UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





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




For the
quarterly period ended March
31, 2010





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





Commission File No. 333-140633





UKARMA
CORPORATION


(Exact
name of registrant as specified in it charter)





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





499
North Canon Drive, Suite 308


Beverly Hills, CA
90210


(Address
of principal executive offices)





(310)
998-8909


(Registrant's
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes xNo o





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  o
            
            Accelerated
      filer oNon-accelerated
      filer o
            
            Smaller
      reporting company x


(Do not
check if a smaller reporting company)





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




APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each issuer's classes of common stock, as of
the latest practicable date:  52,794,482 issued and outstanding as of May
17  2010.










UKARMA
CORPORATION


TABLE OF
CONTENTS


TO
QUARTERLY REPORT ON FORM 10-Q


FOR
QUARTER ENDED MARCH 31, 2010




PagePART I
            FINANCIAL
      INFORMATIONItem
      1.
            Financial
      Statements
            
            1Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            2Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            6Item
      4.
            Controls
      and Procedures
            
            7PART
      II
            OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            
            7Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            7Item
      3.
            Defaults
      Upon Senior Securities
            
            7Item
      5.
            Other
      Information
            
            7Item
      6.
            Exhibits
            
            7Signatures
            
            8










PART
I - FINANCIAL INFORMATION





Item
1.  Financial Statements.





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




1


UKARMA
CORPORATION





BALANCE
SHEETS




As
      ofMarch
      31,
              
              
              December
      31,2010
              
              
              2009(Unaudited)
              
              
              (Audited)ASSETSCurrent
      AssetsCash
              
              $
              30,424
              
              
              $
              85Due
      from stockholder
              
              
              104,922
              
              
              
              46,172Merger
      and acquisition receivable
              
              
              100,000
              
              
              
              100,000Prepaid
      expenses
              
              
              67,326
              
              
              
              67,380Inventory
              
              
              18,125
              
              
              
              18,476Total
      Current Assets
              
              
              320,797
              
              
              
              232,113Property
      and equipment, net of accumulated depreciationof $11,020 for
      2010, and $9,742 for 2009
              
              
              16,964
              
              
              
              18,242Production
      costs, net of accumulated amortization of $366,818 for 2010, and $335,864
      for 2009
              
              
              252,267
              
              
              
              283,221TOTAL
      ASSETS
              
              $
              590,028
              
              
              $
              533,576LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
              
              $
              260,067
              
              
              $
              318,396Accrued
      expenses
              
              
              238,740
              
              
              
              176,546Notes
      payable to unrelated parties, including accrued interest of $441 for 2010,
      and $319 for 2009
              
              
              8,441
              
              
              
              10,819Total
      Current Liabilities
              
              
              507,248
              
              
              
              505,761Stockholders'
      EquityCommon
      stock, $0.001 par value; 100,000,000 shares authorized; 52,794,482 shares
      issued and outstanding
              
              
              52,795
              
              
              
              52,795Preferred
      stock, $0.001 par value; 20,000,000 shares authorized, none
      issued
              
              
              -
              
              
              
              -Paid-in
      capital
              
              
              8,078,617
              
              
              
              7,807,670Accumulated
      deficit
              
              
              (8,048,632
              )
              
              
              (7,832,650
              )Total
      Stockholders' Equity
              
              
              82,780
              
              
              
              27,815TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              590,028
              
              
              $
              533,576
  The
accompanying notes are an integral part of these financial
statements
  F-1
  UKARMA
CORPORATION
 
 STATEMENTS
OF OPERATIONS (UNAUDITED)
 For
the three months ended March 31, 2010 and 2009





For
      three months endedMarch
      31,2010
              
              
              2009Sales
              
              $
              709
              
              
              $
              13,431Cost
      of  Sale
              
              
              351
              
              
              
              773Gross
      Profit
              
              
              358
              
              
              
              12,658Selling,
      General and Administrative Expenses
              
              
              211,700
              
              
              
              530,901Operating
      Loss
              
              
              (211,342
              )
              
              
              (518,243
              )Other
      Income (Expense)Interest
      Expense
              
              
              (3,840
              )
              
              
              (7,499
              )Total
      Other Income (Expense)
              
              
              (3,840
              )
              
              
              (7,499
              )Net
      Loss before Income Taxes
              
              
              (215,182
              )
              
              
              (525,742
              )Provision
      for Income Taxes
              
              
              800
              
              
              
              800Net
      Loss
              
              $
              (215,982
              )
              
              $
              (526,542
              )Loss
      Per Share-Basic and Diluted
              
              $
              (0.01
              )
              
              $
              (0.02
              )Weighted
      Average Number of Shares
              
              
              52,794,482
              
              
              
              31,764,984





The
accompanying notes are an integral part of these financial
statements
  F-2


UKARMA
CORPORATION
 
 STATEMENT
OF CASH FLOWS (UNAUDITED)
 For
the three months ended March 31, 2010, and 2009
  For
      three months endedMarch
      31,2010
                
                
                2009Cash
      Flow from Operating Activities:Net
      loss
                
                $
                (215,982
                )
                
                $
                (526,542
                )Adjustment
      to reconcile net loss to net cash used by operating
      activities:Depreciation
                
                
                1,278
                
                
                
                1,220Amortization
      of production costs
                
                
                30,954
                
                
                
                30,954Issuance
      of stock for services
                
                
                -
                
                
                
                280,506Stock
      option expenses
                
                
                47,947
                
                
                
                51,511(Increase)
      Decrease in:Trade
      accounts receivable
                
                
                -
                
                
                
                309Employee
      advances
                
                
                -
                
                
                
                19,532Prepaid
      expenses
                
                
                54
                
                
                
                3,054Inventory
                
                
                351
                
                
                
                3,395Deposit
                
                
                -
                
                
                
                6,380Increase
      (Decrease) in:Accounts
      payable
                
                
                (58,329
                )
                
                
                53,292Accrued
      expenses
                
                
                62,316
                
                
                
                62,288Net
      Cash Used by Operating Activities
                
                
                (131,411
                )
                
                
                (14,101
                )Cash
      Flow from Investing Activities:Due
      from stockholder
                
                
                (58,750
                )
                
                
                -Purchase
      of property and equipment
                
                
                -
                
                
                
                (111,107
                )Net
      Cash Used by Investing Activities
                
                
                (58,750
                )
                
                
                (111,107
                )Cash
      Flow from Financing Activities:Proceeds
      from notes payable
                
                
                -
                
                
                
                15,000Repayments
      to note payable
                
                
                (2,500
                )
                
                
                (29,600
                )Proceeds
      from pending mergers
                
                
                223,000
                
                
                
                -Proceeds
      from sale of stock
                
                
                -
                
                
                
                139,000Net
      Cash Provided by Financing Activities
                
                
                220,500
                
                
                
                124,400Net
      Increase (Decrease) in Cash
                
                
                30,339
                
                
                
                (808
                )Cash
      Balance at Beginning of Period
                
                
                85
                
                
                
                1,781Cash
      Balance at End of Period
                
                $
                30,424
                
                
                $
                973Supplemental
      Disclosures:Interest
      Paid
                
                $
                3,718
                
                
                $
                -Taxes
      Paid
                
                $
                -
                
                
                $
                -


The
accompanying notes are an integral part of these financial
statements




F-3
 
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS


NOTE
1 – NATURE OF OPERATIONS





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





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





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





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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





Presentation of Interim
Information: The financial information at March 31, 2010 and for the
three months ended March 31, 2010 and 2009 is unaudited but includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial information set
forth herein, in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information.
Accordingly, such information does not include all of the information and
footnotes required by GAAP for annual financial statements. For further
information refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2009.





The
balance sheet as of December 31, 2009 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by U.S. GAAP for complete financial
statements.





The
results for the three months ended March 31, 2010 may not be indicative of
results for the year ending December 31, 2010 or any future
periods.





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





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




F-4
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS





NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)





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





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





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





Property and
Equipment: Property and equipment are valued at cost. Maintenance and
repair costs are charged to expenses as incurred. Depreciation is computed on
the straight-line method based on the estimated useful lives of the assets,
generally 5 to 7 years. Depreciation expense for the three months ended March
31, 2010 and 2009 was $1,278 and $1,220, respectively.





Patents: The Company
capitalizes patent costs as incurred, excluding costs associated with Company
personnel, relating to patenting its technology. The majority of capitalized
costs represent legal fees related to a patent application. In 2009, the Company
determined that a patent application is not likely to be awarded or elects to
discontinue payment of required maintenance fees for a particular patent, the
Company, at that time, records as expense the capitalized amount of such patent
application or patent.





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





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





Advertising Costs:
All costs associated with advertising and promoting the Company’s products and
services are expensed as incurred. Advertising expense for the three months
ended March 31, 2010 was negligible. Advertising expense for the three months
ended March 31, 2009 was $9,035.





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





Stock Based
Compensation:  Effective January 1, 2006, the Company adopted
the fair value recognition provisions of FASB Statement No. 123(R),
“Shares-Based Payment” (SFAS 123R), using the modified-prospective-transition
method.  Under that transition method, compensation cost recognized in
2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006 based of the grant date fair value
calculated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for all share-based payments granted subsequent to December
31, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R).  As a result of adopting SFAS 123(R) on
January 1, 2006, the Company reorganized pre-tax compensation expense related to
stock options of $47,947 and $51,511 for three months ended March 31, 2010 and
2009, respectively.





F-5
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS





NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)





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





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





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





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




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




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





F-6
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS





NOTE
3 – GOING CONCERN





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





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





NOTE
4 – PREPAID EXPENSES





Prepaid
expenses consisted of the following:





March
      31,
              
              
              December
      31,2010
              
              
              2009Prepaid
      Royalty
              
              $
              67,326
              
              
              $
              67,380Total
      Prepaid Expenses
              
              $
              67,326
              
              
              $
              67,380


On April
25, 2008, the Company entered into an agreement with a coauthor for its diet and
nutrition book that it is self publishing and plans to market direct to
customers.  Pursuant to this agreement, the Company paid the coauthor
a $10,000 advance against future royalties.  The Company will pay the
coauthor a 5% royalty if uKarma acts as the publisher or a 2 1⁄2% royalty if
uKarma engages a third party publisher after the $10,000 advance is
recouped.





On March
26, 2008, the Company entered into an agreement with an author to write a book
related to diet and nutrition that the Company plans to self publish and market
directly to consumers. Pursuant to the agreement, the author will be paid a
$40,000 advance on royalties with the following arrangement: $15,000 payable
upon execution of the agreement; $15,000 payable on or before the completion and
delivery of the first 50% of the book; and $10,000 on full completion, delivery,
and acceptance of the book.  The $40,000 advance on royalties is based on
the first 50,000 books sold. The author will receive a 5% royalty on sales above
50,000 books sold where the Company acts as the publisher and 2 1/2% royalty on
sales above 50,0000 books sold if the Company engages a third party
publisher.  As of March 31, 2010, no advance payment has been
paid.





On April
19, 2006, the Company entered into an agreement with a consultant to provide
consulting and advisory services for the Company, to appear in the Company’s
yoga, health, and wellness film productions, to assist in scriptwriting for the
projects such as classes, interviews and introductions, to participate in the
projects rehearsals, and to assist in marketing and promoting the projects.
Accordingly, the Company shall pay a royalty of 8% on the first $300,000 and 10%
on above $300,000 on all gross revenue, net of returns, refunds, chargebacks,
taxes, and shipping and handling charges. As of March 31, 2010, there is a
balance of $57,326 after advancing $70,000 and deducting royalties to the 2010
sales. Future royalty obligations will be deducted from the current
balance.





F-7
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS




NOTE
5 – PROPERTY AND EQUIPMENT





Property
and Equipment consisted of the following:





March
      31,
              
              
              December
      31,2010
              
              
              2009Furniture
      & Fixtures
              
              $
              15,459
              
              
              $
              15,459Machinery
      & Equipment
              
              
              12,524
              
              
              
              12,52527,984
              
              
              
              27,984Accumulated
      Depreciation
              
              
              (11,020
              )
              
              
              (9,742
              )Property
      and Equipment, net
              
              $
              16,964
              
              
              $
              18,242


NOTE
6 – PRODUCTION COSTS





The
Company capitalized costs incurred for recording seven fitness videos’ master
copies.  As of March 31, 2010, total costs of $619,085 were
capitalized.  All costs consisted of in-production costs
only.





Commenced
on the second quarter of 2007, the costs were amortized on a straight-line
method over the estimated life of the recorded performances, which is five
years.  The Company recorded an amortization expense of $30,954 and
$30,954 for the three months ended March 31, 2010 and 2009,
respectively.





NOTE
7 – ACCRUED EXPENSES





Accrued
expenses consisted of the following:





March
      31,
              
              
              December
      31,2010
              
              
              2009Accrued
      Professional Fees
              
              $
              19,770
              
              
              $
              28,700Accrued
      Salaries
              
              
              217,370
              
              
              
              146,246Accrued
      Income Tax
              
              
              1,600
              
              
              
              1,600Total
      Accrued Liabilities
              
              $
              238,740
              
              
              $
              176,546




NOTE
8 – NOTES PAYABLE





The notes
payable to unrelated parties bear interest at 6% per annum and are due on one
year anniversary of May 2009 and September 2009. As of March 31, 2010, the
balance was $8,441 including accrued interest of $441.





F-8
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS




NOTE
9 – STOCKHOLDERS’ EQUITY





During
the three months ended March 31, 2010, the Company did not issue any
shares.





During
the three months ended March 31, 2009, the Company received $139,000 and sold
1,288,266 shares of the Company’s common stock at a price of $0.06 to $0.15 per
share in a self-private placement offering. The Board of Directors also approved
the issuance aggregate of 2,425,403 shares of the Company’s common stock to
various providers in consideration of their services to the Company. The shares
were valued and charged to operations based on the closing trading price on the
grant date or $280,506 of total.





NOTE
10 – MERGER AND ACQUISITION





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





Under the
Agreement, Merger Sub would merge with GCC such that following the merger
(“Merger” or “Transaction”), GCC would be a wholly owned subsidiary of the
Company.  As consideration for the transaction, the Company would
issue to GCC security holders that number of shares of common stock on a fully
diluted basis (“Common Shares”) such that following such issuance, GCC security
holders would hold 95% of the outstanding Company Common Shares on a fully
diluted basis.  GCC common stock would be exchanged for the Company
Common Shares.  GCC’s convertible preferred stock, options, and
warrants would be exchanged for equivalent the Company’s preferred stock,
options, and warrants. In addition, GCC agreed to pay the Company an amount
equal to $275,000.





On
December 22, 2009, the Company amended the Merger Agreement with GCC. Under the
amended agreement, the closing date has changed to May 15, 2010. GCC has also
agreed to pay the Company an amount equal to $475,000 (“Cash Payment”) and
replaced the previous agreement amount of $275,000. As of March 31, 2010,
$375,000 of the Cash Payment has been paid to uKarma as a non-refundable deposit
along with $23,500 of expenses. The Company recorded a receivable of
$100,000 for the installment that was due on March 31, 2010.





F-9
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS




NOTE
11 – NET LOSS PER SHARE





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





For
      three months endedMarch
      31,Numerator:
              
              2010
              
              
              2009Net
      Loss
              
              $
              (215,982
              )
              
              $
              (526,542
              )Denominator:Weighted
      Average of Common Shares
              
              
              52,794,482
              
              
              
              31,764,984Basic
      and Diluted Net Loss per Share
              
              $
              (0.01
              )
              
              $
              (0.02
              )




There
were no dilutive securities for the three months ended March 31, 2010 and March
31, 2009.





There
were also 11,777,000, 11,777,000 shares out-of-money stock options and warrants
excluded from the calculation of diluted net loss per share for the three months
ended March 31, 2010 and 2009, because their exercise prices were greater than
the average fair market price of the common stock.





NOTE
12 – 2006 STOCK OPTION PLAN





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





A summary
of the status of stock options issued by the Company as of March 31, 2010 and
2009 is presented in the following table:





2010
              
              
              2009Number
      of
                Shares
              
              
              Weighted
      Average
                Exercise
      Price
              
              
              Number
      of
                Shares
              
              
              Weighted
      Average
                Exercise
      PriceOutstanding
      at beginning of year
              
              
              5,295,000
              
              
              $
              0.20
              
              
              
              5,295,000
              
              
              $
              0.20Granted
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Exercised/Expired/Cancelled
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at end of period
              
              
              5,295,000
              
              
              $
              0.20
              
              
              
              5,295,000
              
              
              $
              0.20Exercisable
      at end of period
              
              
              4,765,000
              
              
              $
              0.20
              
              
              
              3,708,334
              
              
              $
              0.20
  F-10
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS





NOTE
12 – 2006 STOCK OPTION PLAN (continued)





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





2010
              
              
              2009Weighted
      average fair value per option granted
              
              
              N/A
              
              
              
              N/ARisk-free
      interest rate
              
              
              N/A
              
              
              
              N/AExpected
      dividend yield
              
              
              N/A
              
              
              
              N/AExpected
      lives
              
              
              N/A
              
              
              
              N/AExpected
      volatility
              
              
              N/A
              
              
              
              N/A


The
following table sets forth additional information about stock options
outstanding at March 31, 2010:




Range
      of Exercise Prices
              
              
              Options
      Outstanding
              
              
              Weighted
      Average Remaining Contractual Life
              
              
              Weighted
      Average
                Exercise
      Price
              
              
              Options
      Exercisable$0.20–$0.35
              
              
              
              5,295,000
              
              
              
              5.51
              
              
              $
              0.20
              
              
              
              4,765,0005,295,000
              
              
              
              5.51
              
              
              $
              0.20
              
              
              
              4,765,000


As of
March 31, 2010, there was $49,627 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
Plan.  That cost is expected to be recognized over a weighted average
period of 0.29 years.





As of
March 31, 2009, there was $241,415 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
Plan.  That cost is expected to be recognized over a weighted average
period of 1.24 years.





NOTE
13 – STOCK WARRANTS





As of
March 31, 2010, the Company had warrants to purchase 6,482,000 shares of the
Company’s common stocks. The warrants are exercisable from $0.25 to $1.00 and
will expire through October 2012.





No stock
warrant expense was recognized for the three ended March 31, 2010 and March 31,
2009.





NOTE
14 – RELATED PARTY TRANSACTIONS





As of
March 31, 2008, the Company had an advance of $104,923 due from the Company’s
CEO. The Company also had accrued salary of $201,923 payable to the CEO. The
advance will be netted against the accrued salary payable when it is reported to
the Internal Revenue Service.





F-11
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL
STATEMENTS




NOTE
15 – LEGAL DISPUTE





On June
17, 2009, Jeffrey Fischer (the “Landlord”) filed a complaint against uKarma
Corporation and Bill Glaser, our Chief Executive Officer, in the Los Angeles
Superior Court in Los Angeles, California. The Landlord claimed that we owe back
rent on the lease of our yoga and fitness studio in Sherman Oaks, California and
sought to recover $222,859.97 and evict us from the subject property. We denied
liability and contend that the Landlord never reimbursed us for a tenant
improvement allowance of $165,000 pursuant to the lease along with other
breaches by the Landlord. The judge in the cased denied a writ of attachment
motion that was submitted by the Landlord.  A settlement could not be
reached between the parties, and as such the Company vacated the property on
September 30, 2009.   On December 2, 2009, the Landlord filed a First
Amended complaint naming the Company, Mr. Glaser, and Fred Tannous, a director
of the Company, and a number of unrelated parties and adding additional causes
of actions and damages totaling $1,066,660.00.  The Company filed a demurer
that was heard and sustained by the court on March 2, 2010.  The judge
provided the Landlord with the right to amend the complaint within 45 days from
March 2, 2010.  The Landlord filed a Second Amended Complaint on April 23,
2010, one week after the judge’s allowed timeframe.  The Company filed
a demurer and Motion to Strike that will be heard by the court on July 15,
2010.  If any part of the complaint survives the judge’s ruling to our
demurer and Motion to Strike, we plan to defend such claims that we believe are
false and frivolous along with initiating legal action against the Landlord for
full recovery of all tenant improvements it incurred to date along with other
damages.





F-12


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.




Forward
Looking Statements





The
following discussion and analysis of the results of operations and financial
condition of uKarma Corporation should be read in conjunction with our financial
statements as of and for the quarter ended March 31, 2010 and the notes to those
financial statements that are included elsewhere in this report.  Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations, and intentions.  Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Forward-Looking Information and Business sections in this
report.  We use words such as “anticipate,” “estimate,” “plan,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking
statements.




Overview





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





We
incurred net losses of approximately $122,488 in 2005, $1,397,922 in 2006,
$1,849,636 in 2007, 2,677,092 in 2008 and $1,743,449 in 2009. As of December 31,
2009, we had an accumulated deficit of $7,832,650.  As a company in
the early stage of development, our limited history of operations makes
prediction of future operating results difficult. We believe that
period-to-period comparisons of our operating results should not be relied on as
predictive of our future results.




In May
2007, we began to market and sell our initial Xflowsion yoga/fitness DVD
products.We
believe that our success depends upon our ability to successfully produce,
market, and distribute such products along with having the necessary capital to
operate and grow our business. After test-marketing the initial version of our
infomercial, we recognized the need to shoot additional footage and to reedit it
before airing it again. Due to capital constraints, we had to wait until
our registration statement was declared effective by the Securities and
Exchange Commission in order to raise capital. Our registration statement
was declared effective on August 9, 2007, and we focused the remainder of 2007
raising capital and preparing to update our infomercial and implement our
marketing strategy in 2008.





We began
airing the reedited version of our Xflowsion infomercial nationally on June 27,
2008.  Infomercials typically go through a period of on-air testing
and other means such as focus groups to obtain feedback that can be used to make
edits designed to elicit the greatest consumer response.  We went
through such a process and conducted a focus group during the 3 rd quarter of
2008.  We had a very high percentage (approximately 80%) of
participants who were interested in buying our Xflowsion DVD
series.  Overall, the focus group feedback revealed a strong interest
in the Xflowsion workout and instructor Eric Paskel and confirmed our potential
for Xflowsion to be a big seller.   We also previously received strong
media coverage regarding our Xflowsion brand.  Xflowsion has been
profiled in People Magazine, People.com, Fitness Magazine, TMZ, The National
Enquirer, and many other publications. We have been encouraged by the response
to our Xflowsion DVD series in the media and with consumers and via our past
marketing efforts, and, when in a better capital position, we plan to
reinstitute our marketing initiatives.  It has also been indicated to
us by executives of our competitors and other industry contacts that most
successful fitness DVD infomercials take many incarnations before they become
successful.





During
2008, we entered into a lease to develop and operate a yoga and fitness studio
in Sherman Oaks, CA that we expected to be open in late 2008 or early
2009.  Due to a number of construction delays that we believe were in
large part caused by the breaches and interference of the landlord, and after
spending approximately $500,000 in tenant improvements, we were unable to open
and operate that component of our business.  During that time period,
the U.S. and global economic recession and related turmoil and volatility in the
equity markets along with our financial results made if very difficult to raise
additional capital.  As such, our marketing efforts for our Xflowsion
DVD series and, in particular, the editing and re-airing of our infomercial has
been delayed until such time that we are sufficiently
capitalized.  The ongoing economic uncertainty in general and current
economic condition of the Company may continue to impact our ability to raise
capital and successfully market and sell our Xflowsion products along with
creating and marketing other products.  This could negatively impact
our future operating performance and cash flow.





The
personality of our Xflowsion DVD series, Eric Paskel, appeared on the CBS
reality show, The Amazing Race, which started airing in September
2009.  Prior to the airing of the first episode of that season, we
engaged an online marketing firm to market our Xflowsion DVD series on a CPA
(Cost per Acquisition) basis.  We also explored and planned many other
marketing initiatives in order to leverage the large audience that was going to
be exposed to Eric Paskel.  While it was possible that Mr. Paskel
could have been eliminated on the first show, the audience of millions was a big
opportunity to leverage into potential Xflowsion DVD
sales.  Unfortunately, Mr. Paskel was eliminated at the beginning of
the first episode and, as such, our marketing initiatives relating to that
exposure were put on hold, which affected our sales.  During the first
quarter of 2010, we did not initiate any marketing for our products due to
capital constraints.




2





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





In
addition, we entered into an amendment to the merger agreement in which Galen
has agreed to pay the Company an amount equal to $475,000 (“Cash Payment”). As
of March 31, 2010, $375,000 of the Cash Payment had already been paid to the
Company as a non-refundable deposit along with $23,500 worth of
expenses.





Our
obligations to close the Transaction will be subject to certain conditions of
the other party that must be satisfied or waived, including, among other things,
Galen shall pay the remaining portion of the Cash Payment and Galen shareholders
shall vote to approve the merger transaction.  Galen’s obligations to
close the Transaction will be subject to certain conditions of the other party
that must be satisfied or waived, including, among other things, Galen shall
have certain persons appointed as Company officers and directors.  The
Agreement may be terminated by any party if the Closing does not occur by May
15, 2010 provided such terminating party is not in breach of this
Agreement.  The Company has been informed by Galen’s management that
their audit is approximately 2-4 weeks away from being completed.  As
such, we are in negotiations with Galen to extend the timeframe of the Closing
along with negotiating other terms that we expect to be favorable to our
shareholders..  However, there can be no assurance that Galen will
complete their audit in a timely fashion, pay the remaining cash balance
currently due, or that the transaction will close by a certain
date.





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





Along
with converting his loans to the Company and $144, 231 of deferred compensation
into common stock, our CEO, Bill Glaser, continues to have his salary deferred
until the Company can better afford to pay it.





Critical
Accounting Policies and Estimates




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





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





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





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





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




3





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





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





Property and
Equipment: Property and equipment are valued at cost. Maintenance and
repair costs are charged to expenses as incurred. Depreciation is computed on
the straight-line method based on the estimated useful lives of the assets,
generally 5 to 7 years.





Patents: The Company
capitalizes patent costs as incurred, excluding costs associated with Company
personnel, relating to patenting its technology. The majority of capitalized
costs represent legal fees related to a patent application. In 2009, the Company
determined that a patent application is not likely to be awarded or elects to
discontinue payment of required maintenance fees for a particular patent, the
Company, at that time, records as expense the capitalized amount of such patent
application or patent.





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





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





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





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





Stock Based
Compensation:  Effective January 1, 2006, the Company adopted
the fair value recognition provisions of FASB Statement No. 123(R),
“Shares-Based Payment” (SFAS 123R), using the modified-prospective-transition
method.  Under that transition method, compensation cost recognized in
2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006 based of the grant date fair value
calculated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for all share-based payments granted subsequent to December
31, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R).





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





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





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





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




4





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





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





Results
of Operations





Net sales.
For the three
months ended March 31, 2010, net sales decreased 95% relative to the three
months ended March 31, 2009, from $13,341 to $709.  The decrease from
the first quarter of 2009 to the first quarter of 2010 is primarily attributable
to capital constraints that have caused us not to market and promote our
products.




Cost of
sales. Cost
of sales for the three months ended March 31, 2010 was $351 compared to $773 for
the three months ended March 31, 2009, a decrease of approximately
55%.   The decrease in our cost of sales is attributable to lower
sales with constant fixed costs.





Gross
profit.  Gross profit for the three months ended March 31, 2010 was
$358 compared to $12,658 for the three months ended March 31, 2009, representing
gross margins of approximately 50% and 94%, respectively.  The
decrease is attributable to lower sales with constant fixed costs.





Operating
expenses.
For the three months ended March 31, 2010, total operating expenses were
$211,790, while total operating expenses for the three months ended March 31,
2009 were $530,901, representing a decrease of approximately 60%.  
The decrease in operating expenses is due to a lack of marketing expenses and
costs related to the construction of a fitness studio in 2009.




Net income
(loss).  We had net loss of $215,982 for the three months ended
March 31, 2010 compared to a net loss of $526,542 for the three months ended
March 31, 2009.





LIQUIDITY





Cash
Flows





Net cash
used in operating activities was $131,411 for the three months ended March 31,
2010 while net cash used in operating activities was $14,101 for the three
months ended March 31, 2009.  The decrease in net cash flow from
operating activities between the two quarters was mainly due to a decrease in
Accounts Payable and stock issued for services along with a lower net
loss.





Net cash
used in investing activities was $58,750 for the three months ended March 31,
2010 while net cash used in investing activities was $111,107 for the three
months ended March 31, 2009.  The increase in net cash flow from
investing activities between the periods was due to no property and equipment
expense in 2010 and a note due from a shareholder.





Net cash
provided by financing activities was $220,500 for the three months ended March
31, 2010 while net cash provided by financing activities was $124,400 for
the three months ended March 31, 2009.  The increase in net cash flow
from financing activities was mainly due to proceeds from our pending
merger in 2010 compared to capital raised in 2009.




CAPITAL
RESOURCES





As
ofMarch 31, 2010,
we had working capital of $(186,451).  To satisfy current working
capital needs, our CEO, Bill Glaser, loaned funds to the Company along with
raising capital via the sale of common stock as well as receiving capital from
its planned merger with Galen Capital.  Until we raise sufficient
capital via the sale of our common stock, there is no guarantee that we will be
able to meet current working capital needs if we do not receive additional
infusions of cash via loans, stock sales, revenues, or other
sources.  We have fully incurred the production cost of our Xflowsion
DVD series and last version of our infomercial, and plan to make financial
investments in marketing of our Xflowsion DVD series for the next six
months.  We expect to incur substantial losses over the next two
years.




5





We
estimate that our expenses over the next 12 months beginning on April 1, 2010
will be approximately $860,000 as follows:





General
      and Administrative
            
            $
            300,000Infomercial
      Production
            
            
            150,000Inventory
            
            
            50,000Media
      (Airtime)
            
            
            50,000Marketing/Publicity
            
            
            150,000Legal
            
            
            75,000DVD/CD
      Production
            
            
            50,000Accounting
            
            
            35,000





As of
March 31, 2010, we had cash equivalents of $30,424.  We believe that
we need approximately an additional $830,000 to meet our capital requirements
over the next 12 months.  Our intention is to obtain this money
through debt and/or equity financings.





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




Our
independent certified public accountants have stated in their report dated April
9, 2010 included with our financial statements as of and for the fiscal year
ended December 31, 2009 filed with our Annual Report on Form 10-K with the
Commission on April 15, 2010 that we have incurred operating losses from our
inception and that we are dependent upon our ability to meet our future
financing requirements and the success of future operations.  These
factors raise substantial doubts about our ability to continue as a going
concern.





CONTRACTUAL
OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS





Contractual
Obligations





We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash
flows.




The
following table summarizes our contractual obligations as of March 31, 2010, and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





Payments
      Due by PeriodTotal
            
            
            Less
      than
              1
      year
            
            
            1-3
      Years
            
            
            3-5
      Years
            
            
            5
      years +Contractual
      Obligations:Bank
      Indebtedness
            
            $
            ―
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            ―Other
      Indebtedness
            
            
            8,441
            
            
            
            8,441
            
            
            
            ―
            
            
            
            ―
            
            
            
            ―Operating
      Leases
            
            
            ―
            
            
            
            ―
            
            
            
            ―
            
            
            
            ―
            
            
            
            ―Totals:
            
            $
            8,441
            
            
            $
            8.441
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            ―





Off-Balance
Sheet Arrangements





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




Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.





Not
applicable.




6





Item
4.  Controls and Procedures.




Disclosure
Controls and Procedures





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





Changes
in Internal Control over Financial Reporting





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




PART
II - OTHER INFORMATION





Item
1.  Legal Proceedings.





On June
17, 2009, Jeffrey Fischer (the “Landlord”) filed a complaint against uKarma
Corporation and Bill Glaser, our Chief Executive Officer, in the Los Angeles
Superior Court in Los Angeles, California. The Landlord claimed that we owe back
rent on the lease of our yoga and fitness studio in Sherman Oaks, California and
sought to recover $222,859.97 and evict us from the subject property. We denied
liability and contend that the Landlord never reimbursed us for a tenant
improvement allowance of $165,000 pursuant to the lease along with other
breaches and interferences by the Landlord. The judge in the case denied a writ
of attachment motion that was submitted by the Landlord.  A settlement
could not be reached between the parties, and as such the Company vacated the
property on September 30, 2009.   On December 2, 2009, the Landlord
filed a First Amended complaint naming the Company, Mr. Glaser, and Fred
Tannous, a director of the Company, and a number of unrelated parties and adding
additional causes of actions and damages totaling $1,066,660.00.  The
Company filed a demurer that was heard and sustained by the court on March 2,
2010.  The judge provided the Landlord with the right to amend the
complaint within 45 days from March 2, 2010.  The Landlord filed a Second
Amended Complaint on April 23, 2010, one week after the judge’s allowed
timeframe.  We filed a demurer and Motion to Strike that will be heard
by the court on July 15, 2010.  If any part of the complaint survives
the judge’s ruling to our demurer and Motion to Strike, we plan to defend such
claims that we believe are false and frivolous along with initiating legal
action against the Landlord for full recovery of all tenant improvements it
incurred to date along with other damages.




Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.





None.




Item
3.  Defaults upon Senior Securities.





None.




Item
5.  Other Information.




(a)
            None.





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





Item
6.  Exhibits.





Exhibit
              Number
            
            Description3.1
            
            Amended
      and Restated Certificate of Incorporation, as currently in effect
      (1)3.2
            
            Bylaws,
      as currently in effect (1)31.1
            
            Section 302
      Certification by the Corporation’s Chief Executive Officer
    *31.2
            
            Section 302
      Certification by the Corporation’s Chief Financial Officer
    *32.1
            
            Section 906
      Certification by the Corporation’s Chief Executive Officer
    *32.2
            
            Section 906
      Certification by the Corporation’s Chief Financial Officer
    *





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




7


SIGNATURES





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




UKARMA
      CORPORATION(Registrant)Date:
      May 17, 2010
            By:
            /s/
      Bill GlaserBill
      GlaserChief
      Executive Officer and President
              (Principal
      ExecutiveOfficer)
      and
              Interim
      Chief Financial Officer
              (PrincipalFinancial
      and Accounting Officer)





8