32.1		Section 906 Certification by the Corporation’s Chief Executive Officer and Chief Financial Officer *

*	Filed herewith.

(1)	Incorporated herein by reference to our Form SB-2 filed with the SEC on February 12, 2007.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UKARMA CORPORATION
	(Registrant)

Date: November 23, 2009	By:	/s/ Bill Glaser
		Bill Glaser
		Chief Executive Officer and President (Principal Executive Officer) and Interim Chief Financial Officer (Principal Financial and Accounting Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Avg

Innolog (INHC) Inactive 10-Q2009 Q3 Quarterly report

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