**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**


(Mark
      One)





**x**
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED**September 30, 2008**





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





**Commission
      File No.** **333-140633**





**UKARMA
                CORPORATION**(Exact
                name of registrant as specified in it
                charter)





**Nevada**
            
            **68-048-2472**(State
                or other jurisdiction of incorporation or
            
            (IRS
                Employer Identificationorganization)
            
            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 o No x




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


Large
                  Accelerated filero
              Non-Accelerated
                  FileroAccelerated
                  Filero
              Smaller
                  Reporting Companyx


The
      registrant is a shell company (as defined by Rule 12b-2 of the Exchange
      Act). Yes o No x




APPLICABLE
      ONLY TO CORPORATE ISSUERS:





Indicate
      the number of shares outstanding of each issuer's classes of common stock,
      as of
      the latest practicable date: 25,235,950 issued and outstanding as of
      November 15, 2008.









**UKARMA
      CORPORATION**


TABLE
      OF
      CONTENTS


TO
      QUARTERLY REPORT ON FORM 10-Q


FOR
      PERIOD ENDED SEPTEMBER 30, 2008


**Page****PART
                  I**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Financial
                  Statements
              1Balance
                  Sheets
              1Statements
                  of Operations
              2Statements
                  of Cash Flows
              3Notes
                  to Financial Statements
              4Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              12Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              17Item
                  4.
              Controls
                  and Procedures
              17**PART
                  II**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              18Item
                  1A.
              Risk
                  Factors
              18Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              18Item
                  3.
              Defaults
                  Upon Senior Securities
              18Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              18Item
                  5.
              Other
                  Information
              18Item
                  6.
              Exhibits
              18**Signatures**
              21**Exhibits**









**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1.**  **FINANCIAL
      STATEMENTS**





**UKARMA
      CORPORATION**





**BALANCE
      SHEETS**





As
                    of**September
                    30,**
                
                December
                    31,**2008**
                
                2007**(Unaudited)**
                
                (Audited)ASSETSCurrent
                    AssetsCash
                
                **$**
                **96,571**
                
                $
                483,564Accounts
                    receivable
                
                
                **1,965**
                
                
                -Prepaid
                    expenses
                
                
                **79,357**
                
                
                55,146Inventory
                
                
                **19,933**
                
                
                23,547Payroll
                    tax refund receivable
                
                
                **7,159**
                
                
                -Total
                    Current Assets
                
                
                **204,985**
                
                
                562,257Property
                      and equipment, net of accumulated depreciation of $3,770 for
                      2008, and
                      $1,929 for 2007
                
                
                **139,600**
                
                
                10,711Other
                    AssetsProduction
                      costs, net of accumulated amortization of $181,093 for 2008,
                      and $99,393
                      for 2007Deposit
                
                
                **31,791**
                
                
                3,734Patent
                
                
                **10,358**
                
                
                10,358Total
                    Other Assets
                
                
                **480,141**
                
                
                608,801TOTAL
                    ASSETS
                
                **$**
                **824,726**
                
                $
                1,181,769LIABILITIES
                    AND STOCKHOLDERS' EQUITYCurrent
                    LiabilitiesAccounts
                    payable
                
                **$**
                **191,009**
                
                $
                56,987Accrued
                    expenses
                
                
                **53,059**
                
                
                33,288Notes
                    payable to related party
                
                
                **148,630**
                
                
                183,631Total
                    Current Liabilities
                
                
                **392,698**
                
                
                273,906Stockholders'
                    EquityCommon
                      stock, $0.001 par value; 100,000,000 shares authorized; 24,989,221
                      and
                      20,611,406 shares issue and outstanding in 2008 and 2007,
                      respectively
                
                
                **24,989**
                
                
                20,611Preferred
                      stock, $0.001 par value; 20,000,000 shares authorized,none
                      issued
                
                
                **-**
                
                
                -Paid-in
                    capital
                
                
                **5,836,481**
                
                
                4,152,161Stock
                    subscriptions
                
                
                **-**
                
                
                147,200Accumulated
                    deficit
                
                
                **(5,429,442**
                **)**
                
                (3,412,109
                )Total
                    Stockholders' Equity
                
                
                **432,028**
                
                
                907,863TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY
                
                **$**
                **824,726**
                
                $
                1,181,769




**The
        accompanying notes are an integral part of these unaudited financial
        statements**




1




**UKARMA
        CORPORATION**
 
 **STATEMENTS
        OF CASH FLOWS (Unaudited)**
 **For
        the nine months ended September 30, 2008 and 2007**
 
 **For
                    three months**
                
                **For
                    nine months****ended
                    September 30,**
                
                **ended
                    September 30,****2008**
                
                2007
                
                **2008**
                
                2007Sales
                
                **$**
                **70,215**
                
                $
                19,343
                
                **$**
                **75,637**
                
                $
                75,366Cost
                    of Sale
                
                
                **3,340**
                
                
                4,322
                
                
                **3,614**
                
                
                22,624Gross
                    Profit
                
                
                **66,875**
                
                
                15,021
                
                
                **72,023**
                
                
                52,742Selling,
                    General and Administrative Expenses
                
                
                **511,023**
                
                
                449,080
                
                
                **2,079,374**
                
                
                1,234,689Operating
                    Loss
                
                
                **(444,148**
                **)**
                
                (434,059
                )
                
                **(2,007,351**
                **)**
                
                (1,181,947
                )Other
                    Income (Expenses)Gain
                    on Sale of Securities
                
                
                **-**
                
                
                -
                
                
                **-**
                
                
                3,279Interest
                    Expense
                
                
                **(2,769**
                **)**
                
                (113,101
                )
                
                **(9,182**
                **)**
                
                (125,271
                )Total
                    Other Income (Expense)
                
                
                **(2,769**
                **)**
                
                (113,101
                )
                
                **(9,182**
                **)**
                
                (121,992
                )Net
                    Loss before Income Taxes
                
                
                **(446,917**
                **)**
                
                (547,160
                )
                
                **(2,016,533**
                **)**
                
                (1,303,939
                )Provision
                    for Income Taxes
                
                
                **-**
                
                
                -
                
                
                **800**
                
                
                800Net
                    Loss
                
                **$**
                **(446,917**
                **)**
                $
                (547,160
                )
                **$**
                **(2,017,333**
                **)**
                $
                (1,304,739
                )Loss
                    Per Share-Basic and Diluted
                
                **$**
                **(0.02**
                **)**
                $
                (0.03
                )
                **$**
                **(0.09**
                **)**
                $
                (0.08
                )Weighted
                    Average Number of Shares
                
                
                **25,395,786**
                
                
                16,486,984
                
                
                **22,999,257**
                
                
                16,486,984
   The
        accompanying notes are an integral part of
        these unaudited financial statements


2
  **UKARMA
        CORPORATION**
 
 **STATEMENTS
        OF CASH FLOWS (Unaudited)**
 **For
        the nine months ended September 30, 2008 and 2007**
 
 **For
                    nine months ended****September
                    30,****2008**
                
                2007Cash
                    Flow from Operating Activities:Net
                    loss
                
                **$**
                **(2,017,333**
                **)**
                $
                (1,304,739
                )Adjustment
                      to reconcile net loss to net cash used by operating
                      activities:Depreciation
                
                
                **1,841**
                
                
                1,235Amortization
                    of production costs
                
                
                **81,700**
                
                
                64,896Issuance
                    of stock for services
                
                
                **486,704**
                
                
                152,360Stock
                    option expenses
                
                
                **180,604**
                
                
                142,543Stock
                    warrant expenses
                
                
                **14,440**
                
                
                110,437Non-cash
                    interest expense
                
                
                **-**
                
                
                104,073Gain
                    on sale of investment
                
                
                **-**
                
                
                (3,279
                )(Increase)
                    Decrease in:Accounts
                    receivable
                
                
                **(1,965**
                **)**
                
                -Prepaid
                    expenses
                
                
                **(31,370**
                **)**
                
                71,919Inventory
                
                
                **3,614**
                
                
                (25,392
                )Capitalized
                    production costs
                
                
                **75,017**
                
                
                (41,084
                )Deposit
                
                
                **(28,057**
                **)**
                
                -Increase
                    (Decrease) in:Accounts
                    payable
                
                
                **152,022**
                
                
                (12,767
                )Accrued
                    expenses
                
                
                **1,771**
                
                
                83,019Net
                    Cash Used by Operating Activities
                
                
                **(1,081,012**
                **)**
                
                (656,779
                )Cash
                    Flow from Investing Activities:Purchase
                    of property and equipment
                
                
                **(130,730**
                **)**
                
                (8,711
                )Sale
                    of investment
                
                
                **-**
                
                
                8,279Net
                    Cash Used by Investing Activities
                
                
                **(130,730**
                **)**
                
                (432
                )Cash
                    Flow from Financing Activities:Bank
                    overdraft
                
                
                **-**
                
                
                77,729(Repayments
                    of) Proceeds from notes payable
                
                
                **(35,001**
                **)**
                
                50,000Proceeds
                    from officer advances
                
                
                **-**
                
                
                308,630Stock
                    subscriptions
                
                
                **-**
                
                
                117,950Proceeds
                    from sale of stock
                
                
                **859,750**
                
                
                -Net
                    Cash Provided by Financing Activities
                
                
                **824,749**
                
                
                554,309Net
                    Decrease in Cash
                
                
                **(386,993**
                **)**
                
                (102,902
                )Cash
                    Balance at Beginning of Period
                
                
                **483,564**
                
                
                102,902Cash
                    Balance at End of Period
                
                **$**
                **96,571**
                
                $
                -Supplemental
                    Disclosures:Interest
                    Paid
                
                **$**
                **-**
                
                $
                -Taxes
                    Paid
                
                **$**
                **800**
                
                $
                -Noncash
                    Investment and Financing Activities:Conversion
                      of notes payable and accrued interest intocommon
                      stock
                
                **$**
                **-**
                
                $
                260,186







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




3





**NOTE
      1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**





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.”





The
      company began to generate revenue in the second quarter of 2007; accordingly,
      the Company ceased its development stage status commencing April 1,
      2007.





Presentation
      of Interim Information :
      The
      accompanying financial statements as of September 30, 2008 and for the three
      months and nine months ended September 30, 2008, and 2007 have been prepared
      by
      the Company, without audit, pursuant to the rules and regulations of the
      Securities and Exchange Commission. The accompanying financial statements have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States of America (GAAP).





The
      balance sheet as of December 31, 2007 has been derived from the audited
      financial statements at that date but does not include all of the information
      and footnotes required by the U.S. GAAP for complete financial
      statements.





In
      the
      opinion of Management, all adjustments (which include only normal recurring
      adjustments) necessary to present fairly the financial position, results of
      operations and cash flows as of September 30, 2008 and for the three months
      and
      nine months ended September 30, 2008, and 2007 have been made. The results
      of
      operations for the three months and nine months ended September 30, 2008 are
      not
      necessarily indicative of the operating results for the full year.





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.





Use
      of
      estimates :
      The
      preparation of the accompanying financial statements in conformity with
      accounting principles generally accepted in the United States 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.




4




**NOTE
      1 - NATURE OF OPERATIONS AND 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 insurance
      limits. Management considers the risk to be minimal.





Property
      and Equipment :
      Property and equipment are valued at cost. Maintenance and repair costs are
      charged to expenses as incurred. Depreciation is computed on the straight-line
      method based on the estimated useful lives of the assets, generally 5 to 7
      years. Depreciation expense for the three months ended September 30, 2008 and
      2007 was $809 and $511, respectively. Depreciation expense for the nine months
      ended September 30, 2008 and 2007 was $1,841 and $1,235,
      respectively.





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





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





Advertising
      Costs :
      All
      costs associated with advertising and promoting the Company’s products and
      services are expensed as incurred. Advertising expense for the three months
      ended September 30, 2008 and 2007 was $8,025 and $30,941, respectively.
      Advertising expense for the nine months ended September 30, 2008 and 2007 was
      $312,011 and $218,360, respectively.





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 $51,511 and $184,604 for the
      three months and nine months ended September 30, 2008.





5





**NOTE
      1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**





New
      Accounting Pronouncements :
      In
      March 2008, Financial Accounting Standards Board {“FASB”) issued Statement of
      Financial Accounting Standards (SFAS) No. 161, *“Disclosures
      about Derivative Instruments and Hedging Activities”* (“SFAS
      161”). SFAS 161 is intended to improve financial reporting about derivative
      instruments and hedging activities by requiring companies to enhance disclosure
      about how these instruments and activities affect their financial position,
      performance and cash flows. SFAS 161 also improves the transparency about the
      location and amounts of derivative instruments in a company’s financial
      statements and how they are accounted for under SFAS 133. SFAS 161 is effective
      for financial statements issued for fiscal years beginning after November 15,
      2008 and interim periods beginning after that date. As such, the Company is
      required to adopt these provisions beginning with the quarter ending in February
      2009. Adoption of SFAS 161 is not expected to have a material impact on the
      Company’s financial statements.





In
      February 2007, the FASB issued SFAS No. 159 (“SFAS No. 159”), “ *The
      Fair Value Option For Financial Assets And Financial Liabilities - Including
      An
      Amendment of FASB Statement No. 115.”* SFAS No.
      159 provides an option to report selected financial assets and financial
      liabilities using fair value, and establishes required presentation and
      disclosures to facilitate comparisons with companies that use different
      measurements for similar assets and liabilities. SFAS No. 159 is effective
      for
      the Company’s fiscal year beginning August 1, 2008, with early adoption allowed
      only if SFAS No. 157 is also adopted. The Company is currently evaluating the
      potential impact of this standard on the financial statements.





In
      June
      2007, the FASB ratified Emerging Issues Task Force Issue No. 07-3, *“Accounting
      for Nonrefundable Advance Payments for Goods or Services to Be Used in Future
      Research and Development Activities”* (“EITF
      07-3”). EITF 07-3 requires non-refundable advance payments for goods and
      services to be used in future research and development activities to be recorded
      as an asset and the payments to be expensed when the research and development
      activities are performed. EITF 07-1 will be effective for the Company’s fiscal
      year beginning August 1, 2008. Currently, the Company does not anticipate that
      this statement will have a significant impact on its financial
      statements.




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *“Business
      Combinations”* (“SFAS
      No.141(R)”). SFAS No. 141(R) will replace SFAS 141, and establishes principles
      and requirements for how the acquirer in a business combination reorganizes
      and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed and any noncontrolling interest in the acquiree; recognizes
      and measures the goodwill acquired in the business combination or gain from
      a
      bargain purchase; and determines what information to disclose to enable users
      of
      the financial statements to evaluate the nature and financial effects of the
      business combination. SFAS No. 141(R) applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008.
      Currently, the Company does not anticipate that this Statement will have a
      significant impact on its financial statements.





In
      December 2007, the FASB issued SFAS No. 160, *“Non-Controlling
      Interests in Consolidated Financial Statements - an amendment of ARB No.
      51”* (“SFAS
      No. 160”). This statement requires that noncontrolling or minority interests in
      subsidiaries be presented in the consolidated statement of financial position
      within equity, but separate from the parents’ equity, and that the amount of the
      consolidated net income attributable to the parent and to the noncontrolling
      interest be clearly identified and presented on the face of the consolidated
      statement of income. SFAS No. 160 will be effective for the Company’s fiscal
      year beginning August 1, 2009. The adoption of this statement did not have
      a
      material effect on the Company's financial statements.




6




**NOTE
      1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**





In
      December 2007, the FASB ratified the consensus reached on Emerging Issues Task
      Force Issue No. 07-1, *“Accounting
      for Collaborative Arrangements Related to the Development and Commercialization
      of Intellectual Property”* (“EITF
      07-1”). EITF 07-1 defines collaborative arrangements and establishes reporting
      requirements for transactions between participants in a collaborative
      arrangement and between participants in the arrangement and third parties.
      EITF
      07-1 will be effective for the Company’s fiscal year beginning August 1, 2009.
      The Company is currently evaluating the potential impact of this standard on
      the
      financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB
      110 permits companies to continue to use the simplified method, under certain
      circumstances, in estimating the expected term of “plain vanilla” options beyond
      December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously
      stated that the Staff would not expect a company to use the simplified method
      for share option grants after December 31, 2007. Adoption of SAB 110 is not
      expected to have a material impact on the Company’s financial
      statements.





**NOTE
      2 - 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
      3 - PREPAID EXPENSES**





Prepaid
      expenses were $79,357 and $55,146 as of September 30, 2008 and December 31,
      2007, respectively.





On
      September 30, 2008, the Company also had $2,283 of legal retainer and $2,890
      of
      advance rental expenses.





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
      were 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.




7




**NOTE
      3 - PREPAID EXPENSES (continued)**





On
      March
      26, 2008, the Company entered into an agreement with an author to write a book
      related to diet and nutrition that the Company plans to self publish and market
      directly to consumers. Pursuant to the agreement, the author will be paid a
      $40,000 advance on royalties with the following arrangement: $15,000 payable
      upon execution of the agreement; $15,000 payable on or before the completion
      and
      delivery of the first 50% of the book; and $10,000 on full completion, delivery,
      and acceptance of the book.  The $40,000 advance on royalties is based on
      the first 50,000 books sold. The author will receive a 5% royalty on sales
      above
      50,000 books sold where the Company acts as the publisher and 2 1/2% royalty
      on
      sales above 50,0000 books sold if the Company engages a third party publisher.
      As of September 30, 2008, the Company is still in the preparation stage for
      the
      book publication and total advances in related to the book publication were
      $15,000.





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 September 30, 2008, there is
      a
      balance of $59,184 after advancing $70,000 and deducting royalties to the 2008
      sales. Future royalty obligations will be deducted from the current balance.





**NOTE
      4 - PRODUCTION COSTS**





The
      Company capitalized costs incurred for recording seven fitness videos’ master
      copies. As of September 30, 2008, 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 $30,955 and $30,983
      for
      the three months ended September 30, 2008 and 2007, respectively. The Company
      recorded an amortization expense of $81,700 and $64,896 for the nine months
      ended September 30, 2008 and 2007, respectively.





**NOTE
      5 - PATENT**





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





**NOTE
      6 - ACCRUED EXPENSES**





Accrued
      expenses consisted of the following:


September
                  30,
              
              December
                  31,2008
              
              2007(unaudited)
              
              (Audited)Accrued
                  Interest
              
              $
              37,667
              
              $
              10,488Accrued
                  Professional Fees
              
              
              6,000
              
              
              15,000Employee
                  Reimbursable
              
              
              6,955
              
              
              6,955Accrued
                  Sales Tax
              
              
              43
              
              
              45Accrued
                  Income Tax
              
              
              800
              
              
              800Others
              
              
              1,594
              
              
              -Total
                  Accrued Expenses
              
              $
              53,059
              
              $
              33,288


**NOTE
      7 - NOTES PAYABLE**





The
      notes
      payable bear interest at 7% per annum and are due on demand. As of September
      30,
      2008, the balance was $148,630 and accrued interest of $19,667. As of December
      31, 2007, the balance was $183,631 and accrued interest of $10,488.




8




**NOTE
      8 - STOCKHOLDERS’ EQUITY**





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





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





The
      Board
      of Directors of the Company approved the issuance aggregate of 1,500,816 shares
      of Company’s common stocks to various providers in consideration of their
      services to the Company. The shares were valued and charged to operations at
      a
      price of from $0.2326 to $0.35 per share or $486,704 of total. The valuation
      was
      based on the,Company’s registered offering priced at $0.35 or the prevailing
      market price of its stock at the date shares were issued, with discounts, if
      applicable as per the service agreements.





**NOTE
      9 - NET LOSS PER SHARE**





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




For
                    three months ended
                
                For
                    nine months endedSeptember
                    30,
                
                September
                    30,Numerator:
                
                2008
                
                2007
                
                2008
                
                2007Net
                    Loss
                
                $
                (446,917
                )
                $
                (547,160
                )
                $
                (2,017,333
                )
                $
                (1,304,739
                )Denominator:Weighted
                    Average of Common Shares
                
                
                25,395,786
                
                
                16,486,984
                
                
                22,999,257
                
                
                16,486,984Basic
                    and Diluted Net Loss per Share
                
                $
                (0.02
                )
                $
                (0.03
                )
                $
                (0.09
                )
                $
                (0.08
                )


As
      the
      Company incurred net losses for the three months and nine months ended September
      30, 2008, the effect of dilutive securities totaling 3,166,667 and 3,821,667
      equivalent shares, respectively, has been excluded from the calculation of
      diluted loss per share because their effect was anti-dilutive.





As
      the
      Company incurred net losses for the three months and nine months ended September
      30, 2007, the effect of dilutive securities totaling 2,914,286 and 2,004,762
      equivalent shares, respectively, has been excluded from the calculation of
      diluted loss per share because their effect was anti-dilutive.





There
      were also 5,827,000 and 5,827,000 shares out-of-money stock options and warrants
      excluded from the calculation of diluted net loss per share for the nine months
      ended September 30, 2008 and 2007, respectively, because their exercise prices
      were greater than the average fair market price of the common
      stock.




**NOTE
      10 - 2008 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.




9




**NOTE
      10 - 2008 STOCK OPTION PLAN (continued)**




A
      summary of the status of stock options issued by
      the Company as of September 30, 2008 and 2007 is presented in the following
      table:




2008
                
                2007Weighted
                
                
                
                WeightedNumber
                
                Average
                
                Number
                
                Averageof
                
                Exercise
                
                of
                
                ExerciseShares
                
                Price
                
                Shares
                
                PriceOutstanding
                    at beginning of year
                
                
                5,250,000
                
                $
                0.20
                
                
                5,250,000
                
                $
                0.20Granted
                
                
                45,000
                
                
                -
                
                
                -
                
                
                -Exercised/Expired/Cancelled
                
                
                -
                
                
                -
                
                
                -
                
                
                -Outstanding
                    at end of period
                
                
                5,295,000
                
                $
                0.20
                
                
                5,250,000
                
                $
                0.20Exercisable
                    at end of period
                
                
                3,166,667
                
                $
                0.20
                
                
                2,083,334
                
                $
                0.20




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




2008
              
              2007Weighted
                  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 September 30, 2008:




WeightedAverage
              
              WeightedRange
                  of
              
              
              
              Remaining
              
              AverageExercise
              
              Options
              
              Contractual
              
              Exercise
              
              OptionsPrices
              
              Outstanding
              
              Life
              
              Price
              
              Exercisable$
              0.20
              
              
              5,295,000
              
              
              7
              
              $
              0.20
              
              
              3,166,6675,295,000
              
              
              7
              
              $
              0.20
              
              
              3,166,667




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




10




**NOTE
      11 - STOCK WARRANTS**





On
      January 26, 2007, March 13, 2007, and March 29, 2007, the Company issued stock
      purchase warrants to the CEO of the Company for the right to purchase 200,000,
      250,000, and 125,000 shares of the Company, respectively, at the price of $0.25
      per share. The warrants shall have a term of five years from the date of stocks
      issued. The warrants were valued at $0.19 per share using the Black-Scholes
      option pricing model.





The
      assumptions used in the Black-Scholes option pricing model are as follows:


September
                  30,2008
              
              2007Weighted
                  average fair value per option granted
              
              
              N/A
              
              $
              0.19Risk-free
                  interest rate
              
              
              N/A
              
              
              4.60
              %Expected
                  dividend yield
              
              
              N/A
              
              
              0.00
              %Expected
                  lives
              
              
              N/A
              
              
              5.00Expected
                  volatility
              
              
              N/A
              
              
              100.00
              %




None
      of
      stock warrants expense is recognized for the three months ended September,
      2008
      and 2007. The Company recognized a $14,440 and $110,437 stock warrants expense
      for the nine months ended September 30, 2008 and 2007.





**NOTE
      12 - LEASE AGREEMENTS**





On
      September, 2008, the Company relocated its corporate office from Santa Monica
      to
      Beverly Hills and entered into a new lease agreement that expires on March
      31,
      2009. The lease calls for approximately $2,800 rent per month during the term
      of
      the lease.





On
      April
      25, 2008, the Company entered into a lease agreement for a studio space in
      Los
      Angeles, California, which will be used to offer Xflowsion, fitness and yoga
      classes along with retail items and incidental food. The lease calls for $22,000
      rent per month for five years commencing on the earlier of either September
      25,
      2008, or the date the Company first opens the studio for business. Presently,
      the Company is in process of remodeling the studio.





**NOTE
      13 - PENDING ACQUISITION**





On
      July
      10, 2008, the Company signed a letter of intent to acquire Yoga Shelter, LLC.
      The acquisition has been delayed due to market fluctuations, and the parties
      are
      continuing dialog about exploring ways to work together and are planning to
      revisit the acquisition or other ways to collaborate at a later time in the
      future.





**NOTE
      14 - SUBSEQUENT EVENT**





The
      Company has received approximately $300,000 worth of subscriptions from a
      private stock offering to accredited investors.





11





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





**Forward
      Looking Statements**





*Statements
      included in this management’s discussion and analysis of financial condition and
      results of operations, and in future filings by the company with the securities
      and exchange commission, in the company’s press releases and in oral statements
      made with the approval of an authorized executive officer which are not
      historical or current facts are “forward-looking statements” and are subject to
      certain risks and uncertainties that could cause actual results to differ
      materially from historical earnings and those presently anticipated or
      projected. You are cautioned not to place undue reliance on any such
      forward-looking statements, which speak only as of the date made. The following
      important factors, among others, in some cases have affected and in the future
      could affect the company’s actual results and could cause the company’s actual
      financial performance to differ materially from that expressed in any
      forward-looking statement: (i) the extremely competitive conditions that
      currently exist in the market for companies similar to the company and
      (ii) lack of resources to maintain the company’s good standing status and
      requisite filings with the securities and exchange commission. The foregoing
      list should not be construed as exhaustive and the company disclaims any
      obligation subsequently to revise any forward-looking statements to reflect
      events or circumstances after the date of such statements or to reflect the
      occurrence of anticipated or unanticipated events. The following discussion
      should be read in conjunction with our financial statements and their
      explanatory notes included as part of this quarterly report.*





**Overview**





We
      are an
      early stage company that develops and markets proprietary branded personal
      health and wellness products, including yoga and fitness DVDs, books and CDs,
      nutraceuticals, and other products targeting the mass market and MBS
      (Mind/Body/Spirit) consumers. We began to generate revenue during the second
      quarter of 2007. We incurred net losses of approximately $122,488 in 2005,
      $1,397,922 in 2006, and $1,849,636 in 2007. As of Septmber 30, 2008, we had
      an
      accumulated deficit of $5,429,442. 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.




Since
      April, 2004, we have dedicated our resources to developing our business plan
      and
      producing items that will appeal to the “wellness” conscious consumer, such as
      yoga and fitness DVDs. **** In
      May
      2007, we began to market and sell our initial Xflowsion products. **** We
      believe that our success depends upon our ability to successfully produce,
      market and distribute such products. 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 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 have been going through such a
      process and conducted a focus group during the third quarter
      of this year. We had a very high percentage (approximately 80%) of the
      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 the potential for Xflowsion to sell well.
      We have been using the feedback we received from the focus group and on-air
      infomercial testing to tweak our branding and edit our infomercial so we can
      maximize the potential response and sales by consumers. We plan to begin airing
      the updated version of our infomercial sometime in January 2009. January tends
      to be one of the best times of years for fitness and wellness products due
      to
      New Year’s resolutions. In addition to our infomercial, our Xflowsion DVD series
      has been approved for sale on QVC and we have finalized the economic terms
      of
      our relationship with QVC. We expect that the first air date on QVC will be
      sometime in January 2009.  Along with our infomercial and QVC, we will be
      utilizing online marketing for banner and email marketing, Search Engine
      Optimization (SEO), affiliate marketing, and social media or “word of mouth”
marketing. We also plan to increase our brand exposure and awareness of
      Xflowsion and drive sales via a public relations campaign. Toward that end,
      Xflowsion has been profiled in People Magazine, People.com, TMZ, The National
      Enquirer and many other publications. We have gotten strong media interest
      and
      expect our products and brand to receive much upcoming press coverage including
      feature stories in Fitness Magazine and Shape Magazine. We are very encouraged
      by the response to our Xflowsion DVD series in the media and with consumers
      and
      via our marketing efforts.




12




We
      are
      also exploring many opportunities for a reality TV show that would exploit
      the
      Xflowsion brand. We had an offer for Eric Paskel to appear in the “Biggest
      Loser” television program airing on the NBC television network, but declined due
      to NBC’s insistence on controlling Mr. Paskel’s name and likeness. The “Biggest
      Loser” opportunity has created other potential television opportunities that we
      are currently pursuing. During the third quarter, we signed with a talent agency
      to represent our reality TV show concept. We then met with several TV production
      companies and generated much interest. We are currently negotiating with a
      TV
      production company to produce and shop our show to TV networks. While there
      is
      no guarantee that we will be successful in producing and airing a TV show
      consistent with our products and brands, we believe that such a TV show would
      expose our products to potentially millions of viewers.





In
      addition to beginning our marketing campaign for our Xflowsion DVD series,
      we
      signed a lease to open an Xflowsion studio in Los Angeles, California that
      will
      offer Xflowsion, fitness, and yoga classes along with retail items and food
      and
      beverages. After completing the architectural plans, we obtained a permit and
      began construction. As of the date of this report, the construction for our
      leasehold improvements has been progressing with an expected completion during
      December 2008. As such, we expect our Xflowsion studio to open sometime in
      January 2009. On March 26, 2008, we also engaged an author to write a diet,
      nutrition, and lifestyle book that we plan to self-publish and market direct
      to
      consumers. We expect the book to be completed in the fourth quarter of 2008
      and
      our marketing initiatives for the book to begin during the first quarter of
      2009. We also expect to create an audio CD and downloadable series under our
      Dreams RealizedTM brand name in the fourth quarter of 2008. The Dreams Realized
      audio series will provide strategies and tools for people to achieve better
      health, achieve better relationships, achieve success, reduce stress, and other
      topics related to lifestyle and healthy living. In addition, we engaged a
      consultant to assist in the development of our patent-pending proprietary yoga
      mat. We are currently working on a prototype design before going into
      production.




**Critical
      Accounting Policies and Estimates**





Presentation
      of Interim Information.





The
      accompanying financial statements as of September 30, 2008 and for the nine
      months ended September 30, 2008 and 2007 have been prepared by the Company,
      without audit, pursuant to the rules and regulations of the Securities and
      Exchange Commission. The accompanying financial statements have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America (GAAP).





The
      balance sheet as of December 31, 2007 has been derived from the audited
      financial statements at that date but does not include all of the information
      and footnotes required by the U.S. GAAP for complete financial
      statements.





In
      the
      opinion of management, all adjustments (which include only normal recurring
      adjustments) necessary to present fairly the financial position, results of
      operations and cash flows as of September 30, 2008 and for the nine months
      ended
      September 30, 2008 and 2007 have been made. The results of operations for the
      nine months ended September 30, 2008 are not necessarily indicative of the
      operating results for the full year.





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.




13




Use
      of
      Estimates.





The
      preparation of the accompanying financial statements in conformity with
      accounting principles generally accepted in the United States 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.





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 $ 180,604for the
      nine months ended September 30, 2008.





New
      Accounting Pronouncements.





In
      March
      2008, Financial Accounting Standards Board {“FASB”) issued Statement of
      Financial Accounting Standards (SFAS) No. 161, *“Disclosures
      about Derivative Instruments and Hedging Activities”* (“SFAS
      161”). SFAS 161 is intended to improve financial reporting about derivative
      instruments and hedging activities by requiring companies to enhance disclosure
      about how these instruments and activities affect their financial position,
      performance and cash flows. SFAS 161 also improves the transparency about the
      location and amounts of derivative instruments in a company’s financial
      statements and how they are accounted for under SFAS 133. SFAS 161 is effective
      for financial statements issued for fiscal years beginning after November 15,
      2008 and interim periods beginning after that date. As such, the Company is
      required to adopt these provisions beginning with the quarter ending in February
      2009. Adoption of SFAS 161 is not expected to have a material impact on the
      Company’s financial statements.





In
      February 2007, the FASB issued SFAS No. 159 (“SFAS No. 159”), “ *The
      Fair Value Option For Financial Assets And Financial Liabilities - Including
      An
      Amendment of FASB Statement No. 115.”* SFAS No.
      159 provides an option to report selected financial assets and financial
      liabilities using fair value, and establishes required presentation and
      disclosures to facilitate comparisons with companies that use different
      measurements for similar assets and liabilities. SFAS No. 159 is effective
      for
      the Company’s fiscal year beginning August 1, 2008, with early adoption allowed
      only if SFAS No. 157 is also adopted. The Company is currently evaluating the
      potential impact of this standard on the financial statements.





In
      June
      2007, the FASB ratified Emerging Issues Task Force Issue No. 07-3, *“Accounting
      for Nonrefundable Advance Payments for Goods or Services to Be Used in Future
      Research and Development Activities”* (“EITF
      07-3”). EITF 07-3 requires non-refundable advance payments for goods and
      services to be used in future research and development activities to be recorded
      as an asset and the payments to be expensed when the research and development
      activities are performed. EITF 07-1 will be effective for the Company’s fiscal
      year beginning August 1, 2008. Currently, the Company does not anticipate that
      this statement will have a significant impact on its financial
      statements.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *“Business
      Combinations”* (“SFAS
      No.141(R)”). SFAS No. 141(R) will replace SFAS 141, and establishes principles
      and requirements for how the acquirer in a business combination reorganizes
      and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed and any noncontrolling interest in the acquiree; recognizes
      and measures the goodwill acquired in the business combination or gain from
      a
      bargain purchase; and determines what information to disclose to enable users
      of
      the financial statements to evaluate the nature and financial effects of the
      business combination. SFAS No. 141(R) applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008.
      Currently, the Company does not anticipate that this Statement will have a
      significant impact on its financial statements.




14




In
      December 2007, the FASB issued SFAS No. 160, *“Non-Controlling
      Interests in Consolidated Financial Statements - an amendment of ARB No.
      51”* (“SFAS
      No. 160”). This statement requires that noncontrolling or minority interests in
      subsidiaries be presented in the consolidated statement of financial position
      within equity, but separate from the parents’ equity, and that the amount of the
      consolidated net income attributable to the parent and to the noncontrolling
      interest be clearly identified and presented on the face of the consolidated
      statement of income. SFAS No. 160 will be effective for the Company’s fiscal
      year beginning August 1, 2009. The adoption of this statement did not have
      a
      material effect on the Company's financial statements.





In
      December 2007, the FASB ratified the consensus reached on Emerging Issues Task
      Force Issue No. 07-1, *“Accounting
      for Collaborative Arrangements Related to the Development and Commercialization
      of Intellectual Property”* (“EITF
      07-1”). EITF 07-1 defines collaborative arrangements and establishes reporting
      requirements for transactions between participants in a collaborative
      arrangement and between participants in the arrangement and third parties.
      EITF
      07-1 will be effective for the Company’s fiscal year beginning August 1, 2009.
      The Company is currently evaluating the potential impact of this standard on
      the
      financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB
      110 permits companies to continue to use the simplified method, under certain
      circumstances, in estimating the expected term of “plain vanilla” options beyond
      December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously
      stated that the Staff would not expect a company to use the simplified method
      for share option grants after December 31, 2007. Adoption of SAB 110 is not
      expected to have a material impact on the Company’s financial
      statements.





**Results
      of Operations**





*Comparison
      of Three Months Ended September 30, 2008 and 2007*




Three Months Ended September
                    302008
                
                2007Sales
                
                $
                70,215
                
                $
                19,343Cost
                    of Sales
                
                $
                3,340
                
                $
                4,322Gross
                    Profit
                
                $
                66,875
                
                $
                15,021Operating
                    Expense
                
                $
                511,023
                
                $
                449,080Operating
                    Profit (Loss)
                
                $
                (444,148
                )
                $
                (434,059
                )Other
                    Income (Expense)
                
                $
                (2,769
                )
                $
                (113,101
                )Income
                    (Loss) Before Income Tax Expenses
                
                $
                (446,917
                )
                $
                (286,484
                )Income
                    Tax Expenses
                
                $
                --
                
                $
                --Net
                    Income (Loss)
                
                $
                (446,917
                )
                $
                (547,160
                )




*Sales.* Sales
      increased from $19,343 for the three months ended September 30, 2007 to $70,215
      for the three months ended September 30, 2008. Sales increased because of the
      airing of our infomercial and publicity of our products in People Magazine
      and
      other publications..




*Cost
      of Sales.* Cost
      of
      sales decreased from $4,322 for the three months ended September 30, 2007 to
      $3,340 for the three months ended September 30, 2008. This decrease is
      attributable to negligible changes in materials cost.




*Gross
      Profit.* Gross
      profit for the three months ended September 30, 2008 was $66,875 as compared
      to
      gross profit of $15,021 for the three months ended September 30, 2007.




*Selling,
      General and Administrative Expenses.* Total
      selling, general and administrative expenses for the three months ended
      September 30, 2008 was $511,023 compared to $449,080 for the three months ended
      September 30, 2007, representing a 13.8% increase. The increase is attributable
      to additional editing costs of our infomercial along with stock issued to
      consultants..




*Operating
      Profit/Loss.* Loss
      from
      operations increased by 55% from losses of $286,484 in the three months ended
      September 30, 2007 to losses of $444,148 in the three months ended September
      30,
      2008 as a result of non cash expenses related to stock issuances and warrants
      along with additional production and publicity costs..




15




*Other
      Income (Expenses).* Other
      expenses consisted solely of interest expense during the three months ended
      September 30, 2008 and 2007. Interest expense was $113,101 in the three months
      ended September 30, 2007 compared to $2,769 in the three months ended September
      30, 2008. This decrease was due to options
      that were issued in 2007 that were expensed.





*Income
      Tax Expenses.* There
      was
      no income tax expense for the three months ended September 30, 2007 and
      2008.




*Net
      Income/Loss.* Net
      loss
      for the three months ended September 30, 2008 was $446,917 as compared to a
      net
      loss for the three months ended September 30, 2007 of $547,160, representing
      a
      18.3% decrease in net loss. The decrease is a result of fewer expenses related
      to stock issuances..




*Comparison
      of Nine Months Ended September 30, 2008 and 2007*





Nine Months Ended September
                302008
            
            2007Sales
            
            $
            75,637
            
            $
            75,366Cost
                of Sales
            
            $
            3,614
            
            $
            22,624Gross
                Profit
            
            $
            72,023
            
            $
            52,742Operating
                Expense
            
            $
            2,079,374
            
            $
            1,234,689Operating
                Profit (Loss)
            
            $
            (2,007,351
            )
            $
            (1,181,947
            )Other
                Income (Expense)
            
            $
            (9,182
            )
            $
            (121,992
            )Income
                (Loss) Before Income Tax Expenses
            
            $
            (2,016,533
            )
            $
            (1,303,939
            )Income
                Tax Expenses
            
            $
            800
            
            $
            800Net
                Income (Loss)
            
            $
            (2,017,333
            )
            $
            (1,304,739
            )




*Sales.* Sales
      increased slightly from $75,366 for the nine months ended September 30, 2007
      to
      $75,637 for the nine months ended September 30, 2008. Sales were comparable
      in
      both periods..




*Cost
      of Sales.* Cost
      of
      sales decreased from $22,624 for the nine months ended September 30, 2007 to
      $3,614 for the nine months ended September 30, 2008. This decrease is
      attributable to the fact that we had already had inventory on hand and didn’t
      have to produce further inventory..




*Gross
      Profit.* Gross
      profit for the nine months ended September 30, 2008 was $72,023 as compared
      to
      gross profit of $52,742 for the nine months ended September 30, 2007.




*Selling,
      General and Administrative Expenses.* Total
      selling, general and administrative expenses for the nine months ended September
      30, 2008 was $2,079,374 compared to $1,234,689 for the nine months ended
      September 30, 2007, representing a 68.4% increase. The increase is attributable
      to additional editing costs of infomercial along with stock issued to
      consultants.




*Operating
      Profit/Loss.* Loss
      from
      operations increased by 53.9% from losses of $1,304,739 in the nine months
      ended
      September 30, 2007 to losses of $2,007,351 in the nine months ended September
      30, 2008 as a result of additional editing costs of infomercial along with
      stock
      issued to consultants.





*Other
      Income (Expenses).* Other
      income consisted solely of gain on the sale of securities of $3,279 for the
      nine
      months ended September 30, 2007 compared to none for the nine months ended
      September 30, 2008. The decrease was due to no ownership or sale of other
      securities . Other expenses consisted solely of interest expense during the
      nine
      months ended September 30, 2008 and 2007. Interest expense was $125,271 in
      the
      nine months ended September 30, 2007 compared to $9,182 in the nine months
      ended
      September 30, 2008. This decrease was due to options
      that were issued in 2007 that were expensed.




*Income
      Tax Expenses.* There
      was
      $800 in income tax expense for the nine months ended September 30, 2007 and
      2008.





*Net
      Income/Loss.* Net
      loss
      for the nine months ended September 30, 2008 was $2,017,333 as compared to
      a net
      loss for the nine months ended September 30, 2007 of $1,304,739 representing
      a
      54.6% increase in net loss. The increase is a result of additional advertisement
      and infomercial expenses as well as consulting services.




16




**Liquidity
      and Capital Resources**





As
      of **** September
      30, 2008, we had working capital of $(187,713). We have fully incurred the
      production cost of our Xflowsion DVD series and the production costs of our
      infomercial, and plan to make financial investments primarily in marketing
      for
      the next six months along with other product development related expenses.
      While
      we have satisfied our capital needs via the sale of our common stock along
      with
      loans and stock purchases from our Chief Executive Officer, Bill Glaser, there
      is no guarantee that we will be able to meet current working capital needs
      if we
      do not raise additional funds or generate positive cash flow from sales. We
      expect to incur substantial losses over the next two years.





We
      estimate that our expenses over the next 12 months beginning on October 1,
      2008
      will be approximately $845,000 as follows:





General
                and Administrative
            
            $
            350,000Inventory
            
            
            25,000Media
                (Airtime)
            
            
            50,000Marketing/Publicity
            
            
            125,000Legal
            
            
            40,000DVD/CD
                Production
            
            
            50,000Accounting
            
            
            55,000Product
                Development
            
            
            50,000Retail
                Studio Development
            
            
            100,000





As
      of
      September 30, 2008, we had cash equivalents of $204,985, which will meet our
      capital requirements for approximately the next six months. We believe that
      we
      need approximately an additional $640,000 to meet our capital requirements
      over
      the next 12 months. Our intention is to obtain this money through debt/equity
      financings as well as cash flow from sales. As of the date of this report,
      we
      have fully paid for our initial product inventory for 10,000 Xflowsion DVD
      units
      as well as all branding, web development, DVD production, editing and DVD
      authoring costs, and infomercial production costs.





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 through
      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 or other products and
      services.





**Off-Balance
      Sheet Arrangements**





We
      have
      not entered into any 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
      stockholder’s equity or that are not reflected in our financial statements.
      Furthermore, we do not have any retained or contingent interest in assets
      transferred to an unconsolidated entity that serves as credit, liquidity or
      market risk support to such entity. We do not have any variable interest in
      any
      unconsolidated entity that provides financing, liquidity, market risk or credit
      support to us or engages in leasing, hedging or research and development
      services with us.





**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Not
      Applicable.





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES.**





**Disclosure
      Controls and Procedures**





As
      of the
      end of the period covered by this quarterly report, we carried out an
      evaluation, under the supervision of, and with the participation of our
      management, including our Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the Company’s disclosure controls and procedures (as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of 1934, as amended) as of the end of the period covered by this report. Based
      on that evaluation, our Chief Executive Officer and Chief Financial Officer
      has
      concluded that, as of the end of the period covered by this report, our
      disclosure controls and procedures were effective to enable us to record,
      process, summarize and report information required to be included in our reports
      that we file or submit under the Exchange Act within the time periods required.




17




**Changes
      in Internal Control over Financial Reporting**





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) during the quarter ended September 30, 2008 that have materially
      affected, or are reasonably likely to materially affect our internal control
      over financial reporting.







**PART
      II - OTHER INFORMATION**





**ITEM
      1.**   **LEGAL
      PROCEEDINGS**





We
      know
      of no material, existing or pending legal proceedings against us, nor are we
      involved as a plaintiff in any material proceeding or pending litigation. There
      are no proceedings in which any of our directors, officers or affiliates, or
      any
      registered or beneficial stockholder, is an adverse party or has a material
      interest adverse to our company.





**ITEM
      1A.**  **RISK
      FACTORS**





Not
      applicable.





**ITEM
      2.**   **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





On
      August
      15, 2008, we issued 151,250 shares of our common stock to a consultant as
      payment for services rendered to the Company. On September 26, 2008, we issued
      250,000 shares of our common stock to a consultant as payment for investor
      relations services rendered to the Company.





For
      both
      of these issuances, we relied upon the exemption from registration as set forth
      in Section 4(2) of the Securities Act for the issuance of these shares. The
      shareholders took the shares for investment purposes without a view to
      distribution and had access to information concerning uKarma and our business
      prospects, as required by the Securities Act. In addition, there was no general
      solicitation or advertising for the issuance of the shares. The shareholders
      were permitted access to our management for the purpose of acquiring investment
      information. Due to the shareholders’ dealings with companies similar to ours,
      we deem the shareholders sophisticated for the purposes of Section 4(2) of
      the Securities Act.





**ITEM
      3.**   **DEFAULTS
      UPON SENIOR SECURITIES**





None.





**ITEM
      4.**   **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.





**ITEM
      5.**   **OTHER
      INFORMATION**




(a)
              None.
  (b)
              There
                  were no changes to the procedures by which security holders may
                  recommend
                  nominees to our board of
                  directors.




**ITEM
      6.**   **EXHIBITS**





3.1
            Amended
                and Restated Certificate of Incorporation, as currently in effect
                (1)3.2
            Bylaws,
                as currently in effect (1)4.1
            Form
                of Warrant (1)




18




10.1
            2006
                Stock Plan (1)10.2
            Employment
                Agreement between uKarma Corporation and Bill Glaser dated January
                1, 2006
                (1)10.3
            Consulting
                Agreement between uKarma Corporation and Eric Paskel dated April
                19, 2006
                (1)10.4
            Consulting
                Agreement between uKarma Corporation and Craig Kulman dated February
                13,
                2006 (1)10.5
            Consulting
                Agreement between uKarma Corporation and Len Panzer dated February
                28,
                2006 (1)10.6
            Consulting
                Agreement between uKarma Corporation and Jeremy Koff dated May 5,
                2006
                (1)10.7
            Production
                Agreement between uKarma Corporation and The Tribal Vision Group,
                LLC
                d/b/a Yoga Tribe and Culture Productions dated June 15, 2006
                (1)10.8
            Marketing
                Agreement between uKarma Corporation and Synthesis Marketing dated
                October
                11, 2006 (1)10.9
            Marketing
                Agreement between uKarma Corporation and Much and House Public Relations
                dated October 11, 2006 (1)10.10
            Production
                Agreement between uKarma Corporation and Caudill and Associates dated
                November 2006 (1)10.11
            Option
                Agreement between Fred Tannous and Bill Glaser dated January 17,
                2005
                (1)10.12
            Promissory
                Note issued to Bill Glaser dated November 10, 2006 (1)10.13
            Promissory
                Note issued to Bill Glaser dated January 26, 2007 (1)10.14
            Warrant
                issued to Bill Glaser dated January 26, 2007 (1)10.15
            Promissory
                Note issued to Bill Glaser dated March 13, 2007 (2)10.16
            Common
                Stock Warrant issued to Bill Glaser dated March 13, 2007
                (2)10.17
            Demand
                Promissory Note issued to Bill Glaser dated March 29, 2007
                (2)




10.18
            
            Common
                Stock Warrant issued to Bill Glaser dated March 29, 2007
                (2)10.19
            
            Demand
                Promissory Note issued to Bill Glaser dated April 30, 2007
                (2)10.20
            
            Promissory
                Note issued to Mark Abdou dated June 26, 2007 (2)10.21
            
            Common
                Stock Purchase Warrant issued to Mark Abdou dated June 26, 2007
                (2)10.22
            
            Amendment
                to Option Agreement dated July 9, 2007 (3)10.23
            
            Notice
                of Exercise of Option dated July 9, 2007 (3)10.24
            
            Demand
                Promissory Note issued to Bill Glaser dated July 23,
                2007(3)10.25
            
            Conversion
                Agreement between uKarma Corporation and Bill Glaser dated August
                14, 2007
                (4)10.26
            
            Video
                Distribution Agreement dated September 25, 2007 (5)10.27
            
            Abdou
                Conversion Agreement dated August 27, 2007 (6)10.28
            
            McDonald
                Conversion Agreement dated August 27, 2007
                (6)




19




10.29
            
            Lease
                dated April 25, 2008 (7)10.30
            
            Paskel
                Book Agreement dated April 25, 2008 (8)10.31
            
            Glaser
                Book Agreement dated April 25, 2008 (8)10.32
            
            Aronson
                Book Agreement dated March 26, 2008 (8)10.33
            
            Kenquest
                Lease Agreement dated September 4, 2008 (9)31
            
            Certification
                Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002 — Chief
                Executive Officer and Chief Financial Officer *32
            
            Certification
                Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section
                906 Of
                The Sarbanes-Oxley Act Of 2002 — Chief Executive Officer and Chief
                Financial Officer *




*
            Filed
                herewith.




(1)
            Incorporated
                herein by reference to Form SB-2 filed with the SEC on February 12,
                2007.(2)
            Incorporated
                herein by reference to Form SB-2 Amendment No. 1 filed with the SEC
                on
                June 28, 2007.(3)
            Incorporated
                herein by reference to Form SB-2 Amendment No. 4 filed with the SEC
                on
                August 6, 2007.(4)
            Incorporated
                herein by reference to Form 10-QSB filed with the SEC on August 20,
                2007.(5)
            Incorporated
                herein by reference to Form 8-K filed with the SEC on October 4,
                2007.(6)
            Incorporated
                herein by reference to Form 10-QSB filed with the SEC on November
                19,
                2007.(7)
            Incorporated
                herein by reference to Form 8-K filed with the SEC on May 1,
                2008.(8)
            Incorporated
                herein by reference to Form 10-Q filed with the SEC on August 19,
                2008.(9)
            Incorporated
                herein by reference to Form 8-K filed with the SEC on September 10,
                2008.




20




**SIGNATURES**





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




**UKARMA
                CORPORATION**(Registrant)Date:
                November 19, 2008
            By:
            /s/
                Bill GlaserBill
                GlaserChief
                Executive Officer and Chief Financial
                Officer





21