UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q






(Mark One)xQuarterly report
      pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934
                
                For the quarterly period ended January 31, 2010oTransition report
      pursuant Section 13 or 15(d) of the Securities Exchange Act of
      1934
                
                For
      the transition period from _________ to _________
                
                Commission
      file number 333-145898


ZURVITA
HOLDINGS, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            
            26-0531863(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)








800
      GessnerHouston,
      Texas 77024(Address
      of principal executive offices) (zip
code)








(713)
      464-5002(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 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 xNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes oNo o





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 o
            Accelerated
      filer oNon-accelerated
      filer o  (Do not
      check if a smaller reporting company)
            Smaller
      reporting company x





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





Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of March 1, 2010:


57,010,893
shares of common stock, par value $0.0001











ZURVITA
HOLDINGS, INC.





FORM
10-Q





PART I
- FINANCIAL INFORMATION





Page
      No.Item
      1.
            Financial
      Statements (Unaudited).Condensed
      Consolidated Balance Sheets – January 31, 2010 and July 31,
      2009
            3Condensed
      Consolidated Statements of Operations – For the Three and Six Months Ended
      January 31, 2010 and 2009
            4Condensed
      Consolidated Statements of Cash Flows – For the Six Months Ended January
      31, 2010 and 2009
            5Notes
      to Interim Condensed Consolidated Financial Statements
            6Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
            21Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk.
            26Item
      4.
            Controls
      and Procedures.
            27





PART II
- OTHER INFORMATION





Page
      No.Item
      1.
            Legal
      Proceedings.
            28Item
      1a.
            Risk
      Factors.
            28Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds.
            28Item
      3.
            Defaults
      Upon Senior Securities.
            28Item
      4.
            Reserved.
            28Item
      5.
            Other
      Information.
            28Item
      6.
            Exhibits.
            29Signatures
            31





2




ZURVITA
HOLDINGS, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)January
      31, 2010
              
              
              July
      31, 2009ASSETSCurrent
      assetsCash
              
              $
              66,615
              
              
              $
              1,390,953Security
      sale proceeds in escrow
              
              
              982,500
              
              
              
              -Marketable
      securities (at fair value)
              
              
              240,000
              
              
              
              -Accounts
      receivable
              
              
              121,512
              
              
              
              47,732Agent
      advanced compensation
              
              
              945,617
              
              
              
              927,002Deferred
      expenses
              
              
              294,620
              
              
              
              -Deferred
      marketing costs
              
              
              328,700
              
              
              
              657,400Total
      current assets
              
              
              2,979,564
              
              
              
              3,023,087Property,
      plant and equipment (net)
              
              
              101,457
              
              
              
              112,036Agent
      advanced compensation
              
              
              -
              
              
              
              271,344Marketing
      agreement
              
              
              2,000,000
              
              
              
              -Merchant
      account deposit
              
              
              115,333
              
              
              
              115,333Other
      assets
              
              
              61,698
              
              
              
              24,126Total
      assets
              
              $
              5,258,052
              
              
              $
              3,545,926LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilitiesAccounts
      payable
              
              $
              256,642
              
              
              $
              471,081Accounts
      payable - related party
              
              
              211,886
              
              
              
              -Notes
      payable - current
              
              
              288,142
              
              
              
              787,237Accrued
      expenses
              
              
              239,396
              
              
              
              148,001Deferred
      revenue
              
              
              1,204,999
              
              
              
              934,321Income
      tax payable
              
              
              -
              
              
              
              35,276Total
      current liabilities
              
              
              2,201,065
              
              
              
              2,375,916Notes
      payable - long term
              
              
              1,647,621
              
              
              
              284,967Fair
      value of share conversion feature
              
              
              561,131
              
              
              
              -Fair
      value of warrants
              
              
              6,017,438
              
              
              
              549,780Total
      liabilities
              
              
              10,427,255
              
              
              
              3,210,663Redeemable
      preferred stock
              
              
              2,848,747
              
              
              
              1,211,000Stockholders'
      deficitCommon
      stock ($.0001 par value, 300,000,000 sharesauthorized;
      64,692,161 and 64,440,000 shares issued and56,692,161
      and 56,440,000 shares outstanding as ofJanuary
      31, 2010  and July 31, 2009, respectively)
              
              
              6,469
              
              
              
              6,444Treasury
      stock
              
              
              (210,000
              )
              
              
              (210,000
              )Additional
      paid-in capital
              
              
              9,272,000
              
              
              
              9,094,182Accumulated
      deficit
              
              
              (17,086,419
              )
              
              
              (9,766,363
              )Total
      stockholders' deficit
              
              
              (8,017,950
              )
              
              
              (875,737
              )Total
      liabilities and stockholders' deficit
              
              $
              5,258,052
              
              
              $
              3,545,926




The
accompanying notes are an integral part of these financial
statements.
  3
  ZURVITA
HOLDINGS, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 For
      the Three Months Ended
                
                
                For
      the Six Months EndedJanuary
      31,
                
                
                January
      31,2010
                
                
                2009
                
                
                2010
                
                
                2009REVENUESAdministrative
      websites
                
                $
                513,770
                
                
                $
                234,119
                
                
                $
                998,135
                
                
                $
                414,741Advertising
      sales
                
                
                251,819
                
                
                
                -
                
                
                
                255,591
                
                
                
                -Commissions
                
                
                95,520
                
                
                
                594
                
                
                
                156,841
                
                
                
                614Marketing
      fees and materials
                
                
                555,105
                
                
                
                489,991
                
                
                
                951,227
                
                
                
                797,602Membership
      fees
                
                
                236,696
                
                
                
                468,770
                
                
                
                539,751
                
                
                
                845,413Total
      revenues
                
                
                1,652,910
                
                
                
                1,193,474
                
                
                
                2,901,545
                
                
                
                2,058,370COST
      OF SALESBenefit
      and service cost
                
                
                352,952
                
                
                
                150,610
                
                
                
                630,246
                
                
                
                333,390Sales
      commissions
                
                
                719,028
                
                
                
                530,407
                
                
                
                1,630,876
                
                
                
                1,744,798Total
      cost of sales
                
                
                1,071,980
                
                
                
                681,017
                
                
                
                2,261,122
                
                
                
                2,078,188GROSS
      PROFIT (LOSS)
                
                
                580,930
                
                
                
                512,457
                
                
                
                640,423
                
                
                
                (19,818
                )OPERATING
      EXPENSESDepreciation
                
                
                8,824
                
                
                
                8,362
                
                
                
                17,276
                
                
                
                11,241Office
      related expenses
                
                
                85,575
                
                
                
                68,627
                
                
                
                168,888
                
                
                
                126,647Payroll
      and employee benefits
                
                
                442,390
                
                
                
                294,085
                
                
                
                762,970
                
                
                
                599,797Professional
      fees
                
                
                442,723
                
                
                
                564,356
                
                
                
                748,897
                
                
                
                1,077,134Selling
      and marketing
                
                
                838,693
                
                
                
                686,010
                
                
                
                1,490,807
                
                
                
                1,327,420Travel
                
                
                52,285
                
                
                
                67,415
                
                
                
                106,033
                
                
                
                221,416Total
      operating expenses
                
                
                1,870,490
                
                
                
                1,688,855
                
                
                
                3,294,871
                
                
                
                3,363,655Loss
      from operations before other income (expense)
                
                
                (1,289,560
                )
                
                
                (1,176,398
                )
                
                
                (2,654,448
                )
                
                
                (3,383,473
                )OTHER
      INCOME (EXPENSE)Gain
      on change in fair value of share conversion feature
                
                
                28,103
                
                
                
                -
                
                
                
                32,295
                
                
                
                -Interest
      expense
                
                
                (79,667
                )
                
                
                -
                
                
                
                (108,096
                )
                
                
                -Loss
      on change in fair value of marketable securities
                
                
                (400,000
                )
                
                
                -
                
                
                
                (530,000
                )
                
                
                -Loss
      on change in fair value of warrants
                
                
                2,162
                
                
                
                -
                
                
                
                (4,039,665
                )
                
                
                -Total
      other expense
                
                
                (449,402
                )
                
                
                -
                
                
                
                (4,645,466
                )
                
                
                -Loss
      before income taxes
                
                
                (1,738,962
                )
                
                
                (1,176,398
                )
                
                
                (7,299,914
                )
                
                
                (3,383,473
                )Income
      taxes
                
                
                10,357
                
                
                
                8,354
                
                
                
                20,142
                
                
                
                14,409Net
      loss
                
                $
                (1,749,319
                )
                
                $
                (1,184,752
                )
                
                $
                (7,320,056
                )
                
                $
                (3,397,882
                )Basic
      and diluted loss per share
                
                $
                (
      0.03
                )
                
                $
                (
      0.02
                )
                
                $
                (
      0.13
                )
                
                $
                (
      0.07
                )Basic
      and diluted weighted average number of common shares
      outstanding
                
                
                56,653,792
                
                
                
                49,240,000
                
                
                
                56,546,896
                
                
                
                49,240,000
 
 The
accompanying notes are an integral part of these financial
statements.
  4




ZURVITA
HOLDINGS, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)


For
      the Six Months EndedJanuary
      31, 2010
              
              
              January
      31, 2009Cash
      flows from operating activitiesNet
      loss
              
              $
              (7,320,056
              )
              
              $
              (3,397,882
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      on note payable discount
              
              
              52,254
              
              
              
              -Amortization
      on deferred marketing costs
              
              
              328,700
              
              
              
              -Depreciation
              
              
              17,276
              
              
              
              11,241Share-based
      compensation
              
              
              243,583
              
              
              
              84,802Gain
      on change in fair value of share conversion liability
              
              
              (32,295
              )
              
              
              -Loss
      on change in fair value of marketable securities
              
              
              530,000
              
              
              
              -Loss
      on change in fair value of warrants
              
              
              4,039,665
              
              
              
              -Changes
      in operating assets and liabilitiesIncrease
      in accounts receivable
              
              
              (56,280
              )
              
              
              (7,478
              )Decrease
      (increase) in agent advanced compensation
              
              
              252,729
              
              
              
              (127,843
              )Increase
      in deferred expenses
              
              
              (294,620
              )
              
              
              (352,785
              )Increase
      in merchant account deposits
              
              
              -
              
              
              
              (115,333
              )Increase
      in other assets
              
              
              (15,541
              )
              
              
              (8,216
              )Increase
      (decrease) in accounts payable and accrued expenses
              
              
              84,234
              
              
              
              (12,996
              )Increase
      in deferred revenue
              
              
              270,678
              
              
              
              408,817Net
      cash used in operating activities
              
              
              (1,899,673
              )
              
              
              (3,517,673
              )Cash
      flows from investing activitiesPurchase
      of property and equipment
              
              
              (
      6,698
              )
              
              
              (126,101
              )Purchase
      of marketable securities
              
              
              (770,000
              )
              
              
              -Net
      cash used in investing activities
              
              
              (776,698
              )
              
              
              (126,101
              )Cash
      flows from financing activitiesContributions
      of capital from The Amacore Group, Inc.
              
              
              -
              
              
              
              3,490,198Proceeds
      from sale of preferred stock
              
              
              2,000,000
              
              
              
              -Principal
      payments made on notes payable
              
              
              (647,967
              )
              
              
              -Net
      cash provided by financing activities
              
              
              1,352,033
              
              
              
              3,490,198Net
      change in cash balance
              
              $
              (1,324,338
              )
              
              $
              (153,576
              )Beginning
      cash
              
              
              1,390,953
              
              
              
              174,585Ending
      cash
              
              $
              66,615
              
              
              $
              21,009Supplemental
      disclosure of cash flow informationCash
      paid for interest
              
              $
              17,727
              
              
              $
              -Cash
      paid for income taxes
              
              $
              -
              
              
              $
              -




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





5





ZURVITA
HOLDINGS, INC.


NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)








NOTE
1 – NATURE OF OPERATIONS





Our
condensed consolidated financial statements include the accounts of the Zurvita
Holdings, Inc. (referred to herein as the “Company,” “Zurvita Holdings,” “we,”
“us” or “our”) and our wholly-owned subsidiary Zurvita, Inc.
(Zurvita).  Material intercompany transactions and balances have been
eliminated upon consolidation.  Zurvita is a provider of products and
benefits through the use of a multi-level marketing distribution channel which
consist of independent business operators.  The products marketed
include residential gas and electricity energy rate plans, discount healthcare
benefits and discount benefits on various retail products and services, and
online advertising.  Zurvita also markets numerous low cost ancillary
products such as home warranty, legal assistance and restoration services for
identity theft and consumer credit.





Management’s Assessment of
Liquidity





Since the
Company’s inception, the Company has primarily met its operating cash
requirements through equity contributions from The Amacore Group, Inc.
(Amacore), who was the Company’s sole shareholder prior to July 30,
2009.  Subsequent to July 30, 2009, the Company has sold several
series of preferred stock for gross proceeds of $4.75 million to another related
party. We are using the proceeds from the sale of preferred stock to
subsidize the Company’s operations as the Company’s revenues and operating cash
flows are not currently sufficient to support the Company’s current
operations.





The
Company believes that its cash resources, together with increasing revenue and
assuming the continued support of its related party stockholders, will be
sufficient to sustain current planned operations for the next 12 months. The
Company raised $4.75 million from the sale of preferred stock in three tranches
completed in July 2009, October 2009 and January 2010.   Additional
cash resources may be required should the Company not meet its sales targets,
exceed its projected operating costs, wish to accelerate sales or complete one
or more acquisitions or if unanticipated expenses arise or are
incurred.





The
Company does not currently maintain a line of credit or term loan with any
commercial bank or other financial institution and has not made any other
arrangements to obtain additional financing.  We can provide no
assurance that we will not require additional financing.  Likewise, we
can provide no assurance that if we need additional financing that it will be
available in an amount or on terms acceptable to us, if at all.  If we
are unable to obtain additional funds when they are needed or if such funds
cannot be obtained on terms favorable to us, we may be unable to execute our
business plan or pay our costs and expenses as they are incurred, which could
have a material, adverse effect on our business, financial condition and results
of operations.





At
January 31, 2010, the Company had positive working capital of approximately $779
thousand and an accumulated deficit of approximately $17.1
million.  For the three and six months ended January 31, 2010, the
Company had a net loss of approximately $1.7 million and $7.3 million,
respectively.





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
accompanying condensed consolidated balance sheet as of July 31, 2009, which was
derived from audited financial statements which includes an emphasis paragraph
relating to an uncertainity as to the Company's ability to continue as a going
concern, and the unaudited condensed consolidated financial statements as of
January 31, 2010 and 2009 have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary in order to make the financial statements not misleading
have been included. Results for the three and six month periods ended January
31, 2010 are not necessarily indicative of the results that may be expected for
the year ending July 31, 2010. For further information, refer to the financial
statements and footnotes thereto included in the Company’s Transition Report on
Form 10-K for the seven months ended July 31, 2009.





In June
2009, the Financial Accounting Standards Board (“FASB”) approved FASB Accounting
Standards Codification (“Codification”) as the single source of authoritative
accounting guidance used in the preparation of financial statements in
conformity with U.S. GAAP for all non-governmental entities. Codification, which
changed the referencing and organization of accounting guidance without
modification of existing U.S. GAAP, is effective for interim and annual periods
ending after September 15, 2009.  Since it did not modify existing
U.S. GAAP, Codification did not have any impact on the Company’s financial
condition or results of operations. On the effective date of Codification,
substantially all existing non-SEC accounting and reporting standards are
superseded and, therefore, are no longer referenced by title in the accompanying
interim condensed consolidated financial statements.




6


Revenue
Recognition





Administrative
Websites





Administrative
websites are the websites that representatives pay for that allow them to
operate their business with Zurvita.  Revenue is recognized over the
website subscription period.





Advertising
Sales





Advertising
sales consist of displaying commercial advertisements on the LocalAdLink online
search directory.  Revenue is recognized over the advertising
subscription period.





Commissions





The
Company is paid a commission for its sales of third-party products. Commissions
are recognized as products are sold and services performed and the Company has
accomplished all activities necessary to complete the earnings
process.





Marketing
Fees and Materials





The
Company markets certain of its products through a multi-level sales organization
whereby independent distributors establish their own network of associates. The
independent distributors pay the Company a fee to become marketing
representatives on behalf of the Company. In exchange, the representatives
receive access, on an annual basis, to various marketing and promotional
materials and tools as well as access to customized management reports;
accordingly, revenue from marketing fees is recognized over an annual
period.  The Company also earns ancillary revenue from the sale of
marketing materials recognized when marketing materials are provided to the
representatives.





Membership
Fees





The
Company recognizes revenues from membership fees as earned for the sales of
health-related discount benefit plans and other lifestyle discount benefit
programs, such as household protection and personal financial
services.  These arrangements are generally renewable monthly and
revenue is recognized over the renewal period.  These products often
include elements sold through contracts with third-party providers. Based on
consideration of each contractual arrangement, revenue is reported on a gross
basis.





The
Company records a reduction in revenue for estimated refunds, chargebacks from
credit card companies, and allowances based upon experience and management’s
evaluation of current facts and circumstances. Refunds and chargebacks totaled
approximately $143 and $13 thousand for the three months ended January 31, 2010
and 2009, respectively, and $172 thousand and $50 thousand for the six months
ended January 31, 2010 and 2009, respectively and were recorded as a reduction
of revenue in the accompanying statements of operations.  An estimate
for refunds and chargebacks of approximately $17.5 thousand and $10 thousand is
included in accrued expenses in the accompanying condensed consolidated balance
sheets as of January 31, 2010 and 2009, respectively.





Concentration of Credit
Risk





All of
the Company’s credit card processing is with one merchant processor, as well as
all marketing sales commission payments are calculated by a third-party service
provider.





Use of
Estimates





The
preparation of the Company’s condensed consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  The accounting estimates requiring a high degree
of  management’s subjective judgment include sales refund,
capitalization of certain assets, depreciable/amortizable lives, the expected
volatility of common stock, and the fair value of common stock and warrants
issued for services or in connection with the sale of redeemable preferred
stock.  Due to the uncertainty inherent in such estimates, actual
results may differ from those estimates.





Accounts
Receivable





Accounts
receivable are stated at estimated net realizable value.  Accounts
receivable are primarily comprised of balances due from memberships, net of
estimated allowances for uncollectible accounts.  In determining
collectability, historical trends are evaluated and specific customer issues are
reviewed to arrive at appropriate allowances.  At January 31, 2010 and
July 31, 2009, no allowance was recorded.




7


Property, Plant and
Equipment





Property,
plant and equipment are recorded at cost.  The cost of additions and
improvements are capitalized, while maintenance and repairs are charged to
expense as incurred.  The Company provides for depreciation and
amortization using the straight-line method over the estimated useful lives of
the property as follows: computer hardware, 3 years; furniture and fixtures, 7
years; equipment and machinery, 5 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset.  When assets are
retired or otherwise disposed of, the assets and related accumulated
depreciation are eliminated from the accounts and the resulting gain or loss is
reflected in the results of operations.





Share-Based
Compensation





The
Company recognizes the cost resulting from all share-based payment transactions
in the financial statements using a fair-value-based measurement
method.  The Company uses the Black-Scholes Option Pricing Model in
computing fair value of warrant instrument issuances.





The fair
value of share-based compensation awarded by the majority stockholder to
management personnel is reflected as share based compensation expense and as a
capital contribution in the Company’s financial statements over the requisite
service period.





Convertible
Instruments





The
Company reviews the terms of convertible debt and preferred stock for
indications requiring bifurcation, and separate accounting for the embedded
conversion feature. Generally, embedded conversion features where the ability to
physical or net-share settle the conversion option is not within the control of
the Company or the number of shares is variable are bifurcated and accounted for
as derivative financial instruments. (See Derivative Financial
Instruments below). Bifurcation of the embedded derivative instrument
requires allocation of the proceeds first to the fair value of the embedded
derivative instrument with the residual allocated to the host
instrument.  The resulting discount to the debt instrument or to the
redemption value of convertible preferred securities is accreted through
periodic charges to interest expense over the term of the note or to dividends
over the period to earliest conversion date using the effective interest rate
method, respectively.





Derivative Financial
Instruments





The
Company does not use derivative financial instruments to hedge exposures to
cash-flow or market risks. However, certain other financial instruments, such as
warrants to purchase the Company’s common stock and the embedded conversion
features of debt and preferred instruments that are not considered indexed to
the Company’s common stock are classified as liabilities when either (a) the
holder possesses rights to net-cash settlement, (b) physical or net share
settlement is not within the control of the Company, or (c) based on its
anti-dilutive provisions.  In such instances, net-cash settlement is
assumed for financial accounting and reporting. Such financial instruments are
initially recorded at fair value and subsequently adjusted to fair value at the
close of each reporting period. Fair value for option-based derivative financial
instruments is determined using the Black-Scholes Option Pricing
Model.





Other
convertible instruments that are not derivative financial instruments are
accounted for by recording the intrinsic value of the embedded conversion
feature as a discount from the initial value of the instrument and accreting it
back to face value over the period to the earliest conversion date using the
effective interest rate method.





Income
Taxes





The
Company accounts for income taxes using an asset and liability method pursuant
to which deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is provided against deferred
tax assets based on the weight of available evidence when it is more likely than
not that some or all of the deferred tax assets will not be realized. As of
January 31, 2010, the deferred tax asset is fully reserved.





When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, we believe it is more likely than not that the
position will be sustained upon examination, including the resolution of appeals
or litigation processes, if any.  Tax positions taken are not offset
or aggregated with other positions.  Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority.  The portion of the
benefits associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheet along with any associated interest and penalties that
would be payable to the taxing authorities upon examination. Interest and
penalties associated with unrecognized tax benefits are classified as income tax
expense in the statement of operations.




8


Fair Value
Measurements





U.S. GAAP
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability to a third party with the same credit standing (an exit
price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date.
In many cases, the exit price and the transaction (or entry) price will be the
same at initial recognition. However, in certain cases, the transaction price
may not represent fair value. Fair value is a market-based measurement
determined based on a hypothetical transaction at the measurement date,
considered from the perspective of a market participant, not based solely upon
the perspective of the reporting entity. When quoted prices are not used to
determine fair value, consideration is given to three broad valuation
techniques: (i) the market approach, (ii) the income approach, and (iii) the
cost approach. Entities are required to determine the most appropriate valuation
technique to use, given what is being measured and the availability of
sufficient inputs. Inputs to fair valuation techniques are prioritized, allowing
for the use of unobservable inputs to the extent that observable inputs are not
available. The applicable guidance establishes a three-level hierarchy, based on
the priority of the inputs to the respective valuation technique. The fair value
hierarchy gives the highest priority to quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). An asset or liability’s classification within the
fair value hierarchy is based on the lowest level of significant input to its
valuation. The input levels are defined as follows:





Level
      1
            Unadjusted
      quoted prices in active markets for identical assets or
      liabilities.





Level
      2
            Quoted
      prices in markets that are not active or inputs that are observable either
      directly or indirectly. Level 2 inputs include quoted prices for similar
      assets or liabilities other than quoted prices in Level 1, quoted prices
      in markets that are not active, or other inputs that 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 that are supported by little or no market activity and are
      significant to the fair value of the assets or
      liabilities.  Unobservable inputs reflect the reporting entity’s
      own assumptions about the assumptions that market participants would use
      in pricing the asset or liability.  Level 3 assets and
      liabilities include those whose values are determined using pricing
      models, discounted cash flow methodologies, or similar techniques, as well
      as those for which the determination of fair value requires significant
      management judgment or estimation.





Marketable
Securities





The
Company’s marketable securities consist of non-registered common stock. The
Company has classified these securities as an available-for-sale security due to
the six month holding requirement imposed by the Securities Exchange Commission
on non-exempt security purchases.  The Company, however, has elected to
fair value these securities on a recurring basis and has accounted for these
securities as trading securities in accordance with U.S. GAAP.  The
Company’s election was made due to its short term investment outlook on these
securities.  Accordingly, these investments are carried in the accompanying
consolidated balance sheet at fair value, with the difference between cost and
fair value (unrealized gains and losses) included in the Statement of
Operations.




Securities Sale Proceeds
Held in Escrow




The
Company executed a Securities Purchase Agreement on January 29, 2010 related to
the sale of the Series C Convertible Preferred Stock.  The proceeds
with respect this agreement were placed with an escrow agent on January 29, 2010
but were not released to the Company until February 1, 2010.





Earnings Per
Share





Basic
earnings (loss) per share are calculated by dividing net income (loss) available
to common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted earnings (loss) per share is calculated by
dividing the net income (loss) by the weighted average number of shares of
common stock outstanding for the period, adjusted for the dilutive effect of
common stock equivalents, using the treasury stock method. Convertible debt and
warrants, officer, employee and non-employee stock options that are considered
potentially dilutive are included in the fully diluted shares calculation as
long as the effect is not anti-dilutive.  Contingently issuable shares
are included in the computation of basic loss per share when the issuance of the
shares is no longer contingent.  For the three and six months ended
January 31, 2010 and 2009, securities that could potentially dilute earnings per
share in the future were not included within the Company’s earnings (loss) per
share calculation as their effect would be anti-dilutive.





Reclassifications





Certain
amounts within the marketing fees and materials category on the statement of
operations for the prior period have been reclassified to administrative
websites to conform to the current period presentation.




9


NOTE
3 – NON CASH INVESTING AND FINANCING ACTIVITIES





The
following table presents a summary of the various noncash investing and
financing transactions that the Company entered into during the six months
ended:




January
      31, 2010
              
              
              January
      31, 2009Accounts
      payable paid directly by majority stockholder
              
              $
              -
              
              
              $
              234,650Amortization
      on note payable discount
              
              
              52,254
              
              
              
              -Common
      stock issuance for consulting services
              
              
              65,992
              
              
              
              -Embedded
      conversion feature on note payable issued
              
              
              593,426
              
              
              
              -Financed
      insurance agreement
              
              
              22,031
              
              
              
              -Interest
      converted to principal
              
              
              30,667
              
              
              
              -Note
      payable issued for marketing agreement
              
              
              1,406,574
              
              
              
              -Securities
      sale proceeds held in escrow
              
              
              1,000,000
              
              
              
              -




NOTE
4 – AGENT ADVANCED COMPENSATION





The
Company entered into loan agreements with certain of its independent sales
agents which represent advanced compensation.  The agreements have an
approximately 2 year term; however, if an agent is still selling for the Company
at the maturity date then the note is forgiven.  Therefore, the
Company is expensing them over the term of the loan.  The expense is
recognized in selling and marketing expenses on the statement of operations as
it is not directly related to sales of product or
services.  Approximately $280 thousand and $156 thousand of expense
was recognized for the three months ended January 31, 2010 and 2009,
respectively, and approximately $531 thousand and $270 thousand for six months
ended January 31, 2010 and 2009, respectively.  As of January 31,
2010, the balance of the loans was approximately $946 thousand and is classified
as a current asset as the remaining carrying amount will be fully amortized by
December 31, 2010.




NOTE
5 – DEFERRED EXPENSES





Deferred
expenses consist of the following at January 31, 2010.





January
      31, 2010Advertising
      sales commissions
              
              $
              154,620Advertising
      services
              
              
              15,000Conference
      fees
              
              
              125,000Total
              
              $
              294,620




No such
costs required deferring at July 31, 2009.





NOTE
6 – DEFERRED MARKETING COSTS





Deferred
marketing costs represent an Advertising and Marketing Agreement between the
Company and OmniReliant Holdings, Inc. (“OmniReliant”), a related party. The
marketing agreement was capitalized at the fair value of the stock consideration
given and amortized over the life of the agreement which has a one-year contract
term.  Approximately $164 thousand and $329 thousand of amortization
were taken for the three and six months ended January 31, 2010.





NOTE
7 – MARKETING AGREEMENT





This
marketing agreement represents an agreement between the Company and OmniReliant
whereby the Company was granted a perpetual right, under all intellectual
property rights applicable to the LocalAdLink Software, to market and sell the
product through its independent sales representatives.





The
carrying value of the marketing agreement is the total value of consideration
given, which was a $2 million note payable.  The marketing agreement
is classified as an intangible asset with an indefinite life and subject to
annual impairment analysis, or more frequently if events and circumstances
change.




10


NOTE
8 – NOTES PAYABLE





Notes
payable consist of the following:




January
      31, 2010
              
              
              July
      31, 2009Convertible
      note payable; face amount $2 million; bearing interest of 6% per annum;
      unsecured; principal payment due on October 9, 2012
              
              $
              1,489,494
              
              
              $
              -Financing
      agreement; bearing interest at 5.25% per annum; payable in monthly
      installments of approximately $2.5 thousand; due through July
      2010
              
              
              14,784
              
              
              
              -Promissory
      note payable; bearing interest of 7.5% per annum; unsecured; principal
      payments due monthly approximately $27 thousand through July
      2011
              
              
              431,485
              
              
              
              549,014Promissory
      note payable to majority shareholder (on demand; noninterest bearing;
      unsecured)
              
              
              -
              
              
              
              523,190Total
      notes payable
              
              $
              1,935,763
              
              
              $
              1,072,204




The
convertible note’s principal balance is due three years from the date of
issuance and convertible at any time at the option the holder at a conversion
price of $0.25 per share.  At January 31, 2010, the said note was
convertible into approximately 8 million shares of common stock.  The
Company has accounted for the conversion feature as an embedded derivative
instrument requiring it to be separated from the note payable and reported at
fair value.  The fair value of the conversion feature at issuance date
was approximately $593 thousand.  The separation of the conversion
feature from the note payable resulted in a discount on the note payable and a
share conversion liability in the amount of approximately $593
thousand.  The share liability is subject to recurring fair value
adjustments each reporting period (see Note 11 - Assets and Liabilities Measured
at Fair Value).  The discount is amortized over the life of the note
payable using the effective interest method and recorded as interest expense in
the statement of operations.  During the three and six months ended
January 31, 2010, total interest expense related to the convertible note payable
was approximately $65 thousand and $90 thousand, respectively.





Of the
notes payable presented in the preceding table, approximately $288 thousand is
classified as current maturities as of January 31, 2010.





The
following is a schedule of the future maturity payments required under the
Company’s promissory notes payable.





As
      of January 31, 20102010
              
              $
              288,1422011
              
              
              158,1272012
              
              
              2,030,6672013
              
              
              -2014
              
              
              -Thereafter
              
              
              -$
              2,476,936





11





NOTE
9 – ACCRUED EXPENSES





Accrued
expenses consist of the following at January 31, 2010 and July 31,
2009:





January
      31, 2010
              
              
              July
      31, 2009Commissions
              
              $
              93,368
              
              
              $
              97,023Interest
              
              
              7,446
              
              
              
              -Professional
      fees
              
              
              15,530
              
              
              
              3,118Marketing
      materials
              
              
              9,334
              
              
              
              -Payroll
              
              
              31,650
              
              
              
              29,252Refund
      reserve
              
              
              17,531
              
              
              
              10,000Rent
              
              
              11,119
              
              
              
              -Franchise
      and sales tax payable
              
              
              53,418
              
              
              
              8,608Total
              
              $
              239,396
              
              
              $
              148,001





NOTE
10 – DEFERRED REVENUE





Deferred
revenue consists of the following at January 31, 2010 and July 31,
2009:





January
      31, 2010
              
              
              July
      31, 2009Advertising
      sales
              
              $
              180,378
              
              
              $
              -Conferences
      and training
              
              
              48,876
              
              
              
              -Direct
      response media
              
              
              42,317
              
              
              
              -Marketing
      fees
              
              
              821,795
              
              
              
              787,603Member
      fees
              
              
              111,633
              
              
              
              146,718Total
              
              $
              1,204,999
              
              
              $
              934,321





NOTE
11 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE





Financial
instruments which are measured at estimated fair value on a recurring basis in
the condensed consolidated financial statements include marketable securities,
certain non-compensatory warrants and an embedded share conversion
feature.  The fair value of these warrants and share conversion
feature was determined by an independent expert valuation specialist using the
Black-Scholes Option Pricing Model.





Assets
and liabilities measured at estimated fair value on a recurring basis and their
corresponding fair value hierarchy is summarized as follows:




Fair
      Value Measurements at Reporting Date January 31,
2010Quoted
      Prices inActive Markets
      forIdentical
      Assets(Level
    1)
              
              
              SignificantUnobservableInputs(Level 3)
              
              
              TotalFair ValueMarketable
      securities
              
              $
              240,000
              
              
              $
              -
              
              
              $
              240,000Total
      Assets
              
              $
              240,000
              
              
              $
              -
              
              
              $
              240,000Share
      conversion feature
              
              $
              -
              
              
              $
              561,131
              
              
              $
              561,131Warrants
              
              
              -
              
              
              
              6,017,438
              
              
              
              6,017,438Total
      liabilities
              
              $
              -
              
              
              $
              6,578,569
              
              
              $
              6,578,569




The
Company has categorized its assets and liabilities measured at fair value into
the three-level fair value hierarchy, as defined in Note 2, based upon the
priority of inputs to respective valuation techniques.  The marketable
securities are fair valued on a recurring basis using quoted market
prices.  Liabilities included within level 3 of the fair value
hierarchy presented in the preceding table include certain warrants and share
conversion feature which require fair value on a recurring basis.  The
valuation methodology uses a combination of observable and unobservable inputs
in calculating fair value.




12




The
Company recorded an unrealized loss of approximately $400 thousand and $530
thousand on its marketable securities for the three and six months ended January
31, 2010.  This loss has been included in the Statement of Operations
caption “Loss on change in fair value of marketable securities.”





The
changes in level 3 liabilities measured at fair value on a recurring basis
during the three and six months ended January 31, 2010 are summarized as
follows:





Balance
                Beginning
      of
                Period
              
              
              Issuance
              
              
              (Gain)
      or Loss
                Recognized
      in
                Earning
      from Change in
                Fair
      Value
              
              
              Balance
      End of PeriodFor
      the three months ended,January
      31, 2010Share
      conversion feature
              
              $
              589,234
              
              
              $
              -
              
              
              $
              (28,103
              )
              
              $
              561,131Warrants
              
              $
              5,522,445
              
              
              $
              497,155
              
              
              $
              (2,162
              )
              
              $
              6,017,438For
      the six months ended,January
      31, 2010Share
      conversion feature
              
              $
              -
              
              
              $
              593,426
              
              
              $
              (32,295
              )
              
              $
              561,131Warrants
              
              $
              549,780
              
              
              $
              1,427,993
              
              
              $
              4,039,665
              
              
              $
              6,017,438





For the
three and six months ended January 31, 2010, total unrealized gains of
approximately $28 thousand and $32 thousand is included in earnings in the
Statement of Operations caption “Gain on change in fair value of share
conversion feature.”  For the three and six months ended January 31,
2010, total unrealized gains of approximately $2 thousand and an unrealized loss
of $4 million are included in earnings in the Statement of Operations caption
“Loss on change in fair value of warrants.” The $4
million unrealized loss for the six months ended January 31, 2010 is a result
of a one (1) for four (4) forward split that occurred on August 11,
2009 that had the effect of increasing the number of outstanding warrants by
21.42 million and the increase in share price used in valuing the warrants from
$0.17 to $0.25.





Fair
Value of Financial Instruments





The fair
values of accounts receivable, accounts payable and accrued expenses approximate
their carrying values due to the short term nature of these
instruments.  The fair values of notes payable approximate their
carrying amounts as interest rates on these obligations are representative of
estimated market rates available to the Company on similar
instruments.





Nonrecurring
Fair Value Measurements





The
following table presents an intangible asset that is not subject to recurring
fair value measurements.




Fair
      Value at
                January
      31, 2009
              
              
              Significant
      Unobservable Inputs
                (Level
      3)
              
              
              Total
      Gains
                (Losses)Marketing
      agreement
              
              $
              2,000,000
              
              
              $
              2,000,000
              
              
              $
              -$
              2,000,000
              
              
              $
              2,000,000
              
              
              $
              -




With
respect to the marketing agreement, the fair value of the note payable
consideration given on October 9, 2009 was determined to approximate the fair
market value of the agreement.  Subsequently, there have been no
impairment indicators to require the remeasuring of the intangible asset’s fair
market value as of January 31, 2010; consequently, no gain or loss has been
recorded within the Statement of Operations.





NOTE
12 – REDEEMABLE PREFERRED STOCK





The
Company is authorized to issue 10 million shares of preferred stock with a par
value of $0.0001 per share.  The following table summarizes the
Preferred Stock issuances and number of Preferred Shares
outstanding:





13




Shares
      Outstanding atPreferred
      Stock
              
              Date
      ofIssuance
              
              Issuance
              
              January
      31, 2010
              
              July
      31, 2009Series
      A
              
              July
      30, 2009
              
              1,750,000
              
              1,750,000Series
      B
              
              October
      6, 2009
              
              2,000,000
              
              -Series
      C
              
              January
      29, 2010
              
              1,000,000
              
              -4,750,000
              
              1,750,000





On
January 29, 2010, the Company issued 1 million shares of Series C Convertible
Preferred Stock (the “Series C Convertible Preferred Stock”) for proceeds of $1
million which are convertible at a conversion price of $0.25 (the “Conversion
Price”) into 4 million shares (the “Conversion Shares”) of common stock. The
stated value of each issued share of Convertible Preferred Stock is $1.00 (the
“Stated Value”).





Series A,
Series B and Series C Convertible Preferred Stock is collectively referred to
herein as “Convertible Preferred Stock.”





Significant
rights of the Convertible Preferred Stock are discussed below:





Dividends





The
Convertible Preferred Stock does not accrue dividends.





Voting
Rights





Each
holder of the shares of Convertible Preferred Stock shall have the right to the
number of votes equal to the number of Conversion Shares then issuable upon
conversion of the Convertible Preferred Stock held by such holder in all matters
as to which shareholders are required or permitted to vote, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled
to vote, together with the holders of Common Stock as a single class, with
respect to any question upon which holders of Common Stock have the right to
vote; provided, however, as to any holder of Convertible Preferred Stock, the
right to vote such shares shall be limited to the number of shares issuable to
such holder pursuant to certain beneficial ownership limitations (as listed
below) as of the record date for such vote.  To the extent permitted
under applicable corporate law, but subject to certain limitations on corporate
actions as disclosed below, the Corporation’s shareholders may take action by
the affirmative vote of a majority of all shareholders of the Company entitled
to vote on an action.  Without limiting the generality of the
foregoing, the Company may take any of the actions by the affirmative vote of
the holders of a majority of the Convertible Preferred Stock and the Common
Stock and other voting common stock equivalents, voting together as one
class.





As long
as any shares of Convertible Preferred Stock are outstanding, the Company shall
not, without the written consent or affirmative vote of the holders of no-less
than 51 percent of the then outstanding stated value of the Convertible
Preferred Stock consenting or voting as a separate class from the common stock,
the Company shall not, either directly or by amendment, merger, consolidation or
otherwise:





(i)     
amend its certificate or articles of incorporation in any manner that adversely
affects the rights of the holders of Convertible Preferred Stock;





(ii)     alter
or change adversely the voting or other powers, preferences, rights, privileges,
or restrictions of the  Convertible Preferred Stock;





(iii)   
increase the authorized number of shares of preferred stock
or  Convertible Preferred Stock or reinstate or issue any other series
of preferred stock;





(iv)   
redeem, purchase or otherwise acquire directly or indirectly any junior
securities or any shares pari passu with the Convertible Preferred
Stock;





(v)    directly
or indirectly pay or declare any dividend or make any distribution in respect
of, any junior securities, or set aside any monies for the purchase or
redemption (through a sinking fund or otherwise) of any junior securities or any
shares pari passu with the Convertible Preferred Stock;





(vi) 
authorize or create any class of stock ranking as to dividends, redemption or
distribution of assets upon a liquidation senior to or otherwise pari passu with
the Convertible Preferred Stock; or





(vii)  
enter into any agreement with respect to any of the foregoing.




14


Liquidation
Preferences





Upon any
liquidation, dissolution or winding-down of the Company, whether voluntary or
involuntary (a “Liquidation”), the holders of the shares of Convertible
Preferred Stock shall be paid in cash, before any payment shall be paid to the
holders of common stock, or any other junior stock, an amount for each share of
Convertible Preferred Stock held by such holder equal to the sum of the Stated
Value thereof (such applicable amount payable with respect to a share of
Convertible Preferred Stock sometimes being referred to as the “Individual
Preferred Liquidation Preference Payment” and with respect to all shares of
Convertible Preferred Stock in the aggregate sometimes being referred to as the
“Aggregate Liquidation Preference Payment”).  If, upon such
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, the assets to be distributed among the holders of shares of
Convertible Preferred Stock shall be insufficient to permit payment to the
holders of Convertible Preferred Stock of an aggregate amount equal to the
Aggregate Liquidation Preference Payment, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Convertible Preferred Stock (based on the Individual Preferred Liquidation
Preference Payments due to the respective holders of Convertible Preferred
Stock).





The
liquidation value of Series A, Series B and Series C Convertible Preferred Stock
was $1.75 million, $2 million and $1 million, respectively, as of January 31,
2010.





Conversion
Rights





Each
share of Convertible Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the original issue date (subject to beneficial
ownership limitations as listed below), and without the payment of additional
consideration by the holder thereof, into such number of fully-paid and
nonassessable shares of common stock as is determined by dividing the Stated
Value per share, by the Conversion Price in effect at the time of
conversion.  The Conversion Price originallyfor Series A, B and C
shall be $0.0625, $0.25 and $0.25, respectively; provided, however, that the
Conversion Price, and the rate at which shares of Convertible Preferred Stock
may be converted into shares of common stock, shall be subject to adjustment as
a result of stock dividends, stock splits, and subsequent equity sales at a
price lower than the Convertible Preferred Stock’s Conversion Price. Shares of
Convertible Preferred Stock converted into common stock shall be canceled and
shall not be reissued.





At
January 31, 2010, Series A, Series B and Series C Convertible Preferred Stock is
convertible into 28 million, 8 million and 4 million common shares,
respectively.





Beneficial Ownership
Limitations





The
Company shall not affect any conversion of the Convertible Preferred Stock, and
a holder shall not have the right to convert any portion of the Convertible
Preferred Stock, to the extent that, after giving effect to the conversion, such
holder (together with such holder’s affiliates, and any other person or entity
acting as a group together with such holder or any of such holder’s affiliates)
would beneficially own in excess 4.99% of the number of shares of the common
stock outstanding immediately after giving effect to the issuance of shares of
common stock issuable upon conversion of Convertible Preferred Stock held by the
applicable holder.  The Beneficial Ownership Limitation provisions may
be waived by such holder, at the election of such holder, upon not less than
sixty one (61) days’ prior notice to the Company, to change the Beneficial
Ownership Limitation to 9.99% of the number of shares of the common stock
outstanding immediately after giving effect to the issuance of shares of common
stock upon conversion of Convertible Preferred Stock held by the applicable
holder and the provisions of this section shall continue to
apply.  Upon such a change by a holder of the Beneficial Ownership
Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial
Ownership Limitation shall not be further waived by such holder.





Redemption Rights of the
Company





Shares of
the Convertible Preferred Stock shall be redeemable, in whole or in part, at the
option of the Company, by resolution of its Board of Directors at any time after
the original issue date and before the first (1st) anniversary of the original
issue date at a price equal to one hundred and ten percent (110%) of the Stated
Value.





Redemption Rights of
Holder





The
Convertible Preferred Stock is redeemable for cash in an amount representing the
Stated Value of outstanding Convertible Preferred Stock. The following events
give rise to a redemption triggering event:





·
            The
      Company shall be party to a change of control
  transaction;





·
            The
      Company shall fail to have available a sufficient number of authorized and
      unreserved shares of common stock to issue to such holder upon a
      conversion;




Unless
specifically addressed elsewhere in the Convertible Preferred Stock’s
Certificate of Designation as a Triggering Event, the Corporation shall fail to
observe or perform any other covenant, agreement or warranty contained in the
Certificate of Designation, and such failure or breach shall not, if subject to
the possibility of a cure by the Company, have been cured within 20 calendar
days after the date on which written notice of such failure or breach shall have
been delivered;
  15


·
            There
      shall have occurred a bankruptcy event or material monetary
      judgment;





If the
Company fails to pay the redemption amount as a result of a triggering event on
the date it is due, interest will accrue at a rate equal to the lesser of 18%
per year, or the maximum rate permitted by applicable law, accruing daily from
the date of the triggering event until the amount is paid in full.





Events
that may result in the redemption for cash of preferred stock, and that are not
within a company’s control may require the preferred stock to be classified
outside of stockholders’ equity (in the mezzanine section). All of the above
triggering events are presumed not to be within our
control.  Accordingly, these instruments are recorded in our balance
sheet in the caption Redeemable Preferred Stock, which is outside of
stockholders’ equity.  Management estimates the probability of the
triggering events to be remote due to the Company’s affiliation with
stockholders that represent a majority of the outstanding common and preferred
stock.  Therefore, the carrying value of the preferred stock has not
been increased to the full redemption value.  The reason the carrying
value is not equal to the redemption amount is due to the allocation of value to
certain warrants issued in connection with the preferred stock. The following
table summarizes for each preferred stock issuance the value allocated to the
warrants and preferred stock:





Total
              
              
              Value
              
              
              Preferred
      StockPreferred
      Stock
              
              Proceeds
              
              
              Allocated
      to
              
              
              CarryingIssuance
              
              Received
              
              
              Warrants
              
              
              AmountSeries
      A
              
              $
              1,750,000
              
              
              $
              539,000
              
              
              $
              1,211,000Series
      B
              
              $
              2,000,000
              
              
              $
              930,838
              
              
              $
              1,069,162Series
      C
              
              $
              1,000,000
              
              
              $
              431,415
              
              
              $
              568,585





NOTE
13 – COMMON STOCK





The
Company has authorized 300 million common shares with a par value of $0.0001 per
share.  On all matters required by law to be submitted to a vote of
the holders of common stock, each share of common stock is entitled to one vote
per share.





During
the quarter ended January 31, 2010, the Company issued 252 thousand shares of
restricted common stock in exchange for consulting services.





On July
30, 2009, the Company granted Mr. Jarvis 1.8 million shares of common stock, to
be held in escrow, in connection with the execution of an employment agreement
and pursuant to the Company’s 2009 Incentive Stock Plan.  These shares
will be issued to Mr. Jarvis is accordance with the vesting period or upon
completion of certain performance measures.  Due to the forward stock
split, the amount of shares were increased to 7.2 million shares of common
stock.  The shares are subject to a vesting period in which 3.6
million shares vest on July 30, 2010 and with the remainder vesting on July 30,
2011.  The grant date fair value was $180. For the three and six
months ended January 31, 2010, approximately $123 thousand and $180 thousand of
stock-based compensation expense was recognized, respectively.  For
the three and six months ended January 31, 2009 no stock-based compensation
expense was recognized.





NOTE
14 – WARRANTS





During
2009,  Zurvita’s Board of Directors adopted the 2009 Incentive Stock
Plan (the 2009 Plan), pursuant to which we reserved for issuance 6 million
shares of Zurvita common stock to be used as awards to employees, directors,
consultants, and other service providers. The purpose of the 2009 Plan is to
provide an incentive to attract and retain officers, consultants, advisors and
employees whose services are considered valuable, to encourage a sense of
proprietorship and to stimulate an active interest of such persons into
Zurvita’s development and financial success.  Under the proposed 2009
Plan, Zurvita is authorized to issue incentive stock options intended to qualify
under Section 422 of the Code, non-qualified stock options, stock appreciation
rights, performance shares, restricted stock and long term incentive awards. The
2009 Plan will be administered by our Board of Directors until such time as such
authority has been delegated to a committee of the Board of
Directors.  As of January 31, 2010, 700 thousand total options were
issued under the 2009 Plan.





Compensatory Liability
Warrants





During
the six month period ended January 31, 2010, the Company issued compensatory
warrants to purchase an aggregate of 700 thousand shares of common
stock.  There were approximately 700 thousand warrants outstanding as
of January 31, 2010, all of which are classified as
liabilities.  These warrants are classified as liability instruments
as net share settlement is not considered within the Company’s control or
certain exercise prices are not fixed which has the potential to cause a
variable number of shares and/or value exchange upon exercise.




16


Assumptions
used to determine the fair value of the compensatory warrants granted during the
six months ended January 31, 2010 are as follows.




January
      31, 2010Expected
      dividends
              0%Expected
      volatility
              65%Risk
      free interest rate
              2.27%Expected
      life
              5 years


A summary
of the activity of the Company's compensatory warrants classified as liabilities
on the balance sheet is presented below.




Compensatory
      Warrants
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Weighted
                Average
                Remaining
                Contractual
                TermOutstanding
      at July 31, 2009
              
              
              -
              
              
              
              -
              
              
              
              -Granted
              
              
              700,000
              
              
              $
              0.25
              
              
              
              4.79Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Cancelled
      or Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at January 31, 2010
              
              
              700,000
              
              
              $
              0.25
              
              
              
              4.79Exercisable
      at January 31, 2010
              
              
              700,000
              
              
              $
              0.25
              
              
              
              4.79




The
following table summarizes the status of warrants outstanding at January 31,
2010:





Outstanding
      and Exercisable Liability WarrantsRange
      of
                Exercise
                Prices
              Number
      of
                Warrants
              Weighted
                Average
                Exercise
                Price
              Weighted
                Average
                Remaining
                Contractual
                Term$0.01
      to $0.25
              700,000
              $            0.25
              4.79




As of
January 31, 2010, there was no unrecognized compensation cost related to
non-vested compensatory warrants as all warrants outstanding are
vested.  There were no compensatory warrants exercised during the
three months ended January 31, 2010 and 2009 and therefore, no intrinsic value
associated.  The total fair value of compensatory warrants vested
during the six months ended January 31, 2010 was approximately $65.8
thousand.  The weighted average grant date fair value of compensatory
warrants granted during the six months ended January 31, 2010 and 2009 was $0.09
and $0, respectively.





A summary
of the status of the Company's non-vested shares as of January 31, 2010, and the
changes during the six months ended January 31, 2010, is presented
below.




Compensatory
      Warrants
              
              
              Weighted
                Average
                Grant-Date
                Fair
      ValueNon-vested
      at July 31, 2009
              
              
              -
              
              
              $
              -Granted
              
              
              700,000
              
              
              
              0.09Vested
              
              
              (700,000
              )
              
              
              -Forfeited
              
              
              -
              
              
              
              -Non-vested
      at January 31, 2010
              
              
              -
              
              
              $
              -




17




Non-compensatory
Warrants





During
the six month period ended January 31, 2010, the Company issued in conjunction
with preferred stock non-compensatory warrants to purchase an aggregate of
approximately 12 million shares of common stock.  There were
approximately 40.6 million non-compensatory warrants outstanding as of January
31, 2010, all of which were classified as liabilities.  These warrants
are classified as liability instruments as net share settlement is not
considered within the Company’s control or certain exercise prices are not fixed
which has the potential to cause a variable number of shares and/or value
exchange upon exercise.




Assumptions
used to determine the fair value of the non-compensatory warrants granted during
the six months ended January 31, 2010 are as follows.




January
      31, 2010Expected
      dividends
                0%Expected
      volatility
                65%Risk
      free interest rate
                2.14%
      - 3.13%Expected
      life
                5 -
      7 years
 A summary
of the activity of the Company's non-compensatory warrants classified as
liabilities on the balance sheet is presented below.


Non-Compensatory
      Warrants
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Weighted
                Average
                Remaining
                Contractual
                TermOutstanding
      at July 31, 2009
              
              
              28,560,000
              
              
              $
              0.06
              
              
              
              6.96Granted
              
              
              12,000,000
              
              
              
              0.25
              
              
              
              6.79Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Cancelled
      or Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at January 31, 2010
              
              
              40,560,000
              
              
              $
              0.12
              
              
              
              6.56Exercisable
      at January 31, 2010
              
              
              40,560,000
              
              
              $
              0.12
              
              
              
              6.56




The
following table summarizes the status of warrants outstanding at January 31,
2010:


Outstanding
      and Exercisable Liability WarrantsRange
      of
                  Exercise
                  Prices
                Number
      of
                  Warrants
                Weighted
                  Average
                  Exercise
                  Price
                Weighted
                  Average
                  Remaining
                  Contractual
                  Term$0.01
      to $0.25
                40,560,000
                $            0.12
                6.56


As of
January 31, 2010, there was no unrecognized compensation cost related to
warrants as all warrants outstanding are vested.  There were no
warrants exercised during the six months ended January 31, 2010 and 2009 and
therefore no intrinsic value associated.  The total fair value of
warrants vested during the six months ended January 31, 2010 was approximately
$1.4 million.  The weighted average grant date fair value of warrants
granted during the six months ended January 31, 2010 and 2009 was $0.11 and $0,
respectively.





A summary
of the status of the Company's non-vested shares as of January 31, 2010, and the
changes during the six months ended January 31, 2010, is presented
below.




18




Non-Compensatory
      Warrants
                
                
                Weighted
                  Average
                  Grant-Date
                  Fair
      ValueNon-vested
      at July 31, 2009
                
                
                -
                
                
                $
                -Granted
                
                
                12,000,000
                
                
                
                0.11Vested
                
                
                (12,000,000
                )
                
                
                -Forfeited
                
                
                -
                
                
                
                -Non-vested
      at January 31, 2010
                
                
                -
                
                
                $
                -


Amacore Stock Warrants
Issued




During
2008, Amacore granted to Mr. Jarvis 800 thousand warrants to purchase common
stock in connection with his employment agreement with the
Company.  In the event the warrants are exercised, Amacore will issue
the corresponding authorized and available common stock to Mr.
Jarvis.  The contractual term of the warrants issued was five
years.




Amacore
had accelerated the vesting conditions of the original award prior to July 31,
2009 and therefore, no compensation expense is recorded in fiscal
2010.  As of January 31, 2010 there were 800 thousand warrants
outstanding and exercisable.  No warrants expired, nor were any
warrants exercised or forfeited during the three and six months ended January
31, 2010 and therefore, no intrinsic value of warrants exercised.  As
of January 31, 2010 the weighted average exercise price of warrants granted was
$0.60.  As of January 31, 2010 the weighted average grant date fair
value of warrants granted was $0.43.




For the
three and six months ended January 31, 2010 no stock-based compensation expense
was recognized.  For the three and six months ended January 31, 2009,
approximately $40 thousand and $85 thousand of stock-based compensation expense
was recognized, respectively.




NOTE
15 – RELATED PARTY TRANSACTIONS





Equity
Contributions





During
the six months ended January 31, 2010 and 2009, the Company received
approximately $0 and $3.5 million of equity contributions from its majority
stockholder, Amacore, respectively.





Commissions
Paid





There are
immediate family members of Mr. Jarvis who operate as Independent Business
Owners (“IBO”) who were paid agent advances and commission compensation which
amounted to approximately $11 thousand and $24 thousand and approximately $21
thousand and $73 thousand, respectively, for the three and six months ended
January 31, 2010, these amounts were for work in which they performed on behalf
of the Company.





Intercompany Accounts
Payable





As of
January 31, 2010, the Company owes Amacore approximately $212 thousand as
Amacore paid certain operating expenses on behalf of Zurvita.





Interest
on Note Payable to OmniReliant Holdings, Inc.





The
Company recognized approximately $65 thousand and $90 thousand of interest
expense for the three and six months ended January 31, 2010, respectively, with
respect to the note payable due OmniReliant, who is a significant shareholder of
the Company.  Of the interest expense recognized, approximately $31
thousand was deferred and added to the principal of the note.  The
remaining interest due OmniReliant was accrued and will either be paid or
deferred at the Company’s election based upon the contractual terms of the note
payable.  No such related party interest expense was incurred during
the six months ended January 31, 2009.





Related
Party Receivable





As of
January 31, 2010, the Company is owed $10 thousand from OmniReliant for certain
costs paid for on OmniReliant’s behalf.




19


NOTE
16 – SUBSEQUENT EVENTS





On
February 3, 2010, the Company filed a Certificate of Amendment with the
Secretary of State of Delaware, pursuant to which it increased the number of
shares of common stock authorized to issue from 100,000,000, par value $0.0001
to 300,000,000, par value $0.0001.





On
February 1, 2010, the Company paid $140 thousand of the outstanding payable to
Amacore.





On
February 1, 2010, the Company granted and issued certain of its Consultants an
aggregate of approximately 1.1 million options to purchase common
stock.  The options are immediately exercisable at an exercise price
of $0.50 and have a contractual life of six months. On February 1, 2010, the
Company's stock was trading at $1.02. As of March 17, 2010, approximately 28
thousand of these options were exercised for proceeds of approximately $14
thousand.





On
February 9, 2010, the Company issued an aggregate of 97,000 shares of common
stock to various parties as consideration for monthly accounting and legal
services to be provided through April 30, 2010.  As consideration for
deferring interest and principal payments for three months, the Company also
entered into an agreement with a Note Holder for the issuance of 200,000 shares
of common stock.  In addition, the Company granted and issued an
aggregate of 405,000 options for common stock to various vendors and consultants
as consideration for future consulting services.  The options have a
contractual life of five years and have exercise prices ranging from $0.50 to
$0.75 with vesting terms ranging from zero to six months. On February 9, 2010,
the Company's stock was trading at $0.85.





On March
1, 2010, the Board of Directors elected Keith Hughes and Shadron Stastney to
fill two board seat vacancies created by the resignations of Paul Morrison and
Christopher Phillips.





20





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





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





Information
contained in this discussion, other than historical information, is considered
“forward-looking statements” that are subject to risks and
uncertainties.  These forward-looking statements include information
about possible or assumed future results of our business, financial condition,
liquidity, results of operations, plans and objectives including, without
limitation, statements about the Company’s ability to continue operations
through January 31, 2010, the liability of the Company for claims made in
pending litigation, plans for future products, strengthening our relationship
with our various sales organizations, our marketing intentions, our anticipated
products, efforts to expand distribution channels, Zurvita Holding’s anticipated
growth in sales and margins, and our ability to achieve profitability. In some
cases, you may identify forward-looking statements by words such as “may,”
“should,” “plan,” “intend,” “potential,” “continue,” “believe,” “expect,”
“predict,” “anticipate” and “estimate,” the negative of these words or other
comparable words.  These statements are only
predictions.  One should not place undue reliance on these
forward-looking statements.  The forward-looking statements are
qualified by their terms and/or important factors, many of which are outside the
Company’s control, involve a number of risks, uncertainties and other factors
that could cause actual results and events to differ materially from the
statements made.  The forward-looking statements are based on the
Company’s beliefs, assumptions and expectations of our future performance,
taking into account information currently available to the
Company.  These beliefs, assumptions and expectations can change as a
result of many possible events or factors, including those events and factors
described in “Risk Factors” in the Company’s Transition Report on Form 10-KT for
the seven months ended July 31, 2009 filed with the Securities and Exchange
Commission on November 12, 2009 (the “2009 Transition Report”), not all of which
are known to the Company.  If a change occurs, the Company’s business,
financial condition, liquidity and results of operations may vary materially
from those expressed in the aforementioned forward-looking statements. The
Company will update this forward-looking information only to the extent required
under applicable securities laws.  Neither the Company nor any other
person assumes responsibility for the accuracy or completeness of these
forward-looking statements.





The
following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and notes thereto, and other
financial information included elsewhere in this Form 10-Q.





Introduction





Management’s
discussion and analysis of results of operations and financial condition
(“MD&A”) is provided as a supplement to and should be read in conjunction
with our unaudited condensed consolidated financial statements and the related
notes thereto included elsewhere herein to help provide an understanding of our
financial condition and results of our operations.  The MD&A is
organized as follows:





·
            Overview– This section
      provides a general description of our
business.





·
            Results of operations
      –This section provides an analysis of our results of
      operations comparing the three and six months ended January 31, 2010 and
      2009.  This analysis is provided on a consolidated
      basis.





·
            Liquidity and capital
      resources– This section provides an analysis of our cash
      flows for the six months ended January 31, 2010 and 2009 as well as a
      discussion of our liquidity and capital
  resources.





Overview





Description
of Business





Zurvita
Holdings Inc. (“Zurvita”) is a direct sales marketing company offering
high-quality products and services targeting individuals, families and small
businesses.  The Company’s differentiated services feature consumer
products and small business solutions offered through a growing network of
independent sales consultants.  Zurvita offers a unique
business-to-business strategy with turnkey solutions for commercial and
residential energy, advertising, telecommunications and healthcare
services.  Zurvita also markets numerous low-cost ancillary products,
such as legal assistance and restoration services for identity theft and
consumer credit.





Business
Strategy





The
Zurvita business strategy embraces a direct sales approach exemplified through
the strength of network marketing.  The business strategy is designed
to create a marketing sales force by compensating independent business owners
(“Consultants”) of Company products and services not only for sales they
personally generate, but also for the sales of other Consultants whom they
introduced to the business, creating a sales organization of Consultants and a
hierarchy of multiple levels of compensation.  The products, services
and business opportunity are typically marketed directly to potential business
partners, consumers and small businesses by means of relationship referrals and
word-of-mouth marketing.




21




Consultants
become associated with the Company in an independent contractor relationship and
receive remuneration for selling products and services and for expanding their
network of people doing the same by promoting the Zurvita business
opportunity.





Strategically,
the Zurvita business opportunity is built on service and technology platforms
whereby Consultants market high demand products and services that target
consumers and small businesses at many levels.  The business
opportunity creates a Consultant sales organization that in turn sponsors other
motivated Consultants.  At the core of this business opportunity is
the Company’s vision to create a business model where each independent sales
Consultant has an opportunity to make a living on a full-time basis and to
obtain long-term financial security through means of marketing products that
have demand in the market place and that create long-term residual
income.





Zurvita
has developed processes to dramatically increase performance
success:





Focus on Lead
Generation





Zurvita
entered into an Advertising and Marketing Agreement with OmniReliant Holdings,
Inc., (“OmniReliant”), pursuant to which Zurvita agreed to provide placement of
advertising for OmniReliant on its website and OmniReliant agreed to provide the
Company with certain marketing services.  The marketing services to be
provided by OmniReliant include the production of infomercials, video production
services, management of call centers, and buying and fulfillment
services.





Strengthen Brand
Recognition





National
and regional marketing efforts are administrated to support corporate and
“personal” branding initiatives.  Inherent to the network marketing
industry is the axiom that people don’t follow products or features, but rather
the people with whom they are building relationally.  Zurvita not only
invests resources promoting the corporate brand, but has developed a
technological platform allowing Consultants to build web-based personal branded
sites enhancing their position as affiliate marketers of Zurvita programs and
services.





Increase Product and Service
Offerings





Zurvita
continues to explore the marketplace for new products and services anticipated
by consumers. The network marketing industry mandates a state of continuous
improvement by offering its Consultants and customers products and services that
offer time, value and conveniences at cost competitive prices.





The
Company entered into the growing online advertising market with the second
quarter launch of a proprietary local advertising search directory
service.  The Local Search Engine Directory service is a proprietary
local search and advertising software program owned by
OmniReliant.  The Local Search Engine Directory platform connects
consumers who visit high-volume websites with thousands of national and local
advertisers, thereby increasing brand identity and exposure, and ultimately
customer revenue, by geo-targeting advertising placements in local markets,
where they make the most impact.  Additionally, a customer can perform
additional searches for local businesses and services across a complete
selection of categories and get the information they require.





When a
business owner purchases one of the three advertising programs offered, the
local business receives a suite of easy-to-use tools that allows it to
completely manage its business listing and advertisements on its own
website.  Depending on the service level selected, a business owner
can add and manage all of the information it wishes to display, including
contact information, such as name, address, phone number and directions. The
advertising program also provides business owners with the ability to easily
create discount coupons and add multiple photos to an image gallery and upload
videos.  All of the management tools have been designed to be
intuitive, enabling business owners with little or no technology experience to
effectively manage their business listings.





Marketing





Zurvita
marketing strategies open new, innovative marketing and sales avenues for
Consultants to build income through expansion of their sales organization and
the residual benefits offered through the sale of product and
services.  The marketing strategy features unique components beyond
the traditional approach indicative of most network marketing
companies.





Media





The
agreement with OmniReliant brings strength and uniqueness to Zurvitas’ overall
marketing strategy.  The synergistic relationship brings the strength
of television production and national media placement to drive prospects to the
Zurvita business opportunity and to fuel interest in Zurvita programs that are
distributed as leads to thousands of Consultants.  OmniReliant offers
a host of products that create additional product options for
Zurvita.





Technology





Zurvita
recognizes the Internet is a powerful platform for the network
marketer.  The highly social aspect of the Internet lends itself as a
natural marketing vehicle and opens new population of prospects
continuously.  Zurvita offers Consultants robust “back” office support
complimented with sales and marketing tools.




22


Training and
Support





The
success of an external marketing program is only as effective as the internal
marketing strategies to keep Consultants informed and
engaged.  Zurvita is committed to a variety of communication
initiatives that promote leadership and business
effectiveness.  Weekly telephone/webinar meetings as well as
informational seminars create opportunities to develop leaders and to promote
the business opportunity.  National conferences and regional events
further support Zurvita’s training and development efforts of its national sales
force.





RESULTS
OF OPERATIONS





Results
of Operations





For
      the three months ended January 31,
              
              
              For
      the six months endedJanuary
      31,2010
              
              
              2009
              
              
              Increase
      (Decrease)
              
              
              2010
              
              
              2009
              
              
              Increase
      (Decrease)Revenues
              
              $
              1,652,910
              
              
              $
              1,193,474
              
              
              $
              459,436
              
              
              $
              2,901,545
              
              
              $
              2,058,370
              
              
              $
              843,175Cost
      of Sales
              
              
              1,071,980
              
              
              
              681,017
              
              
              
              390,963
              
              
              
              2,261,122
              
              
              
              2,078,188
              
              
              
              182,934Gross
      Profit (Loss)
              
              
              580,930
              
              
              
              512,457
              
              
              
              68,473
              
              
              
              640,423
              
              
              
              (19,818
              )
              
              
              660,241Operating
      Expenses
              
              
              1,870,490
              
              
              
              1,688,855
              
              
              
              181,635
              
              
              
              3,294,871
              
              
              
              3,363,655
              
              
              
              (68,784
              )Operating
      Loss
              
              
              (1,289,560
              )
              
              
              (1,176,398
              )
              
              
              113,162
              
              
              
              (2,654,448
              )
              
              
              (3,383,473
              )
              
              
              (729,025
              )Other
      Income (Expense)
              
              
              (449,402
              )
              
              
              -
              
              
              
              449,402
              
              
              
              (4,645,466
              )
              
              
              -
              
              
              
              4,645,466Loss
      Before Income Taxes
              
              
              (1,738,962
              )
              
              
              (1,176,398
              )
              
              
              
              
              
              
              (7,299,914
              )
              
              
              (3,383,473
              )Income
      Taxes
              
              
              10,357
              
              
              
              8,354
              
              
              
              2,003
              
              
              
              20,142
              
              
              
              14,409
              
              
              
              5,733Net
      Loss
              
              $
              (1,749,319
              )
              
              $
              (1,184,752
              )
              
              $
              564,567
              
              
              $
              (7,320,056
              )
              
              $
              (3,397,882
              )
              
              $
              3,922,174Basic
      and Diluted Loss Per Share
              
              $
              (0.03
              )
              
              $
              (0.02
              )
              
              
              
              
              
              $
              (0.13
              )
              
              $
              (0.07
              )Basic
      and diluted weighted averagenumber of  common shares
      outstanding
              
              
              56,653,792
              
              
              
              49,240,000
              
              
              
              
              
              
              
              56,546,896
              
              
              
              49,240,000





Revenue:





For the
three and six months ended January 31, 2010, revenue was approximately $1.7
million and $2.9 million, respectively, as compared to approximately $1.2
million and $2.1 million for the three and six months ended January 31, 2009,
respectively, an increase of approximately $459 thousand and $843 thousand,
respectively.




Administrative
websites sales and marketing fees were approximately $514 thousand and $555
thousand for the three months ended January 31, 2010, respectively, as compared
to approximately $234 thousand and $490 thousand, respectively, for the three
months ended January 31, 2009.  For the six months ended January 31, 2010,
administrative websites and marketing fees were approximately $998 thousand and
$951 thousand, respectively, as compared to $415 thousand and $798 thousand,
respectively, for the six months ended January 31, 2009.  The aggregate
increase in administrative website sales and marketing fees was approximately
$345 thousand and $736 thousand for the three and six months ended January 31,
2010.  The increase in administrative website sales and marketing fees is a
direct result of growth in the total sales representative base which was
approximately 13.7 thousand as of January 31, 2010 from approximately 6.9
thousand as of January 31, 2009.  The Company was able to attract and
retain more representatives as a result of greater product offering as of
January 31, 2010 as compared to January 31, 2009.




The
Company’s advertising sales and commissions relating to energy sales were new
revenue streams between the periods which both contributed to an aggregate of
$347 thousand and $412 thousand of new revenue for the three and six months,
respectively, ended January 31, 2010 as compared to 2009 comparable
periods.  The Company is focusing its efforts and resources on these new
products and is recruiting consultants based upon the availability these new
products.  The Company’s membership fees were approximately $237 thousand
and approximately $540 for the three and six months ended January 31, 2010,
respectively, as compared to approximately $469 thousand and approximately $845
thousand for three and six months ended January 31, 2009, respectively. 
However, the decrease in membership revenue is a result of the Company’s efforts
focusing on recruiting, advertising and energy sales.




Cost
of Sales:





For the
three and six months ended January 31, 2010, cost of sales was approximately
$1.1 million and $2.3 million, respectively, an increase of approximately $391
thousand and $183 thousand, respectively, from the respective period in 2009.
Cost of sales includes the benefit and service costs associated with the
products and services sold and sales commissions paid to consultants.  The
increase in cost of sales for the three and six month periods is a direct result
of increased revenues.




23




Gross
Profit:





For the
three and six months ended January 31, 2010, gross profit was approximately $581
thousand and $640 thousand, respectively, as compared to a gross profit of
approximately $513 thousand and gross loss of approximately $20 thousand for the
three and six months ended January 31, 2009, respectively.  The
increase in gross profit is due to the fact that the Company’s product offering
and consultant base were further developed between the two
periods.  The growth in product offerings has reduced the need of
utilizing non-traditional sales incentives to attract and retain consultants,
which historically had resulted in commissions either being paid in excess of
revenue recognized or resulting in minimal gross profit.





Operating
Expenses:





Our
operating expenses for the three and six months ended January 31, 2010 were $1.9
million and $3.3 million, respectively, as compared to $1.7 million and $3.4
million for the three and six months ended January 31, 2009.





The table
below sets forth components of our operating expenses for the three and six
months ended January 31, 2010 compared to the corresponding prior year
period:





Three
      Months EndedJanuary
      31,
              
              
              Six
      Months EndedJanuary
      31,2010
              
              
              2009
              
              
              Increase
      (Decrease)
              
              
              2010
              
              
              2009
              
              
              Increase
      (Decrease)Depreciation
              
              $
              8,824
              
              
              $
              8,362
              
              
              
              462
              
              
              $
              17,276
              
              
              $
              11,241
              
              
              
              6,035Office
      related expenses
              
              
              85,575
              
              
              
              68,627
              
              
              
              16,948
              
              
              
              168,888
              
              
              
              126,647
              
              
              
              42,241Payroll
      and benefits
              
              
              442,390
              
              
              
              294,085
              
              
              
              148,305
              
              
              
              762,970
              
              
              
              599,797
              
              
              
              163,173Professional
      fees
              
              
              442,723
              
              
              
              564,356
              
              
              
              (121,633
              )
              
              
              748,897
              
              
              
              1,077,134
              
              
              
              (328,237
              )Selling
      and marketing
              
              
              838,691
              
              
              
              686,010
              
              
              
              152,681
              
              
              
              1,490,807
              
              
              
              1,327,420
              
              
              
              163,387Travel
              
              
              52,285
              
              
              
              67,415
              
              
              
              (15,130
              )
              
              
              106,033
              
              
              
              221,416
              
              
              
              (115,383
              )Total
      operating expenses
              
              $
              1,870,488
              
              
              $
              1,688,855
              
              
              $
              181,633
              
              
              $
              3,294,871
              
              
              $
              3,363,655
              
              
              $
              (68,784
              )




Depreciation
expense for the three and six months ended January 31, 2010, was approximately
$9 thousand and $17 thousand, respectively, an increase of approximately $460
and $6 thousand over the same prior year periods.  The increase is
directly related to the purchase of property, plant and equipment as the growth
of the business required additional capital assets.





Office
related costs include rent, insurance, utilities and office
maintenance. For the three month period ended January 31, 2010 these costs
were approximately $26 thousand, $17 thousand, $13 thousand, and $30 thousand,
respectively.   For the six months ended January 31, 2010 these
costs were approximately $47 thousand, $40 thousand, $23 thousand and $59
thousand, respectively.  The overall increase of approximately $17 thousand
and $42 thousand is due to the increased operations of the Company.





Payroll
and related expenses for the three and six months ended January 31, 2010 were
approximately $442 thousand and $763 thousand, respectively, a increase of
approximately $148 thousand and $163 thousand over the same prior year
periods.  The increase is due to the Company’s operational
growth.  Additional employees were specifically hired to operate the
Company’s online advertising program.





Professional
fees consist of consulting, accounting fees, contract labor and legal costs. For
the three month period ended January 31, 2010, these costs were approximately
$293 thousand, $122 thousand, $6 thousand and $22 thousand, respectively.
 For the six month period ended January 31, 2010, these costs were
approximately $450 thousand, $191 thousand, $6 thousand and $102 thousand,
respectively.    During the three and six months ended January
31, 2009, legal expense represented approximately $228 thousand and $534
thousand  of the professional fees incurred and was related to
litigation in which the Company was involved. The Company’s legal costs have
been materially reduced due to a legal settlement entered into post January 31,
2010, which was the primary reason for the overall decrease in professional fees
of $122 thousand and $328 thousand for the three and six months ended January
31, 2010 as compared to the same prior year periods.





Selling
and marketing expenses for the three and six months ended January 31, 2010 was
$839 thousand and $1.5 million, respectively, an increase of approximately $153
thousand and $163 thousand as compared to the same prior year
periods.  The increase is mainly related to amortization of the
Company’s finite-lived advertising and marketing agreement in the amounts of
$164 thousand and $328 thousand for the three and six months ended January 31,
2010, respectively. Excluding this amortization, selling and marketing expenses
decreased approximately $78 thousand and $231 thousand for the three and six
months ended January 31, 2010, respectively, as compared to the same prior year
periods.  This decrease is related to the reduction of non sales-based
compensation practices employed to attract and retain consultants.




24




Business
travel expenses for the three and six months ended January 31, 2010 were
approximately $52 thousand and $106 thousand, respectively, a decrease of
approximately $15 thousand and $115 thousand as compared to the same prior year
periods.  The decrease in travel expenses is a result of the Company’s
efforts to reduce non-essential costs.





Other
Income (Expense):





Interest
expense





Interest
expense for the three and six months ended January 31, 2010 was approximately
$80 thousand and $108 thousand, respectively, compared to $0 for the same prior
year periods.  The increase in interest expense is attributable to the
issuance of notes payables subsequent to January 31, 2009.





Gain
on change in fair value of embedded share conversion feature





An
embedded share conversion feature exists within a convertible note payable that
was issued on October 9, 2009.  The Company has determined the
conversion feature to be a derivative instrument and has valued it at fair
value.  We recorded an unrealized gain on the conversion feature for
the three and six months ended January 31, 2010 of approximately $28 thousand
and $32 thousand, respectively.  This gain is a non-cash item not
impacting operating cash flows or results of operations. See Note 11– Assets and Liabilities
Measured at Fair Value, to financial statements contained within Item 1
of Part 1 of this Form 10Q for additional information with respect to the
calculation of change in fair value of this conversion feature for the three and
six months ended January 31, 2010.





Loss
on change in fair value of marketable securities





The
Company’s marketable securities consist of non-registered common stock. The
Company has classified these securities as an available-for-sale security due to
the six month holding requirement imposed by the Securities and Exchange
Commission on non-exempt security purchases.  The Company, however, has
elected to fair value these securities on a recurring basis.  The
Company recorded an unrealized loss of $400 thousand and $530 thousand for the
three and six months ended January 31, 2010, respectively.  No
marketable securities existed during the three and six months ended January 31,
2009.  This loss is a non-cash item not impacting operating cash flows
or results of operations. See Note 11– Assets and Liabilities
Measured at Fair Value, to financial statements contained within Item 1
of Part 1 of this Form 10Q for additional information with respect to the
determination of fair value.





Loss
on change in fair value of warrants





The
Company’s liability warrants are recorded at fair value.  For the
three and six months ended January 31, 2010, change in fair value of warrants
was approximately a gain of $2 thousand and a loss of $4 million, respectively. The $4
million unrealized loss for the six months ended January 31, 2010 is a result
of a one (1) for four (4) forward split that occurred on August 11,
2009 that had the effect of increasing the number of outstanding warrants by
21.42 million and the increase in share price used in valuing the warrants from
$0.17 to $0.25. This loss
is a non-cash item not impacting operating cash flows or results of
operations.  See Note 11– Assets and Liabilities
Measure at Fair Valueto the financial statements contained within Item 1
of Part 1 of this Form 10Q for additional information with respect to the
calculation of change in fair value of warrants for the three and six months
ended January 31, 2010.





Income
Taxes:





For the
three and six months ended January 31, 2010, the Company estimated approximately
$10 thousand and $20 thousand in Texas gross margin tax, an increase of $2
thousand and $6 thousand as compared to the same prior year
periods.  The increase is directly related to the Company’s increased
revenue and profitability between the two periods. The Company realized no tax
benefit from the deferred tax asset resulting from net operating losses
carryforward as the deferred tax asset has been fully reserved.





Net
loss:





The
Company’s net loss amounted to approximately $1.7 million and $7.3 million for
the three and six months ended January 31, 2010, respectively, as compared to
approximately $1.2 million and $3.4 million net loss for the three and six
months ended January 31, 2009.  Although the Company experienced an
increase in revenues and improvement in gross margin, the increase in net loss
is attributable to non-cash amortization of the Company’s advertising and
marketing agreement as well as significant non-cash unrealized losses recognized
on the Company’s marketable securities and outstanding liability
warrants.





Loss
per common share:





Loss per
common share amounted to $0.03 and $0.13 for the three months and six months
ended January 31, 2010, compared to $0.02 and $0.07 for the three and six months
ended January 31, 2009, respectively.  The aforementioned amortization
and unrealized losses mainly contributed to the increase in loss per share for
the three and six month periods.





25





OFF
BALANCE SHEET ARRANGEMENTS





We do not
have any off balance sheet arrangements as of January 31, 2010.





LIQUIDITY
AND CAPITAL RESOURCES





The
following table compares our cash flows for the six month period ended January
31, 2010 to the corresponding prior period:





January
      31, 2010
              
              
              January
      31, 2009Net
      cash used in operating activities
              
              $
              (1,899,673
              )
              
              $
              (3,517,673
              )Net
      cash used in investing activities
              
              
              (776,698
              )
              
              
              (126,101
              )Net
      cash provided by financing activities
              
              
              1,352,033
              
              
              
              3,490,198Net
      change in cash
              
              $
              (1,324,338
              )
              
              $
              (153,576
              )




Future
minimum rental payments required under the Company’s operating leases that have
initial or remaining non-cancelable lease terms in excess of one year on a
fiscal year basis are as follows:


As
      of January 31, 20102010
                
                $
                53,4042011
                
                
                106,8082012
                
                
                106,8082013
                
                
                -2014
                
                
                -Thereafter
                
                
                -$
                267,020


Funds
from operations are the anticipated source to fulfill these
commitments.





Since its
inception, the Company has met its capital needs principally through sales of
its equity and debt securities.  These costs and expenses included
operating expenses, such as salary expenses, professional fees, rent
expenses and other general and administrative expenses discussed above, and the
costs of sales discussed above to the extent such costs of sales exceeded our
revenue.





We
believe that without significant equity and debt investment from outside
sources, the Company will not be able to sustain its current planned operations
for the next 12 months.  During fiscal 2010, the Company has raised
from a shareholder $3 million of equity funding.  In order to raise
capital, the Company may sell additional equity or convertible debt securities
which would result in additional dilution to our stockholders. The issuance of
additional debt would result in increased expenses and could subject us to
covenants that may have the effect of restricting our operations.  We
can provide no assurance that additional financing will be available in an
amount or on terms acceptable to us, if at all. If we are unable to obtain
additional funds when they are needed or if such funds cannot be obtained on
terms favorable to us, we may be unable to execute upon our business plan or pay
our costs and expenses as they are incurred, which could have a material,
adverse effect on our business, financial condition and results of
operations.





Currently,
the Company does not maintain a line of credit or term loan with any commercial
bank or other financial institution.  The Company has approximately
$1.9 million of outstanding notes payable as of January 31, 2010.





Item
3.Quantitative and
Qualitative Disclosures About Market Risk





Not
applicable




26


Item
4.Controls and
Procedures





Evaluation
of Disclosure Controls and Procedures





Our
management, with the participation of our principal executive and principal
financial officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this Quarterly Report on Form 10-Q.
 Based on this evaluation, our principal executive and principal financial
officer concluded that our disclosure controls and procedures are ineffective to
ensure that information we are required to disclose in reports that we file or
submit under the Exchange Act (i) is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms, and (ii) is
accumulated and communicated to our management, including our principal
executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosure.  Presently, our disclosure
controls and procedures are not designed adequately to provide reasonable
assurance that such information is accumulated and communicated to our
management.  This conclusion was based on the material weaknesses
identified with regard to internal controls over financial reporting, as
described in the Company’s Transition Report for the seven months ended July 31,
2009.





There was
no change in our internal control over financial reporting that occurred during
the quarter covered by this Quarterly Report on Form 10-Q that materially
affected, or is reasonably likely to materially affect, our control over
financial reporting.





27





PART
II – OTHER INFORMATION








Item
1.Legal
Proceedings





As of
January 31, 2010, there were no material changes in the Company’s legal
proceedings as previously disclosed in the Company’s 2009 Transition
Report.





Item
1a.Risk
Factors





Not
applicable.





Item
2.Unregistered
Sales of Equity and Use of Proceeds





On
January 29, 2010, the Company entered into a Securities Purchase Agreement with
an accredited investor (the “Purchase Agreement”), pursuant to which the Company
issued and sold 1,000,000 shares of its newly designated Series C Convertible
Preferred Stock (the “Series C Preferred Stock”) and Series C Common Stock
Purchase Warrants to purchase an aggregate of 4,000,000 shares of the Company’s
common stock (the “Series C Warrants” and, together with the Series C Preferred
Stock, the “Private Placement Securities”). The Company received aggregate
proceeds from the Sale of the Private Placement Securities equal to
$1,000,000.





Item
3.Defaults Upon
Senior Securities





Not
applicable.





Item
4.Reserved





Reserved.





Item
5.Other
Information.





None





28





Item
6.Exhibits





(a)
Exhibits:





2.1
            Share
      Exchange Agreement by and among Red Sun Mining, Inc., Zurvita, Inc. and
      the shareholders of Zurvita, Inc. dated July 30, 2009 (incorporated by
      reference to Exhibit 2.1 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission August 5, 2009)3.1
            Certificate
      of Amendment, dated June 26, 2009 (incorporated by reference to Exhibit
      3.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).3.2
            Certificate
      of Amendment to the Certificate of Incorporation, dated August 19, 2009
      (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 25,
      2009).3.3
            Certificate
      of Amendment to the Certificate of Incorporation, dated February 3, 2010
      (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on February 3,
      2010).4.1
            Series
      A Convertible Preferred Stock Certificate of Designation, dated July 30,
      2009 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K
      filed with the Securities and Exchange Commission on August 5,
      2009)4.2
            Form
      of Series A Common Stock Purchase Warrant Certificate I between Red Sun
      Mining, Inc. and Vicis Capital Master fund, dated July 30, 2009
      (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).4.3
            Form
      of Series A Common Stock Purchase Warrant Certificate II between Red Sun
      Mining, Inc. and Midtown Partners & Co. LLC, dated July 30, 2009
      (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).4.4
            Securities
      Purchase Agreement by and between Red Sun Mining, Inc. and Vicis Capital
      Master Fund dated July 30, 2009 (incorporated by reference to Exhibit 4.4
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).5.02
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on January 26,
      2010)5.03
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on March 8,
    2010)5.04
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on January 28,
      2010)5.1
            Opinion
      of Sichenzia Ross Friedman Ference LLP dated February 1, 2010
      (incorporated by reference to Exhibit 5.1 to the Company’s Form S-8 filed
      with the Securities and Exchange Commission on February 1,
      2010)10.1
            Advertising
      and Marketing Agreement by and between the Company and OmniReliant
      Holdings, Inc., dated July 30, 2009 (incorporated by reference to Exhibit
      10.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).10.2
            Marketing
      and Sales Agreement by and between The Amacore Group, Inc. and the
      Company, dated July 30, 2009 (incorporated by reference to Exhibit10.2 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on August 5, 2009).10.3
            Employment
      Agreement with Mark Jarvis dated July 30, 2009 (incorporated by reference
      to Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on August 5, 2009).10.4
            Commission
      Agreement with Tracy Jarvis dated July 30, 2009 (incorporated by reference
      to Exhibit 10.4 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on August 5, 2009).10.5
            Securities
      Purchase Agreement by and between the Company and Midtown Partners &
      Co., LLC. dated October 6, 2009 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on October 13, 2009).  29
  10.6
            Series
      B Convertible Preferred Stock Certificate of Designation Marketing and
      Sales Agreement dated October 6, 2009 (incorporated by reference to
      Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on October 13, 2009)10.7
            Form
      of Series B Common Stock Purchase Warrant Certificate between the Company
      and Midtown Partners & Co. LLC, dated October 6, 2009 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on October 13,
2009).10.8
            Securities
      Purchase Agreement by and between the Company and Beyond Commerce, Inc.
      dated October 9, 2009 (incorporated by reference to Exhibit 10.1 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      October 16, 2009).10.9
            License
      and Marketing Agreement between the Company and OmniReliant Holdings, Inc.
      dated October 9, 2009  (incorporated by reference to Exhibit
      10.2 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on October 16, 2009).10.10
            6%
      Promissory Note dated October 9, 2009 due October 9, 2012 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on October 16,
2009).10.11
            Securities
      Purchase Agreement by and between the Company and Vicis Captial Master
      Fund dated January 29, 2010 (incorporated by reference to Exhibit 10.1 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on February 3, 2010).10.12
            Form
      of Series C Common Stock Purchase Warrant Certificate between the Company
      and Vicis Captial Master Fund, dated January 29, 2010 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on February 3,
2010).10.13
            Series
      C Convertible Preferred Stock Certificate of Designation, dated January
      29, 2010 (incorporated by reference to Exhibit 10.2 to the Company’s Form
      8-K filed with the Securities and Exchange Commission on February 3,
      2010)10.14
            2009
      Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the
      Company’s Form S-8 filed with the Securities and Exchange Commission on
      February 1, 2010)16.1
            Change
      in registrants certifying accountant – Letter from George Stewart, CPA
      dated November 3, 2009 (incorporated by reference to Exhibit 16.1 to the
      Company’s Form 8-K with the Securities and Exchange Commission on November
      9, 2009)31.1
            Certification
      of the Principal Executive Officer pursuant to Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934 as adopted pursuant to Section 302
      of the Sarbanes-Oxley Act of 200231.2
            Certification
      of Principal Financial Officer pursuant to Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
            Certification
      pursuant to Section 906 Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
      1350).





30





SIGNATURES





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





Dated:March
      17, 2010
            /s/
      Jay
      ShaferJay
      ShaferCo-Chief
      Executive OfficerDated:March
      17, 2010
            /s/
      Mark
      JarvisMark
      JarvisCo-Chief
      Executive OfficerDated:March
      17, 2010
            /s/
      Jason PostJason
      PostChief
      Financial Officer





31





EXHIBIT
INDEX





2.1
            Share
      Exchange Agreement by and among Red Sun Mining, Inc., Zurvita, Inc. and
      the shareholders of Zurvita, Inc. dated July 30, 2009 (incorporated by
      reference to Exhibit 2.1 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission August 5, 2009)3.1
            Certificate
      of Amendment, dated June 26, 2009 (incorporated by reference to Exhibit
      3.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).3.2
            Certificate
      of Amendment to the Certificate of Incorporation, dated August 19, 2009
      (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 25,
      2009).3.3
            Certificate
      of Amendment to the Certificate of Incorporation, dated February 3, 2010
      (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on February 3,
      2010).4.1
            Series
      A Convertible Preferred Stock Certificate of Designation, dated July 30,
      2009 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K
      filed with the Securities and Exchange Commission on August 5,
      2009)4.2
            Form
      of Series A Common Stock Purchase Warrant Certificate I between Red Sun
      Mining, Inc. and Vicis Capital Master fund, dated July 30, 2009
      (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).4.3
            Form
      of Series A Common Stock Purchase Warrant Certificate II between Red Sun
      Mining, Inc. and Midtown Partners & Co. LLC, dated July 30, 2009
      (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on August 5,
      2009).4.4
            Securities
      Purchase Agreement by and between Red Sun Mining, Inc. and Vicis Capital
      Master Fund dated July 30, 2009 (incorporated by reference to Exhibit 4.4
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).5.02
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on January 26,
      2010)5.03
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on January 28,
      2010)5.04
            Departure
      of Directors or Certain Officers; Election of Directors; Appointment of
      Certain Officers; Compensatory Arrangements of Certain Officers
      (incorporated by reference to Exhibit 5.02 to the Company’s Form 8-K filed
      with the Securities and Exchange Commission on March 8,
    2010)5.1
            Opinion
      of Sichenzia Ross Friedman Ference LLP dated February 1, 2010
      (incorporated by reference to Exhibit 5.1 to the Company’s Form S-8 filed
      with the Securities and Exchange Commission on February 1,
      2010)10.1
            Advertising
      and Marketing Agreement by and between the Company and OmniReliant
      Holdings, Inc., dated July 30, 2009 (incorporated by reference to Exhibit
      10.1 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on August 5, 2009).10.2
            Marketing
      and Sales Agreement by and between The Amacore Group, Inc. and the
      Company, dated July 30, 2009 (incorporated by reference to Exhibit10.2 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on August 5, 2009).10.3
            Employment
      Agreement with Mark Jarvis dated July 30, 2009 (incorporated by reference
      to Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on August 5, 2009).10.4
            Commission
      Agreement with Tracy Jarvis dated July 30, 2009 (incorporated by reference
      to Exhibit 10.4 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on August 5, 2009).10.5
            Securities
      Purchase Agreement by and between the Company and Midtown Partners &
      Co., LLC. dated October 6, 2009 (incorporated by reference to Exhibit 10.1
      to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on October 13, 2009).  32
  10.6
            Series
      B Convertible Preferred Stock Certificate of Designation Marketing and
      Sales Agreement dated October 6, 2009 (incorporated by reference to
      Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and
      Exchange Commission on October 13, 2009)10.7
            Form
      of Series B Common Stock Purchase Warrant Certificate between the Company
      and Midtown Partners & Co. LLC, dated October 6, 2009 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on October 13,
2009).10.8
            Securities
      Purchase Agreement by and between the Company and Beyond Commerce, Inc.
      dated October 9, 2009 (incorporated by reference to Exhibit 10.1 to the
      Company’s Form 8-K filed with the Securities and Exchange Commission on
      October 16, 2009).10.9
            License
      and Marketing Agreement between the Company and OmniReliant Holdings, Inc.
      dated October 9, 2009  (incorporated by reference to Exhibit
      10.2 to the Company’s Form 8-K filed with the Securities and Exchange
      Commission on October 16, 2009).10.10
            6%
      Promissory Note dated October 9, 2009 due October 9, 2012 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on October 16,
2009).10.11
            Securities
      Purchase Agreement by and between the Company and Vicis Captial Master
      Fund dated January 29, 2010 (incorporated by reference to Exhibit 10.1 to
      the Company’s Form 8-K filed with the Securities and Exchange Commission
      on February 3, 2010).10.12
            Form
      of Series C Common Stock Purchase Warrant Certificate between the Company
      and Vicis Captial Master Fund, dated January 29, 2010 (incorporated by
      reference to Exhibit 10.3 to the Company’s Form 8-K filed with the
      Securities and Exchange Commission on February 3,
2010).10.13
            Series
      C Convertible Preferred Stock Certificate of Designation, dated January
      29, 2010 (incorporated by reference to Exhibit 10.2 to the Company’s Form
      8-K filed with the Securities and Exchange Commission on February 3,
      2010)10.14
            2009
      Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the
      Company’s Form S-8 filed with the Securities and Exchange Commission on
      February 1, 2010)16.1
            Change
      in registrants certifying accountant – Letter from George Stewart, CPA
      dated November 3, 2009 (incorporated by reference to Exhibit 16.1 to the
      Company’s Form 8-K with the Securities and Exchange Commission on November
      9, 2009)31.1
            Certification
      of the Principal Executive Officer pursuant to Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934 as adopted pursuant to Section 302
      of the Sarbanes-Oxley Act of 200231.2
            Certification
      of Principal Financial Officer pursuant to Section 13(a) or 15(d) of
      the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
            Certification
      pursuant to Section 906 Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
      1350).




33