UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





(Mark
One)


x     
Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
quarterly period ended October 31, 2009





o     
Transition 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 x     
No 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 o   No 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 o     
No x





Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of December 8, 2009:


56,640,000
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 – October 31, 2009 and July 31,
      2009
            3Condensed
      Consolidated Statements of Operations – For the Three Months Ended October
      31, 2009 and 2008
            4Condensed
      Consolidated Statements of Cash Flows – For the Three Months Ended October
      31, 2009 and 2008
            5Notes
      to Interim Condensed Consolidated Financial Statements
            6Item
      2.   Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
            18Item
      3.   Quantitative and Qualitative Disclosures about Market
      Risk.
            23Item
      4.   Controls and Procedures.
            23





PART II
- OTHER INFORMATION





Page
      No.Item
      1.   Legal Proceedings.
            24Item
      1a. Risk Factors.
            24Item
      2.   Unregistered Sales of Equity Securities and Use of
      Proceeds.
            24Item
      3.   Defaults Upon Senior Securities.
            24Item
      4.   Submission of Matters to a Vote of Security
      Holders.
            24Item
      5.   Other Information.
            24Item
      6.   Exhibits.
            25Signatures
            26





















ZURVITA
HOLDINGS, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS




(Unaudited)October
      31, 2009
                
                
                July
      31, 2009ASSETSCurrent
      assetsCash
                
                $
                852,108
                
                
                $
                1,390,953Marketable
      securities (at fair value)
                
                
                640,000
                
                
                
                -Accounts
      receivable
                
                
                36,983
                
                
                
                47,732Agent
      advanced compensation
                
                
                1,003,035
                
                
                
                927,002Deferred
      marketing costs
                
                
                493,050
                
                
                
                657,400Total
      current assets
                
                
                3,025,176
                
                
                
                3,023,087Property,
      plant and equipment (net)
                
                
                103,584
                
                
                
                112,036Agent
      advanced compensation
                
                
                96,951
                
                
                
                271,344Marketing
      agreement
                
                
                2,000,000
                
                
                
                -Merchant
      account deposit
                
                
                115,333
                
                
                
                115,333Other
      assets
                
                
                32,367
                
                
                
                24,126Total
      assets
                
                $
                5,373,411
                
                
                $
                3,545,926LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilitiesAccounts
      payable
                
                $
                179,802
                
                
                $
                471,081Notes
      payable - current
                
                
                269,595
                
                
                
                787,237Accrued
      expenses
                
                
                177,333
                
                
                
                183,277Deferred
      revenue
                
                
                1,117,822
                
                
                
                934,321Total
      current liabilities
                
                
                1,744,552
                
                
                
                2,375,916Notes
      payable - long term
                
                
                1,626,090
                
                
                
                284,967Fair
      value of share conversion feature
                
                
                589,234
                
                
                
                -Fair
      value of warrants
                
                
                5,522,445
                
                
                
                549,780Total
      liabilities
                
                
                9,482,321
                
                
                
                3,210,663Redeemable
      preferred stock
                
                
                2,280,162
                
                
                
                1,211,000Stockholders'
      deficitCommon
      stock ($.0001 par value, 100,000,000 sharesauthorized;
      64,440,000 shares issued and56,440,000
      shares outstanding as of October 31, 2009and
      July 31, 2009, respectively)
                
                
                6,444
                
                
                
                6,444Treasury
      stock
                
                
                (210,000
                )
                
                
                (210,000
                )Additional
      paid-in capital
                
                
                9,151,584
                
                
                
                9,094,182Accumulated
      deficit
                
                
                (15,337,100
                )
                
                
                (9,766,363
                )Total
      stockholders' deficit
                
                
                (6,389,072
                )
                
                
                (875,737
                )Total
      liabilities and stockholders' deficit
                
                $
                5,373,411
                
                
                $
                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 EndedOctober
      31,2009
                  
                  
                  2008REVENUESAdvertising
      sales
                  
                  $
                  3,772
                  
                  
                  $
                  -Commissions
                  
                  
                  61,321
                  
                  
                  
                  20Marketing
      fees and materials
                  
                  
                  880,487
                  
                  
                  
                  488,232Membership
      fees
                  
                  
                  303,055
                  
                  
                  
                  376,643Total
      revenues
                  
                  
                  1,248,635
                  
                  
                  
                  864,895COST
      OF SALESBenefit
      and service cost
                  
                  
                  277,294
                  
                  
                  
                  182,780Sales
      commissions
                  
                  
                  911,848
                  
                  
                  
                  1,214,391Total
      cost of sales
                  
                  
                  1,189,142
                  
                  
                  
                  1,397,171GROSS
      PROFIT (LOSS)
                  
                  
                  59,493
                  
                  
                  
                  (532,276
                  )OPERATING
      EXPENSESDepreciation
                  
                  
                  8,452
                  
                  
                  
                  2,879Office
      related expenses
                  
                  
                  83,313
                  
                  
                  
                  58,020Payroll
      and employee benefits
                  
                  
                  320,580
                  
                  
                  
                  305,712Professional
      fees
                  
                  
                  306,174
                  
                  
                  
                  512,778Selling
      and marketing
                  
                  
                  652,114
                  
                  
                  
                  641,411Travel
                  
                  
                  53,748
                  
                  
                  
                  154,001Total
      operating expenses
                  
                  
                  1,424,381
                  
                  
                  
                  1,674,801Loss
      from operations before other income (expense)
                  
                  
                  (1,364,888
                  )
                  
                  
                  (2,207,077
                  )OTHER
      INCOME (EXPENSE)Gain
      on change in fair value of share conversion feature
                  
                  
                  4,192
                  
                  
                  
                  -Interest
      expense
                  
                  
                  (28,429
                  )
                  
                  
                  -Loss
      on change in fair value of marketable securities
                  
                  
                  (130,000
                  )
                  
                  
                  -Loss
      on change in fair value of warrants
                  
                  
                  (4,041,827
                  )
                  
                  
                  -Total
      other income (expense)
                  
                  
                  (4,196,064
                  )
                  
                  
                  -Loss
      before income taxes
                  
                  
                  (5,560,952
                  )
                  
                  
                  (2,207,077
                  )Income
      taxes
                  
                  
                  9,785
                  
                  
                  
                  6,054Net
      loss
                  
                  $
                  (5,570,737
                  )
                  
                  $
                  (2,213,131
                  )Basic
      and diluted loss per share
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.04
                  )Basic
      and diluted weighted average number of common shares
      outstanding
                  
                  
                  56,440,000
                  
                  
                  
                  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 Three Months EndedCash
      flows from operating activities
                
                October
      31, 2009
                
                
                October
      31, 2008Net
      loss
                
                $
                (5,570,737
                )
                
                $
                (2,213,131
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      on note payable discount
                
                
                10,125
                
                
                
                -Amortization
      on deferred marketing costs
                
                
                164,350
                
                
                
                -Depreciation
                
                
                8,452
                
                
                
                2,879Share-based
      compensation
                
                
                57,402
                
                
                
                44,790Gain
      on change in fair value of share conversion liability
                
                
                (4,192
                )
                
                
                -Loss
      on change in fair value of marketable securities
                
                
                130,000
                
                
                
                -Loss
      on change in fair value of warrants
                
                
                4,041,827
                
                
                
                -Changes
      in operating assets and liabilitiesDecrease
      (increase) in accounts receivable
                
                
                10,749
                
                
                
                (329
                )Decrease
      (increase) in agent advanced compensation
                
                
                98,360
                
                
                
                (111,444
                )Increase
      in deferred expenses
                
                
                -
                
                
                
                (194,105
                )Increase
      in merchant account deposits
                
                
                -
                
                
                
                (115,333
                )Increase
      in other assets
                
                
                (8,241
                )
                
                
                (8,216
                )Increase
      (decrease) in accounts payable and accrued expenses
                
                
                (297,223
                )
                
                
                114,856Increase
      in deferred revenue
                
                
                183,501
                
                
                
                556,807Net
      cash used in operating activities
                
                
                (1,175,627
                )
                
                
                (1,923,226
                )Cash
      flows from investing activitiesPurchase
      of property and equipment
                
                
                -
                
                
                
                (68,111
                )Purchase
      of marketable securities
                
                
                (770,000
                )
                
                
                -Net
      cash used in investing activities
                
                
                (770,000
                )
                
                
                (68,111
                )Cash
      flows from financing activitiesContributions
      of capital from The Amacore Group, Inc.
                
                
                -
                
                
                
                1,816,752Proceeds
      from sale of preferred stock
                
                
                2,000,000
                
                
                
                -Principal
      payments made on notes payable
                
                
                (593,218
                )
                
                
                -Net
      cash provided by financing activities
                
                
                1,406,782
                
                
                
                1,816,752Net
      change in cash balance
                
                $
                (538,845
                )
                
                $
                (174,585
                )Beginning
      cash
                
                
                1,390,953
                
                
                
                174,585Ending
      cash
                
                $
                852,108
                
                
                $
                -Supplemental
      disclosure of cash flow informationCash
      paid for interest
                
                $
                7,476
                
                
                $
                -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.  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., 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 $3.75 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 $3.75 million from the sale of preferred stock in two tranches
completed in July 2009 and October 2009.   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
October 31, 2009, the Company had positive working capital of approximately $1.3
million and an accumulated deficit of approximately $15.3
million.  For the three months ended October 31, 2009, the Company had
a net loss of approximately $5.6 million.








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, and the unaudited condensed
consolidated financial statements as of October 31, 2009 and 2008 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 month periods ended October 31, 2009 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





Advertising
Sales
 
 Advertising
sales consist of displaying 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 $29 and $37 thousand for the three months ended October 31, 2009
and 2008, respectively and were recorded as a reduction of revenue in the
accompanying statements of operations.  An estimate for refunds and
chargebacks of approximately $10 thousand is included in accrued expenses in the
accompanying condensed consolidated balance sheets as of October 31, 2009 and
2008.





Concentration of Credit
Risk





All of
the Company’s credit card processing is with one merchant processor, as well as
all multi-level 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 October 31, 2009 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 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 generally 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.





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.




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 months ended October
31, 2009 and 2008, 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.





Recent Accounting
Pronouncements





In April
2009, the FASB issued guidance on interim disclosures about fair value of
financial instruments which requires disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. This guidance also requires those disclosures
in summarized financial information at interim reporting periods and is
effective for interim reporting periods ending after June 15, 2009. As this
pronouncement is only disclosure-related, it did not have an impact on our
financial position and results of operations. The required disclosures are
presented in Footnote 9 – Assets and Liabilities Measured at Fair
Value.





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 three months
ended:




October
      31, 2009
                
                
                October
      31, 2008Accounts
      payable paid directly by majority stockholder
                
                $
                -
                
                
                $
                20,000Embedded
      conversion feature on note payable issued
                
                
                593,426
                
                
                
                -Note
      payable issued for marketing agreement
                
                
                1,406,574
                
                
                
                -






9





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 $250 thousand and $114 thousand of expense
was recognized for the three months ended October 31, 2009 and 2008,
respectively.  As of October 31, 2009, the balance of the loans was
approximately $1.1 million of which approximately $1 million is classified as a
current asset.




NOTE
5 – DEFERRED MARKETING COSTS





On July
30, 2009, Zurvita entered into an Advertising and Marketing Agreement with
OmniReliant Holdings, Inc., a related party, and issued 15.2 million shares of
common stock.  The marketing agreement is capitalized at the Company’s
estimated fair value of the stock and amortized over the life of the agreement
which has a one-year contract term.  Approximately $164 thousand of
amortization was taken for the three months ended October 31, 2009.





NOTE
6 –MARKETING AGREEMENT





On
October 9, 2009, the Company entered into a marketing agreement with OmniReliant
Holdings, Inc., a related party, 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 in consideration for a promissory note in the principal amount
of $2 million.


The
recorded value of the marketing agreement is the total value of consideration
given, which was $2 million.  The marketing agreement is classified as
an intangible asset with a indefinite life and subject to annual impairment
analysis.





NOTE
7 – NOTES PAYABLE





Notes
payable consist of the following:




October
      31, 2009
              
              
              July
      31, 2009Promissory
      note payable; face amount $2 million; bearing interest of 6% per annum;
      unsecured; principal payment due on October 9, 2012
              
              $
              1,416,699
              
              
              $
              -Promissory
      note payable; bearing interest of 7.5% per annum; unsecured; principal
      payments due monthly approximately $27 thousand through July
      2011
              
              
              478,986
              
              
              
              549,014Promissory
      note payable to majority shareholder (on demand; noninterest bearing;
      unsecured)
              
              
              -
              
              
              
              523,190Total
      notes payable
              
              $
              1,895,685
              
              
              $
              1,072,204






10







On
October 9, 2009, the Company entered into a marketing agreement and issued a
note payable in the amount of $2 million.  This note payable is
payable three years from the date of issuance and convertible to common stock at
any time at the option the holder at a conversion price of $0.25 per
share.  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 conversion liability is
subject to recurring fair value adjustments each reporting period (see Note 9 -
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 months ended October 31, 2009, total
interest expense related to the accretion of the discount on the note
payable was approximately $7 thousand.





Of the
notes payable presented in the preceding table, approximately $270 thousand is
classified as current maturities as of October 31, 2009.





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




As
      of October 31, 20092010
              
              $
              269,5952011
              
              
              209,3912012
              
              
              2,000,0002013
              
              
              -2014
              
              
              -Thereafter
              
              
              -$
              2,478,986






NOTE
8- DEFERRED REVENUE





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


October
      31, 2009
                    
                    
                    July
      31, 2009Deferred
      advertising sales
                    
                    $
                    69,418
                    
                    
                    $
                    -Deferred
      marketing fees
                    
                    
                    918,998
                    
                    
                    
                    787,603Deferred
      member fees
                    
                    
                    129,406
                    
                    
                    
                    146,718Total
                    
                    $
                    1,117,822
                    
                    
                    $
                    934,321







NOTE
9– 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.




11





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 October 31, 2009


Quoted
      Prices in Active Markets for Identical Assets
                  (Level
      1)
                
                
                Significant
      Unobservable Inputs (Level 3)
                
                
                Total
      Fair ValueMarketable
      securities
                
                $
                640,000
                
                
                $
                -
                
                
                $
                640,000Total
      Assets
                
                $
                640,000
                
                
                $
                -
                
                
                $
                640,000Share
      conversion feature
                
                $
                -
                
                
                $
                589,234
                
                
                $
                589,234Warrants
                
                
                -
                
                
                
                5,522,445
                
                
                
                5,522,455Total
      liabilities
                
                $
                -
                
                
                $
                6,111,679
                
                
                $
                6,111,679







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.





The
Company recorded an unrealized loss of approximately $130 thousand on its
marketable securities for the three months ended October 31,
2009.  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 months ended October 31, 2009 are summarized as
follows:




Fair
Value Measurements
 Using
Significant Unobservable Inputs
 (Level
3)
 
 
 Balance
      Beginning of Period
                
                
                Issuance
                
                
                (Gain)
      or Loss Recognized in Earning from Change in Fair Value
                
                
                Balance
      End of PeriodShare
      conversion feature
                
                $
                -
                
                
                $
                593,426
                
                
                $
                (4,192
                )
                
                $
                589,234Warrants
                
                $
                549,780
                
                
                $
                983,065
                
                
                $
                4,041,827
                
                
                $
                5,522,445
 For the
three months ended October 31, 2009, total unrealized gain of approximately $4
thousand is included in earnings in the Statement of Operations caption “Gain on
change in fair value of share conversion.”  For the three months ended
October 31, 2009, total unrealized losses of approximately $4 million are
included in earnings in the Statement of Operations caption “Loss on change in
fair value of warrants.”




12





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 October 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 October 31, 2009; consequently, no gain or loss has been
recorded within the Statement of Operations.





NOTE
10—REDEEMABLE PREFERRED STOCK





The
Company is authorized to issue 10 million shares of preferred stock with a par
value of $0.0001 per share.





On July
30, 2009 the company issued 1.75 million shares of Series A Convertible
Preferred Stock (the “Series A Convertible Preferred Stock”) for proceeds of
$1.75 million which are convertible at a conversion price of $0.0625 (the
“Conversion Price”) into 28 million shares (the “Conversion Shares”) of common
stock.  The proceeds of $1.75 million were allocated between the
preferred stock and detachable warrants based on the relative fair values of
$1.21 million and $550 thousand, respectively.  The stated value of
each issued share of Convertible Preferred Stock is $1.00 (the “Stated
Value”).





On
October 6, 2009 the company issued 2 million shares of Series B Convertible
Preferred Stock (the “Series B Convertible Preferred Stock”) for proceeds of $2
million which are convertible at a conversion price of $0.25 (the “Conversion
Price”) into 8 million shares (the “Conversion Shares”) of common
stock.  The proceeds of $2 million were allocated first to the
warrants based on their fair value and the remainder to preferred
stock.  The allocation between the preferred stock and detachable
warrants was $1.07 million and $983 thousand, respectively.  The
stated value of each issued share of Convertible Preferred Stock is $1.00 (the
“Stated Value”).





Series A
Convertible and Series B 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.




13





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.





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 and Series B Convertible Preferred Stock was $1.75
million and $2 million, respectively, as of October 31, 2009.





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 and B shall
be $0.0625 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.





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.




14





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;





·
            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 warrants
issued July 2009 and October 2009 were valued at $550 thousand and $931
thousand, respectively, and the remaining proceeds were allocated to the
preferred stock of $1.21 million and $1.07 million, respectively.





Series A
Convertible Preferred Stock outstanding as of October 31, 2009 and July 31,
2009, was 1.75 million shares.  Series B Convertible Preferred Stock
outstanding as of October 31, 2009 and July 31, 2009, was 2 million shares and 0
shares, respectively.





NOTE
11 - COMMON STOCK





The
Company has authorized 100 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.





On July
31, 2009, the Company’s majority shareholder effected the Company’s adoption of
a long-term incentive stock plan (the “2009 Incentive Stock Plan”). A maximum of
6 million shares of common stock has been authorized to be issued under the 2009
Incentive Stock Plan in connection with the grant of awards, subject to
adjustment for corporate transactions, including, without limitation, any stock
dividend, forward stock split, reverse stock split, merger or recapitalization.
Common stock issued under the 2009 Incentive Stock Plan may be either newly
issued shares, treasury shares, reacquired shares or any combination thereof. If
common stock issued as restricted stock, restricted stock units or otherwise
subject to repurchase or forfeiture rights is reacquired by us pursuant to such
rights, or if any award is cancelled, terminates, or expires unexercised, the
common stock which would otherwise have been issuable pursuant to such awards
will be available for issuance under new awards.





The Board
of Directors has the discretion to select to whom awards will be granted; to
determine the type, size, terms and conditions of each award; to modify or
waive, within certain limits, the terms and conditions of any award; to
determine the time when awards will be granted; to establish performance
objectives; to prescribe the form of documents representing awards under the
2009 Incentive Stock Plan; and to make all other determinations which it deems
necessary, advisable or desirable in the interpretation and administration of
the 2009 Incentive Plan. The Board’s decisions are final, conclusive and
binding.





On August
19, 2009, the Company had a one (1) for four (4) forward split of the
outstanding Zurvita Holdings, Inc. common stock. The record date for the forward
split was August 11, 2009 but has retroactive treatment to be effective as of
January 25, 2008.  The number of issued and outstanding common shares
prior to and subsequent to the effect of the forward split was 14.11 million and
56.44 million, respectively.







15


NOTE
12– NON-COMPENSATORY WARRANTS





During
the three month period ended October 31, 2009 the Company issued warrants to
purchase an aggregate of approximately 8 million shares of common
stock.  There were approximately 28.6 million and 8 million warrants
outstanding to purchase common stock, exercisable at $0.0625 and $0.25 per share
through 2016, respectively.





Certain
of these warrants are liability instruments issued in conjunction with preferred
stock while others are non-compensatory warrants classified as liability
instruments.  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.  As of
October 31, 2009, approximately 36.6 million warrants were classified as
liabilities.





Assumptions
used to determine the fair value of the warrants granted for the three months
ended October 31, 2009 are as follows.




Expected
      dividends
              0%Expected
      volatility
              65%Risk
      free interest rate
              2.25%
      - 3.05%Expected
      life
              
              5 -
      7 years







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




Warrants
              
              
              Weighted
      Average Exercise Price
              
              
              Weighted
      Average Remaining Contractual TermOutstanding
      at July 31, 2009
              
              
              28,560,000
              
              
              
              0.06
              
              
              
              6.96Granted
              
              
              8,000,000
              
              
              
              0.25
              
              
              
              6.93Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Cancelled
      or Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at October 31, 2009
              
              
              36,560,000
              
              
              $
              0.10
              
              
              
              6.76Exercisable
      at October 31, 2009
              
              
              36,560,000
              
              
              $
              0.10
              
              
              
              6.76










The
following table summarizes the status of warrants outstanding at October 31,
2009:






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
                
                
                
                36,560,000
                
                
                $
                0.10
                
                
                
                6.76







As of
October 31, 2009, there was no unrecognized compensation cost related to
non-vested warrants as all warrants outstanding are vested.  There
were no warrants exercised during the three months ended October 31, 2009 and
2008 and therefore no intrinsic value associated.  The total fair
value of warrants vested during the three months ended October 31, 2009 was
approximately $931 thousand.  The weighted average grant date fair
value of warrants granted during the three months ended October 31, 2009 and
2008 was $0.12 and $0, respectively.





A summary
of the status of the Company's non-vested shares as of October 31, 2009, and the
changes during the three months ended October 31, 2009, is presented
below.




Warrants
              
              
              Weighted
      Average
                Grant-Date
                Fair
      ValueNon-vested
      at July 31, 2009
              
              
              -
              
              
              $
              -Granted
              
              
              8,000,000
              
              
              
              0.12Vested
              
              
              (8,000,000
              )
              
              
              -Forfeited
              
              
              -
              
              
              
              -Non-vested
      at October 31, 2009
              
              
              -
              
              
              $
              -




16






NOTE 13 – COMPENSATORY WARRANTS AND
STOCK




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 October 31, 2009 there were 800 thousand warrants
outstanding and exercisable.  No warrants expired, nor were any
warrants exercised or forfeited during the three months ended October 31, 2009
and therefore, no intrinsic value of warrants exercised.  As of
October 31, 2009 the weighted average exercise price of warrants granted was
$0.60.  As of October 31, 2009 the weighted average grant date fair
value of warrants granted was $0.43.




Stock Awards
Issued





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 discussed in Note 11, the amount of shares were increased to 7.2 million
shares of common stock.  The shares are subject to a vesting
period which 3.6 million shares shall vest on July 30, 2010 and July 30, 2011,
respectively.  The grant date fair value was $180. For the three
months ended October 31, 2009 and 2008, approximately $57 thousand and $0 of
stock-based compensation expense was recognized, respecitvely.





NOTE
14 - RELATED PARTY TRANSACTIONS





Equity
Contributions





During
the three months ended October 31, 2009 and 2008, the Company received
approximately $0 and $1.8 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 $13 thousand and approximately $52 thousand,
respectively, for the three months ended October 31, 2009, for work in
which they perform on behalf of the Company.





Executed
Agreements





On
October 9, 2009, the Company entered into a license and marketing agreement (the
“License Agreement”) with OmniReliant whereby OmniReliant granted a perpetual
right and license, under all intellectual property rights applicable to the
LocalAdLink Software (the “Software”), to access, use, execute, display, market,
and sell advertisements utilizing the Software to the Company in consideration
for a royalty fee of $2.00 per user for a period of twenty four (24) months,
commencing ninety (90) days from the date the Company runs its first
advertisement.  Additionally, pursuant to the terms of the License
Agreement, OmniReliant granted the Company the right to market and sell
advertisements through its independent sales representatives in consideration
for a 6% promissory note in the principal amount of $2 million, payable three
(3) years from the date of issuance and convertible at any time at the option of
OmniReliant at a conversion price of $0.25 per share.





NOTE
15- SUBSEQUENT EVENTS





Management
has evaluated subsequent events through December 15, 2009, the date of issuance
of the financial statements.





On
November 13, 2009, the Board of Directors granted stock options to each Board
member and Corporate Secretary.  A total of 700 thousand stock options
with an exercise price and contractual life of $0.25 and 5 years, respectively,
were issued.





On
November 24, 2009, the Company issued approximately 200 thousand shares of
restricted common stock in exchange for investor relations
services.





On
December 8, 2009, the Company issued approximately 52 thousand shares of
restricted common stock in exchange for consulting expenses.







17





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 October 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 months ended October 31, 2009 to
      2008.  This analysis is provided on a consolidated
      basis.





·
            Liquidity and capital
      resources– This section provides an analysis of our cash
      flows for the three months ended October 31, 2009 to 2008 as well as a
      discussion of our liquidity and capital
  resources.





Overview





Description
of Business





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.  Zurvita also
markets numerous low cost ancillary products such as home warranty, legal
assistance and restoration services for identity theft and consumer
credit.





Business
Strategy





The
Zurvita Holdings business strategy embraces the strength of direct sells
exemplified through the network marketing channel.  The business
strategy is designed to create a marketing and 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 who they introduced to the business, creating a sales organization
of Consultants and a hierarchy of multiple levels of
compensation.  The products and services and business opportunity are
usually marketed directly to consumers and potential business partners by means
of relationship referrals and word of mouth marketing.





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 Holdings business
opportunity.




18





Strategically,
the Zurvita Holdings business opportunity is built on service and technology
platforms whereby Consultants market products at many levels.  The
business opportunity is to create 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
representative 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 that create long-term residual
income.





Zurvita
Holdings is positioned to market and sell products and services currently in
high demand in the marketplace.  Additionally, Zurvita Holdings sells
products and services through nationally recognized companies that offer
membership and/or subscription programs or services at competitive
prices.





Zurvita
Holdings has developed processes to dramatically increase performance
success:





Focus on Lead
Generation





Concurrent
with the closing of the Share Exchange, Zurvita Holdings entered into an
Advertising and Marketing Agreement with OmniReliant Holdings, Inc.,
(“OmniReliant”), pursuant to which Zurvita Holdings 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, buying and fulfillment
services.  In consideration for such services, OmniReliant received an
aggregate of 15.2 million shares of the Company’s common stock.





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 Holdings
not only invest 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 Holdings
programs and services.





Increase Product and Service
Offerings





Zurvita
Holdings 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 members products and
services that offer time, value and conveniences at cost competitive
prices.  One such product made recently available to customers is
LocalAdLink advertising.





The
Company and OmniReliant entered into a strategic licensing and marketing
agreement whereby the Company’s representatives can sell advertising which
utilizes OmniReliant’s proprietary LocalAdLink technology. LocalAdLink is an
online advertising service that enables local businesses to reach local
customers. The public Web site www.LocalAdLink.com is a local search directory
and acts as the central hub for the LocalAdLink technology. When a customer
visits LocalAdLink.com, geo-targeting technology identifies their location and
serves up local businesses in their zip code. Once here, 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 partners with LocalAdLink, 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 driving directions.  LocalAdLink.com also provides business owners
with the ability to easily create discount coupons, add multiple photos to an
image gallery and upload videos.  All of the management tools have
been designed to be intuitive, so that business owners with little or no
technology experience can effectively manage their business
listings.





Marketing





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




19





Technology





Zurvita
Holdings 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 Holdings offers Consultants robust “back”
office support complimented with sales and marketing tools.





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 Holdings 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 Holding’s training and development efforts of its
national sales force.





RESULTS
OF OPERATIONS





Results
of Operations





For
      the three months ended,October
      31, 2009
              
              
              October
      31, 2008
              
              
              Increase
      (Decrease)Revenues
              
              $
              1,248,635
              
              
              $
              864,895
              
              
              $
              383,740Cost
      of Sales
              
              
              1,189,142
              
              
              
              1,397,171
              
              
              
              (208,029
              )Gross
      Profit (Loss)
              
              
              59,493
              
              
              
              (532,276
              )
              
              
              591,769Operating
      Expenses
              
              
              1,424,381
              
              
              
              1,674,801
              
              
              
              (250,420
              )Operating
      Loss
              
              
              (1,364,888
              )
              
              
              (2,207,077
              )
              
              
              842,189Other
      Expense
              
              
              (4,196,064
              )
              
              
              -
              
              
              
              (4,196,064
              )Loss
      Before Income Taxes
              
              
              (5,560,952
              )
              
              
              (2,207,077
              )Income
      Taxes
              
              
              9,785
              
              
              
              6,054
              
              
              
              3,731Net
      Loss
              
              $
              (5,570,737
              )
              
              $
              (2,213,131
              )
              
              $
              (3,357,606
              )





Revenue:





For the
three months ended October 31, 2009, revenue was approximately $1.2 million, as
compared to approximately $865 thousand for the three months ended October 31,
2008 an increase of approximately $384 thousand.  Revenue primarily
consisted of membership product sales to individual consumers and marketing fees
paid by Individual Business Owners (“IBO”) of approximately $303 thousand and
$880 thousand, respectively, for the three months ended October 31, 2009 and
approximately $376 thousand and $488 thousand, respectively, for the three
months ended October 31, 2008.  Revenue growth is attributable to the
progression of Zurvita’s business plan which has resulted in new product
offerings and continued growth in the Company’s network sales representatives
from 2,519 at October 31, 2008 to 6,324 as of October 31, 2009.





Cost
of Sales:





For the
three months ended October 31, 2009, cost of sales was approximately $1.2
million as compared to approximately $1.4 million for the three months ended
October 31, 2008, a decrease of approximately $208 thousand.  Cost of
sales includes sales commissions paid to IBO’s and the benefit and service costs
associated with the products and services sold.  Commissions and
benefit/service costs were approximately $912 thousand and $277 thousand,
respectively, for the three months ended October 31, 2009 as compared to
approximately $1.2 million and $183 thousand, respectively, for the three months
ended October 31, 2008.  In order to attract and retain marketing
representatives while the Company’s product offering was being developed,
non-traditional means of sales compensation were employed during fiscal
2008.  During the three months ended October 31, 2009, the division
had an increase in marketable products which has lessened the need for
non-traditional compensation methods to encourage and retain
representatives.   As a result, the Company’s cost of sales as a
percentage of revenue decreased to 95% for the three months ended October 31,
2009 from 162% for the three months ended October 31, 2008.







20


Gross
Profit:





For the
three months ended October 31, 2009, gross profit was approximately $59 thousand
as compared to a gross loss of approximately $532 thousand for the three months
ended October 31, 2009, an increase of $592 thousand. The increase in gross
profit is due to the fact that the Company’s product offering and IBO base were
further developed between the two periods.  This growth in the
Company’s IBO based has caused significant growth in marketing fees paid by and
materials sold to IBOs. The growth in product development has reduced the need
of utilizing non-traditional sales incentives to attract and retain IBO’s, which
historically had resulted in commissions being paid in excess of revenue
recognized.





Operating
Expenses:





Our
operating expenses for the three month ended October 31, 2009 were $1.4 million,
as compared to $1.7 million for the three months ended October 31,
2008.





The table
below sets forth components of our operating expenses for the three months ended
October 31, 2009 compared to the corresponding prior year period:




Three
      Months Ended October 31,2009
              
              
              2008
              
              
              Increase
      (Decrease)Depreciation
              
              $
              8,452
              
              
              $
              2,879
              
              
              
              5,573Office
      related expenses
              
              
              83,313
              
              
              
              58,020
              
              
              
              25,293Payroll
      and benefits
              
              
              320,580
              
              
              
              305,712
              
              
              
              14,868Professional
      fees
              
              
              306,174
              
              
              
              512,778
              
              
              
              (206,604
              )Selling
      and marketing
              
              
              652,114
              
              
              
              641,411
              
              
              
              10,703Travel
              
              
              53,748
              
              
              
              154,001
              
              
              
              (100,253
              )Total
      operating expenses
              
              $
              1,424,381
              
              
              $
              1,674,801
              
              
              $
              (250,420
              )







Depreciation
expense for the three months ended October 31, 2009, was approximately $8
thousand, an increase of approximately $6 thousand over the three months ended
October 31, 2008.  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 October 31,
2009,  these costs were approximately $20 thousand, $23 thousand, $10
thousand, and $30 thousand, respectively.   The overall increase of
approximately $25 thousand is due to the increased operations of the
Company.





Payroll
and related expenses for the three months ended October 31, 2009 were
approximately $321 thousand, a increase of approximately $15 thousand as
compared to the three months ended October 31, 2008.  The slight
increase is due to addition of personnel from the first year of
operations.





Professional
fees consist of consulting, accounting fees, legal costs. For the three month
period ended October 31, 2009, these costs were approximately $157 thousand, $69
thousand, and $80 thousand, respectively.   During the three months ended
October 31, 2008 legal expense represented approximately $445 thousand of the
professional fees incurred and was primarily related to litigation between the
Company/Amacore and Ameriplan.  On July 7, 2009, the Companies were
able to settle the outstanding litigation noted above for $1.8 million by means
of a Mutual Compromise and Settlement Agreement of which $1.2 million was paid
by Amacore and of which $600 thousand was the future responsibility of the
Company and structured as a note payable.  If Company and Amacore were
not related parties or named parties of the lawsuit at the time of the
settlement, the outcome, and consequently, the loss incurred by the Company with
respect to this settlement may have been materially different.  As a
result of the settlement, the Company’s legal costs have been materially
reduced, which was the primary reason for the overall decrease in professional
fees of $207 thousand for the three months ended October 31, 2009 as compared to
the three months ended October 31, 2008.





Selling
and marketing expenses for the three months ended October 31, 2009 was $652
thousand, an increase of approximately $11 thousand as compared to the three
months ended October 31, 2008.  The slight increase is directly related to
various marketing initiatives undertaken to attract and recruit representatives
to the Company’s business opportunity.





Business
travel expenses for the three months ended October 31, 2009 were approximately
$54 thousand, a decrease of approximately $100 thousand as compared to the three
months ended October 31, 2008.  The decrease in travel expenses is a result
of the Company’s efforts to reduce non-essential costs.




21





Other
Expense:





Interest
expense





Interest
expense for the three months ended October 31, 2009 was approximately $28
thousand, compared to $0 for the same period in 2008.  The increase in
interest expense is attributable to the issuance of notes payables subsequent to
October 31, 2008.





Gain
on change in fair value of 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 months ended October 31, 2009 of approximately $4
thousand.  This gain is non-cash item not impacting operating cash
flows or results of operations. See Note 9– 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
months ended October 31, 2009.





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 $130 thousand for the three months ended
October 31, 2009.  No marketable securities existed during the three
months ended October 31, 2008.





Loss
on change in fair value of warrants





The
Company’s warrants are recorded at fair value.  For the three months
ended October 31, 2009, the loss attributed to the change in fair value of
warrants was approximately $4 million.  This loss is a non-cash item
not impacting operating cash flows or results of operations.  See
Note 9– 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 months ended
October 31, 2009.





Income
Taxes:





For the
three months ended October 31, 2009, the Company estimated approximately $10
thousand in Texas gross margin tax, an increase of $6 thousand as compared to
the three months ended October 31, 2008.  The increase is directly
related to the Company’s increased revenue between the two periods. Subsequent
to July 31, 2009, there has been no change in management's assessment that its
federal net operating loss carryforwards are not considered realizable.
Therefore, no income tax benefit has been recognized for the three months ended
October 31, 2009.





Net
loss:





The
Company’s net loss amounted to approximately $5.6 million for the three months
ended October 31, 2009 as compared to approximately $2.2 million net loss for
the three months ended October 31, 2008.   Although the Company
experienced and an increase in revenues and improvement in gross margin, the
increase in net loss is attributable to the non-cash losses recorded on the
Company’s warrants and marketable securities.





Loss
per common share:





Loss per
common share amounted to $0.10 for the three months ended October 31, 2009,
compared to $0.04 for the three months ended October 31, 2008,
respectively.








OFF
BALANCE SHEET ARRANGEMENTS





We do not
have any off balance sheet arrangements as of October 31, 2009.





LIQUIDITY
AND CAPITAL RESOURCES





The
following table compares our cash flows for the three month period ended October
31, 2009 to the corresponding prior period:





October
      31, 2009
            
            
            October
      31, 2008Net
      cash used in operating activities
            
            $
            (1,175,627
            )
            
            $
            (1,923,226
            )Net
      cash used in investing activities
            
            
            (770,000
            )
            
            
            (68,111
            )Net
      cash provided by financing activities
            
            
            1,406,782
            
            
            
            1,816,752Net
      change in cash
            
            $
            (538,845
            )
            
            $
            (174,585
            )






22










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 October 31, 20092010
              
              $
              80,1062011
              
              
              106,8082012
              
              
              106,8082013
              
              
              -2014
              
              
              -Thereafter
              
              
              -$
              293,722


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 $2 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
$2.5 million of outstanding notes payable as of October 31, 2009.





Item
3. Quantitative and Qualitative Disclosures About Market Risk





Not
applicable





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.





23





PART
II - OTHER INFORMATION








Item
1. Legal Proceedings





As of
October 31, 2009, 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
October 6, 2009 the company issued 2 million shares of Series B Convertible
Preferred Stock pursuant to a Securities Purchase Agreement dated October 6,
2009.  The Company received gross proceeds of $2 million from the
sale.  The securities were issued by the Company pursuant to Section
4(2) of the Securities Act.





Item
3. Defaults Upon Senior Securities





Not
applicable.





Item
4. Submission of Matters to a Vote of Security Holders.





None





Item
5. Other Information.





None











24





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).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).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).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).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)31.2
            Certification
      of the Co-Chief 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 Chief 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 2002





32.1
            Certification
      pursuant to Section 906 Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
      1350).








25





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:December
      15, 2009
            /s/
      Jay
      ShaferJay
      ShaferCo-Chief
      Executive OfficerDated:December
      15, 2009
            /s/
      Jason PostJason
      PostChief
      Financial Officer







































26





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).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).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).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).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)31.2
            Certification
      of the Co-Chief 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 Chief 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 2002





32.1
            Certification
      pursuant to Section 906 Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
      1350).









27