UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q





x     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2011 or





 ̈      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the transition period from ______ to ______





Commission File Number 333-140633





INNOLOG HOLDINGS CORPORATION


(Exact name of registrant as specified in its charter)





Nevada
68-0482472(State or other jurisdiction of
(IRS Employerincorporation or organization)
Identification Number)





4000 Legato Road, Suite 830, Fairfax, Virginia 22033





(703) 766-1412





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 þ  No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. o Yes  o No The registrant is not yet subject to this requirement.





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





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





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


o Yes  þ  No





APPLICABLE ONLY TO CORPORATE ISSUERS





Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.





14,129,973 shares of common stock, $0.001 par value, outstanding on May 20, 2011.





INNOLOG HOLDINGS CORPORATION


REPORT ON FORM 10-Q


QUARTER ENDED March 31, 2011


TABLE OF CONTENTS





PageNumberPART I - FINANCIAL INFORMATION
3Item 1. Financial Statements (Unaudited)
3Condensed Consolidated Balance Sheets – March 31, 2011 and December 31, 2010
3Condensed Consolidated Statements of Operations For the Three Months Ended March 31, 2011 and 2010
4Condensed Consolidated Statement of Stockholders’ Deficiency
5Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2011 and 2010
6Notes to Condensed Consolidated Financial Statements
8Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
24Item 3. Quantitative and Qualitative Disclosures About Market Risk
30Item 4. Controls and Procedures
30PART II - OTHER INFORMATION
31Item 1. Legal Proceedings
31Item 1A. Risk Factors
31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
31Item 3. Defaults Upon Senior Securities
31Item 4. Removed and Reserved
31Item 5. Other Information
31Item 6. Exhibits
32Signatures
33




2


PART I – FINANCIAL INFORMATION





Item 1: Financial Statements.





INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 
 March 31, 2011


December 31, 2010(Unaudited)ASSETSCurrent AssetsAccounts receivable, net

$
722,573


$
741,478Prepaid expenses and other current assets


19,846



19,846Total Current Assets


742,419



761,324Property and equipment, net


23,437



23,702Other assets


25,485



24,352Total Assets

$
791,341


$
809,378LIABILITES AND STOCKHOLDERS' DEFICIENCYCurrent LiabilitiesCash overdraft

$
30,792


$
61,223Line of credit, bank


497,570



497,570Accounts payable


2,229,847



2,253,197Accured salaries and benefits


2,433,564



2,113,327Accrued interest


301,403



193,740Other accrued liabilites


1,303,484



1,228,279Due to former stockholder


245,350



251,350Accrued loss on contract


-



47,782Deferred rent


33,258



33,258Notes payable


530,000



471,905Notes payable, affliates


2,079,384



1,984,384Total current liabilites


9,684,652



9,136,015COMMITMENTSStockholders' DeficiencyCommon stock, $0.001 par value, 200,000,000 shares authorized;14,129,973 and 13,629,973 shares issued and outstandingat March 31, 2011 and December 31, 2010, respectively


14,130



13,630Preferred stock, $0.001 par value; 50,000,000 shares authorized;36,894,758 and 37,394,758 shares issued and outstandingat March 31, 2011 and December 31, 2010, respectively


36,895



37,395Common stock to be issued


64,700



-Additional paid in capital


886,123



862,923Accumulated deficit


(9,895,159
)


(9,240,585
)Total Stockholders' Deficiency


(8,893,311
)


(8,326,637
)Total Liabilities and Stockholders' Deficiency

$
791,341


$
809,378
  3
 
 INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 For the three months


For the three monthsended March 31,


ended March 31,2011


2010Revenues

$
1,303,706


$
1,712,729Operating expensesDirect costs


633,651



764,063Operating expenses


941,515



1,097,002Management fees, affiliate


-



244,510Bad debt expense, affiliate


27,000



-Total operating expenses


1,602,166



2,105,575Loss from operations


(298,460
)


(392,846
)Other Income (Expenses)Merger expenses


-



(233,000
)Other income


-



170Interest expense


(356,114
)


(74,385
)Total other income (expenses)


(356,114
)


(307,215
)Loss before income tax provision


(654,574
)


(700,061
)Income tax provision


-



-Net  Loss

$
(654,574
)

$
(700,061
)Loss per share - basic and diluted

$
(0.05
)


(0.08
)Weighted average number of shares


13,946,640



8,882,545
  4
 
 INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
 (UNAUDITED)
 
 COMMON STOCK


ADDITIONAL





TOTALCOMMON STOCK


PREFERRED STOCK


TO BE ISSUED


PAID IN


ACCUMULATED


STOCKHOLDERS'SHARES


AMOUNT


SHARES


AMOUNT


SHARES


AMOUNT


CAPITAL


DEFICIT


DEFICIENCYBalance, December 31, 2010


13,629,973


$
13,630



37,394,758


$
37,395



-


$
-


$
862,923


$
(9,240,585
)

$
(8,326,637
)Conversion of preferred stock to common stock


500,000



500



(500,000
)


(500
)


-



-



-







-Common stock to be issued


-



-



-



-



1,000,000



64,700



-







64,700Warrants granted for services


























23,200







23,200Net loss


-



-



-



-



-



-



-



(654,574
)


(654,574
)Balance, March 31, 2011


14,129,973


$
14,130



36,894,758


$
36,895



1,000,000


$
64,700


$
886,123


$
(9,895,159
)

$
(8,893,311
)
  5
 
 INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 
 For the Three


For the Threemonths ended


months endedMarch 31, 2011


March 31, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(654,574
)

$
(700,061
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization


1,678



11,911Amortization of debt issuance cost


64,700Stock based compensation


23,200Accrued loss on contracts in progress


(47,782
)


-Merger expense related to issuance of stock


-



-Bad debt expense, affiliates


-



-Changes in assets and liabilities:Accounts receivable


18,905



175,444Prepaid expenses and other assets


(1,133
)


(26,079
)Deferred rent


-



(754
)Due to related party


-



283,864Billings in excess of contract costs and related earnings


-



71,159Accounts payable and accrued expenses


449,324



534,458Net cash used in operating activities


(145,682
)


349,942CASH FLOWS FROM INVESTING ACTIVITIES:Payment for purchase of Innovative Logistics Techniques, Inc


-



(126,451
)Advances to affiliates


-



-Advances on note receivable, affiliates


-



-Property and equipment purchased


(1,413
)


-Net cash used in investing activities


(1,413
)


(126,451
)CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under line of credit, bank


-



-Due to Factor


-



-Borrowings on notes payable, others


287,500



-Repayments on note payable,others


(229,405
)


-Borrowings on notes payable, related party


100,000



-Repayments on note payable, related party


(5,000
)


-Net borrowings from former stockholder


(6,000
)


-Net cash provided by financing activities


147,095



-NET CHANGE IN CASH


-



223,491CASH - BEGINNING OF PERIOD


-



9,278CASH - END OF PERIOD

$
-


$
232,769SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest

$
174,454



24,000
 
 6
 
  INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
 
 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 
 During the three months ended March 31, 2011, the Company assumed two notes payable from Galen totaling $359,405. Of this amount, $279,636 was recorded as a dividend to Galen.
  7
  INNOLOG HOLDINGS CORPORATION AND SUBSIDIARY
 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 Note 1: Basis of Presentation
 
 The accompanying unaudited condensed financial statements of Innolog Holdings Corporation, and its wholly owned subsidiary, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations.
 
 In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation, and to make the financial statements not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Operating results for interim periods are not necessarily indicative of operating results for the entire fiscal year or any other future periods.
 
 Note 2: Organization and Nature of Business
 
 Innolog Holdings Corporation (“Holdings” or “Innolog”) was formed as a holding company on March 23, 2009 for the purpose of acquiring companies that provide services primarily to federal government entities.  Its wholly owned subsidiaries are Innolog Group Corporation and Innovative Logistics Techniques, Inc. (“Innovative”). Holdings was previously a wholly owned subsidiary of Galen Capital Corporation (“Galen”). In June 2010, Holdings was spun out and the stockholders of Galen became the stockholders of Holdings.
 
 Innovative Logistics Techniques, Inc. (”Innovative”), a Virginia corporation, formed in March 1989, is a solutions oriented organization providing supply chain logistics and information technology solutions to clients in the public and private sector. Innovative's services and solutions are provided to a wide variety of clients, including the Department of Defense, Department of Homeland Security and civilian agencies in the federal government and state and local municipalities, as well as selected commercial organizations.
 
 As more fully described in Note 3, on October 15, 2009, uKarma Corporation, formed in June 2001 (“uKarma”), a publicly traded Nevada corporation, and Galen entered into an agreement to merge (the "Merger Agreement") in a reverse merger transaction. In June 2010, the rights to merge were assigned directly to Holdings. The merger transaction was closed on August 17, 2010, and the Holdings stockholders have become the controlling stockholders of uKarma and the business of Holdings will continue. Under this transaction, Innolog Holdings Corporation's name was changed to Innolog Group Corporation and became a wholly owned subsidiary of uKarma Corporation. uKarma Corporation's name was changed to Innolog Holdings Corporation.
 
 Innolog Holdings Corporation (formerly uKarma Corporation) and its wholly owned subsidiaries are   referred to herein as the “Company.”
  8
 
 Note 3: Merger Agreement
 
 On August 11, 2010, uKarma, GCC Merger Sub Corp., it’s wholly-owned Nevada subsidiary (“Merger Sub”), Galen, and Holdings, entered into an Amended and Restated Merger Agreement (“New Agreement”).  The New Agreement provided that Holdings would be merged with Merger Sub such that Innolog would be a wholly owned subsidiary of uKarma (“Acquisition”).  Pursuant to the Acquisition, Holdings common stockholders received one share of uKarma common stock for every share of Holdings common stock they held (“Common Stock Ratio”).  Likewise, holders of Holdings Series A Preferred Stock received one share of uKarma Series A Preferred Stock for every share of Holdings Series A Preferred Stock they held.  Holders of options and warrants to purchase Holdings common stock received comparable options and warrants to purchase uKarma common stock with the exercise price and number of underlying uKarma shares proportional to the Common Stock Ratio.  Holdings would also pay uKarma $525,000 in cash (which included past advances from Galen) in connection with the intended acquisition.
 
 uKarma completed the acquisition of all of the equity interests of Innolog  held by all equity holders of Holdings (“Innolog Owners”) through the issuance of 8,882,545 shares of common stock of uKarma and 36,964,758 restricted shares of convertible Series A Preferred Stock to the Innolog Owners. Immediately prior to the Merger Agreement transaction, uKarma had 4,747,428 shares of common stock issued and outstanding. Immediately after the issuance of the shares to the Innolog Owners, uKarma had 13,629,973 shares of common stock issued and outstanding and 36,964,758 shares of convertible Series A preferred stock issued and outstanding.
 
 As a result of the Acquisition, Holdings’ stockholders became the controlling stockholders, and Holdings became uKarma’s wholly owned subsidiary.  In connection with acquiring Holdings, uKarma indirectly acquired the business and operations of Holdings’ wholly owned subsidiary, Innovative.
 
 All of uKarma’s directors and officers resigned, and designees of Holdings were appointed as new directors and officers of the Company following the Closing.  Effective at merger, the name of uKarma Corporation was changed to Innolog Holdings Corporation.
 
 Concurrently with the Merger, uKarma’s current existing operations were assigned to a wholly owned subsidiary called Awesome Living, Inc. (“AL”).  The Board of Directors and stockholders of uKarma holding a majority of the then outstanding common stock approved a spin-off of AL equity securities to uKarma’s common stockholders of record as of August 12, 2010. These financial statements are presented reflecting the spin off.
 
 Since the owners and management of the Company possessed voting and operating control of the combined company after the share exchange, the transaction constituted a reverse acquisition for accounting purposes, as contemplated by FASB ASC 805-40 and corresponding ASC 805-10-55-10, 12 and 13.  Under this accounting, the entity that issues shares (uKarma – the legal acquirer) is identified as the acquiree for accounting purposes.  The entity whose shares are acquired (Holdings) is the accounting acquirer.
 
 For SEC reporting purposes, Holdings is treated as the continuing reporting entity that acquired uKarma.  The reports filed after the transaction have been prepared as if Holdings (accounting acquirer) were the legal successor to uKarma’s reporting obligation as of the date of the acquisition.  Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of Holdings for all periods presented.
 
 In connection with the reverse acquisition, all share and per share amounts of Holdings have been retroactively adjusted to reflect the legal capital structure of uKarma pursuant to FASB ASC 805-40-45-1.
  9
 
 Note 4: Going Concern
 
 The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern.  However, the Company has sustained substantial operating losses since inception, and had a stockholders’ deficit (defined as total assets minus total liabilities) of $8,893,311 and $8,326,637 at March 31, 2011 and December 31, 2010, respectively.  There are many delinquent claims and obligations, such as payroll taxes, employee income tax withholdings, employee benefit plan contributions, delinquent loans payable and accounts payable, that could ultimately cause the Company to cease operations.
 
 The Company anticipates it may not have sufficient cash flows to fund its operations over the next twelve months without the completion of additional financing.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.
 
 The report from the Company’s independent registered public accounting firm relating to the December 31, 2010 consolidated financial statements states that there is substantial doubt about the Company’s ability to continue as a going concern.
 
 Management believes that actions presently being taken such as continued expense reduction, the implementation of a renewed sales effort and the capital financing efforts of the Company will help to revise the Company’s operating and financial requirements.
 
 Note 5: Summary of Significant Accounting Policies
 
 Principles of Consolidation:
 
 The consolidated financial statements include the assets, liabilities and operating results of Holdings and it’s wholly owned subsidiary since the date of the acquisition.  All significant intercompany accounts and transactions have been eliminated in consolidation.
 
 Use of Estimates:
 
 Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates.
 
 Reclassifications:
 
 Certain items in prior financial statements are reclassified to conform to the current presentation.
 
 Contract Revenue Recognition:
 
 Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred plus a proportionate amount of fees earned. Revenue on fixed-price contracts is recognized on the percentage-of-completion method based on costs incurred in relation to total estimated costs. Revenue on time-and-materials contracts is recognized at contractual rates as hours and out of pocket expenses are incurred. Anticipated losses on contracts are recognized in the period they are first determined. In accordance with industry practice, amounts relating to long-term contracts, including retainages, are classified as current assets although an undeterminable portion of these amounts is not expected to be realized within one year. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.
  10
 
 Concentration of Credit Risk:
 
 The Company maintains its cash, which, at times may exceed federally insured limits, in bank deposit accounts with a high credit quality financial institution. The Company believes it is not exposed to any significant credit risk with regards to those accounts. Accounts receivable principally consist of amounts due from the federal government and large prime federal government contractors. Management believes associated credit risk is not significant.
 
 Allowance for Doubtful Accounts:
 
 The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. Estimated losses are based on historical collection experience coupled with review of the current status of existing receivables.  The allowance for doubtful accounts amounted to $89,112 at March 31, 2011 and at December 31, 2010.
 
 Property and Equipment:
 
 Property and equipment are stated at cost and depreciated by the straight-line method over estimated useful lives which are as follows:
 
 Office furniture and equipment
3 to 5 yearsComputer hardware and software
2 to 5 years
 
 Leasehold improvements and lease acquisition costs are amortized over the shorter of the life of the applicable lease or the life of the asset. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.
 
 Long-Lived Assets:
 
 The Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable.  An impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying amount. If impairment is indicated, the amount of the loss to be recorded is based on an estimate of the difference between the carrying amount and the fair value of the asset.  Fair value is based upon discounted estimated cash flows expected to result from the use of the asset and its eventual disposition and other valuation methods.
 
 Goodwill:
 
 In accordance with FASB ASC 350, “Intangibles – Goodwill and Other”, goodwill is tested for impairment at least annually. Goodwill was written off during the nine months ended September 30, 2010. There was no impairment loss recorded for the period ended March 31, 2010.
 
 Income Taxes:
 
 The Company applies the provisions of FASB ASC 740, “Income Tax” which clarifies the accounting for uncertainty in tax positions. FASB ASC 740 requires the recognition of the impact of a tax position in the financial statements if that position is more likely than not to be sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. At March 31, 2011, the Company has no unrecognized tax benefits.
 
 The Company files a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method under FASB ASC 740, whereby deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities, and their respective tax basis, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized as income in the period that includes the enactment date. Estimates of the realization of deferred tax assets are based-on the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.
 
 Stock Based Compensation:
 
 The Company accounts for stock based compensation in accordance with FASB ASC 505-50, “Equity Based Payments to Non-Employees”.  Under the fair value recognition provisions of FASB ASC 505-50, the Company measures stock based compensation cost at the grant date based on the fair value of the award and recognizes expense over the requisite service period.
 
 Debt Issuance Costs:
 
 Debt issurance costs are capitalized and amortized over the term of the related loan.
  11
 
 Fair Value Measurements:
 
 FASB ASC 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value.   That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
 
 Level 1:  Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.
 
 Level 2:  Inputs to the valuation methodology include:
 ·
quoted prices for similar assets or liabilities in active markets;
 ·
quoted prices for identical or similar assets or liabilities in inactive markets;
 ·
inputs other than quoted prices that are observable for the assets or liability;
 ·
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
  If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
 
 Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
 The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of
 unobservable inputs.
 
 The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:
 
 The carrying values of accounts receivable, accounts payable, accrued expenses, notes payable, and the line of credit payable approximate fair value due to the short term maturities of these instruments.
 
 Contingent consideration payable is based on the revenues and earnings projections of Innovative discounted by the rate of the seller note.
 
 The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
 
 The Company has determined that the contingent consideration liability falls within level three of the hierarchy. The balance was written down to zero during 2010.
  12
 
 Earnings (loss) per Share:
 
 Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes the dilutive potential of shares of common stock if their effect is anti-dilutive.
 
 The computation of basic and diluted loss per share for the three months ended March 31, 2011 and March 31, 2010 is equivalent since the Company reported a net loss and the effect of any common stock equivalents would be anti-dilutive.
 
 Recent Accounting Pronouncements:
 
 Management does not believe that any recently issued, but not yet effective accounting standards, if adopted, will have a material effect on the Company's financial statements.
 
 Note 6:  Major Customers
 
 Revenues from prime contracts and subcontracts with U.S. Government agency customers in aggregate accounted for approximately 100% of total revenues for the three months ended March 31, 2011 and March 31, 2010.
 
 Note 7:  Accounts Receivable
 
 Accounts receivable consisted of the following as of March 31, 2011 and December 31, 2010:
 
 March 31,

2011


December 31,

2010Billed receivables

$
743,621


$
672,466Unbilled receivables


68,064



158,124Reserve for bad debts


(89,112
)


(89,112
)$
722,573


$
741,478
 
 Contract receivables from prime contracts and subcontracts with U.S. Government agency customers in aggregate accounted for 100% of total contract receivables at March 31, 2011 and December 31, 2010.
 
 Note 8:  Line of Credit
 
 In April 2009, Holdings entered into a credit agreement with Eagle Bank under which it may borrow up to $500,000. Borrowings under the agreement are guaranteed by eight individuals, who are directly or indirectly related to Holdings. The borrowings are payable upon the bank’s demand. Interest is payable monthly at the bank’s prime rate (as defined) plus 1%.  At March 31, 2011, the interest rate was 5%.  As of March 31, 2011, the Company was not in compliance with certain covenants in the agreement.
  13
 
 Note 9:  Notes Payable
 
 As of March 31, 2011 and December 31, 2010, $530,000 and $471,905 were outstanding, respectively, on notes payable to individuals, trusts, and corporations not related to the Company, of which maturity dates vary from October 11, 2010 to May 20, 2011. Some of the notes are collateralized by the Company’s accounts receivable. Interest charges are a percentage per annum or a flat fee as detailed in each note. New loans totaled $537,500 for the three months ended March 31, 2011. For new notes during 2011, the lenders were granted warrants to purchase 450,000 shares of Innolog common stock at a strike price of $0.01 per share, and 150,000 shares of Innolog common stock at a strike price of $0.50 per share.   In addition, for one of the notes in the amount of $100,000, the lender received 402,000 shares of Series A Convertible Preferred Stock and for other notes totaling $150,000 the lender received 500,000 shares of common stock from the former sole stockholder of the Company, Galen.  In exchange, the Company will issue 1,000,000 shares of its common stock to Galen.  The value of these shares was $64,700 on the date of the loan.  The entire amount was charged to expense during the three months ended March 31, 2011 since the loan was due in March 2011.  Of these loans, $317,500 have matured and are in default. Additional interest is due upon default and accrues at 15% per annum or 10% per month.
 
 Note 10:   Related Party Transactions
 
 Notes Payable:
 
 In March 2009, Holdings and Innovative (the “Borrowers”) entered into an agreement (the “Loan Agreement”) with eight individuals (the “Lenders”) who are directly or indirectly related to Holdings, under which the Borrowers may borrow up to $2,000,000. The total borrowings as of March 31, 2011 and December 31, 2010 amounted to $1,499,384, collaterized by substantially all assets of the Borrowers and guaranteed by Galen. Repayment of the loan is due at the Lenders’ demand. In order to make the loan to the Borrowers, the Lenders borrowed $1,499,384 from Eagle Bank.  The promissory note to Eagle Bank matured in March 2011 and interest was payable monthly at the bank’s prime rate (as defined) plus 1%.  Interest is directly paid by the Company to the bank on a monthly basis. This loan is currently under negotiation to be renewed by the bank. In addition to the interest due to the bank, during 2009, the Company granted warrants to the Lenders under which they may purchase 1,760,000 common shares of the Company’s common stock, with a strike price of $0.023 per share.  The warrants expire on March 31, 2014. The fair value of these warrants amounted to $520,000 and was amortized to interest expense during 2009, with a strike price of $0.023 per share.  The warrants expire on March 31, 2014. The fair value of these warrants amounted to $520,000 and was amortized to interest expense during theyear ended December 31, 2009.  Total interest incurred on this loan amounted to approximately $19,000 during the three months ended March 31, 2011 and 2010, respectively.
 
 In March 2010, Galen assigned a note payable due to a director of the Company in the amount of $325,000 to the Company.  Of this amount $279,636 was treated as a dividend to Galen, which was the sole stockholder at the time, and $45,364 related to expenses incurred by Galen on behalf of the Company.  This note was due on June 30, 2010.  In March 2011, the note was amended. Principal  and interest of $32,500 are due on or prior to the maturity date of March 21, 2012. Warrants to purchase 325,000 shares of the Company’s common stock at a strike price of $.50 were granted in conjunction with this note. There was no interest incurred on this note during the three months ended March 31, 2011 and 2010.
 
 As of March 31, 2011 and December 31, 2010, $255,000 and $160,000 were outstanding, respectively, on other notes payable to related parties. Maturity dates vary from January 9, 2011 to February 10, 2012. New and renewed loans totaled $150,000 for the three months ended March 31, 2011. These parties were also granted warrants to purchase 200,000 shares of Innolog common stock. The strike price to purchase the common stock is $0.50 per share with a 5 year expiration date. Interest is charged at a flat fee, as defined in each agreement. Additional interest is due upon default. Of these notes, $75,000 were in default as of March 31, 2011. Total interest incurred on these notes amounted to $20,051 during the three months ended March 31, 2011. Total interest accrued on these notes amounted to $51,958 and $37,705 as of March 31, 2011 and December 31, 2010.
  14
 
 Loans from Former Stockholder:
 
 As of March 31, 2011 and December 31, 2010, $245,350 and $251,350, respectively, was outstanding on notes payable to a former stockholder. During the three months ended March 31, 2011 and March 30, 2010, interest of $18,547 and $24,000 was incurred on these notes. As of March31, 2011 and December 31, 2010 $9,297 and $0, respectively, of interest was accrued on these notes.  All of these notes are in default and carry a default interest rate of 15% per annum. The loans are currently being renegotiated.
 
 In November 2010, one of the notes in the amount of $57,332, including interest of $17,200, was converted into 30,000 shares of Innolog’s $0.001 par value Series A Convertible Preferred Stock, which was valued at $0.01 per share.
 
 Management Fees, Affiliate:
 
 Pursuant to an Executive Management Agreement with Galen entered into on April 1, 2009, the Company was being charged a management fee of $100,000 per month limited to15% of the gross revenue of the Company for each twelve month period, effective with the consummation of the agreement. Management fees amounted to zero and $244,510 during the three months ended March 31, 2011 and 2010, respectively. In addition, during the three months ended March 31, 2010, Galen charged the Company $264,018 for costs incurred by Galen in excess of the management fees. The agreement expired on September 30, 2010.
 
 Dividends to Galen:
 
 In April 2009, the Company entered into an interest-free credit agreement with an affiliate under which the affiliate could borrow up to $1,500,000 through April 15, 2010.  As of December 31, 2009, the outstanding balance was $740,000.  As of December 31, 2009, amounts due to three of the Company’s affiliates under common control amounted to $521,189.  There was no interest charged on these payables and no scheduled due date,  As of December 31, 2009, these amounts were offset and $218,811 was presented as an offset to equity.  In June 2010, the $740,000 due under the note receivable was forgiven, and the amount due to affiliates was offset against the $740,000 and treated as a dividend during 2010 since all of these amounts related to the Company’s sole stockholder or affiliates under common control at the time.
 
 During the three months ended March 31, 2010, net advances to Galen amounted to $264,018 and represented operating expenses incurred by Galen on behalf of Innolog, mainly consisting of consulting fees, payroll, rent expense, and health care expense. Thus, this amount was charged to expense by the Company during the three months ended March 31, 2010.
 
 Consulting Agreement:
 
 In May 2010, Emerging Companies, LLC entered into an agreement with the Company to provide consulting services to the Company relating to merger and acquisition transactions, interfacing with the public markets and other advisors, and other core business advisory services.  Two of the Company’s executive officers and directors are members of Emerging Companies, LLC.  On July 29, 2010, the agreement was amended so that the advisor was granted warrants to purchase 500,000 shares of the Company’s common stock at $.50 per share.
 
 Legal Fees:
 
 During the three months ended March 31, 2011, the Company incurred legal fees in the amount of $100,000 on behalf of its executive officer in defense of an investigation by a governmental agency..
  15
 
 Note 11:  Commitments and Contingencies
 
 Leases:
 
 The Company leases office space in Washington, D.C.; Orlando, Florida; Springfield, Virginia; and McLean, Virginia under operating leases expiring at various dates through 2013. The premises leases contain scheduled rent increases and require payment of property taxes, insurance and certain maintenance costs. The minimum future commitments under lease agreements existing as of March 31, 2011 are approximately as follows:
 
 Year ending December 31,2011

$
172,0002012


128,0002013


33,000$
333,000
 
 Total rent expense amounted to $80,258 and $182,453 for the three months ended March 31, 2011 and 2010, respectively.
 
 In 2010, Innovative vacated its office space prior to expiration of the lease. The landlord subsequently filed a lawsuit against the Company under which it pursued total damages of approximately $1,000,000, which approximates the rent charges for the remaining term of the lease. On February 14, 2011, Innovative entered into a settlement agreement in which it agreed to a payment of $350,000 on May 31, 2011. In the event, Innovative does not make the payment timely, it has agreed to a confessed judgment in the amount of  $936,510 and this amount has been included in other accrued liabilities on the balance sheet as of March 31, 2011 and December 31, 2010.
 
 Late Deposit of Payroll Taxes and Employee Income Tax Withholdings:
 
 During 2011, 2010, and part of 2009, the Company has not made deposits of federal and state employer payroll taxes, as well as employee income tax withholdings.  As of  March 31, 2011 and December 31, 2010, the total of payroll tax accrued and income tax withheld balances including penalties and interest, amounted to $2,203,038 and $1,791,250, respectively, which is included in accrued salaries and benefits on the balance sheet.   The Company is currently in discussions with the taxing authorities to develop a payment plan.
 
 Employment Agreement:
 
 On April 1, 2009, Innovative entered into an employment agreement with its President and Chief Executive Officer through March 31, 2014, which provides for a minimum annual salary of $198,000. At March 31, 2011, the total commitment, excluding incentives, was $594,000.
 
 Contracts:
 
 Substantially all of the Company’s revenues have been derived from prime or subcontracts with the U.S. government. These contract revenues are subject to adjustment upon audit by the Defense Contract Audit Agency.  Audits have been finalized through 2005. Management does not expect the results of future audits to have a material effect on the Company’s financial position or results of operations.
  16
 
 Delinquent payables
 
 The Company has been delinquent in numerous payables to different parties some of which filed law suits against the Company. All necessary accruals have been made as of March 31, 2011 and December 31, 2010 and are included in accounts payable and other accrued liabilities.
 
 Note 12: Income Taxes
 
 The Company’s effective income tax rate is lower than what would be expected if the federal statutory rate were applied to income from continuing operations primarily because of the deferred tax asset being fully reserved.
 
 Temporary differences giving rise to the deferred tax assets consist primarily of the excess of the goodwill and other intangible assets for tax reporting purposes over the amount for financial reporting purposes, and net operating loss carry forwards.  The Company’s ability to utilize the federal and state tax assets is uncertain, therefore the deferred tax asset is fully reserved.
 
 At March 31, 2011, the Company had net operating loss carry forwards of approximately $5.6 million for federal and Virginia state tax purposes expiring through 2030.
 
 The Company recognizes interest and penalties related to income tax matters in interest expense and operating expenses, respectively.  As of March 31, 2011, the Company has no accrued interest and penalties related to uncertain tax positions.
 
 Note 13: Employee Benefit Plan
 
 Innovative has a defined contribution employee benefit plan covering all full time employees who elect to participate. The plan provides for elective salary deferrals by employees and annual elective matching contributions. There were no employer contributions for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively.
 
 Innovative has been late in making deposits of employee deferrals in the amount of $192,201. As of March 31, 2011, an estimated late deposit penalty of $32,000 has been accrued and included in accrued salaries and benefits on the balance sheet. The Department of Labor is reviewing Innovative’s employee benefit plan document as well as other records to determine the status of compliance. The outcome is undetermined as of the date of these financial statements.
 
 Note 14: Capital Stock
 
 Common Stock:
 
 As of December 31, 2009, 100,000,000 shares of $.001 par value common stock were authorized and 20,000,000 shares of common stock were issued and outstanding.  In May 2010, the Company consummated a .44-for-1 reverse stock split, thereby decreasing the number of issued and outstanding shares to 8,882,545, and increasing the par value of each share to $0.0023.
 
 In connection with the merger with uKarma, uKarma’s Articles of Incorporation were amended such that there are 200,000,000 shares of $.001 par value common stock authorized and 13,629,973 shares of common stock issued and outstanding. The common stock amount has been changed from $20,000 to $13,630 to reflect the change in par value.
 
 During the three months ended March 31, 2011, 500,000 shares of preferred stock were converted to 500,000 shares of common stock.
 
 As of March 31, 2011, there were 14,129,973 shares of common stock outstanding.
  17
 
 Preferred Stock:
 
 The Company has authorized 50,000,000 shares of preferred stock, with a par value of $0.001 per share (“Preferred Stock”). The Preferred Stock may be issued from time to time in series having such designated preferences and rights  and such limitations as the Board of Directors may determine.
 
 The Company has designated 38,000,000 shares of the preferred stock as Series A Convertible Preferred Stock (“Series A Stock”). The holders of Series A Stock have voting rights with a $2.00 liquidation preference per share, and may convert each share of Series A Stock into one share of common stock at any time.  Series A Stock converts automatically upon the occurrence of an offering meeting certain criteria and the sale of the Company. Holders of the Series A Stock are entitled to accrue dividends based on the prior fiscal year’s net income equal to 10% of such net income.
 
 During the three months ended March 31, 2011, 500,000 shares of preferred stock were converted to 500,000 shares of common stock.
 
 As of March 31, 2011, there were 36,894,758 shares of Series A Stock outstanding and no dividends have been accrued.
 
 Dividends:
 
 As of the year ended December 31, 2009, the net amount due from Galen, totaling $218,811, was reclassified to equity and was treated as a dividend to Galen, the Company’s sole stockholder at the time, during the three months ended March 31, 2010. In addition, during the three months ended March 31, 2010, the Company assumed two notes payable from Galen totaling $359,405. Of this amount, $279,636 was recorded as dividends to Galen.
 
 Stock Warrant Activity:
 
 On March 31, 2009, the Company granted 4,000,000 warrants to various affiliated individuals in conjunction with their guarantee of the Company’s line of credit (Note 8) and their loans to the Company (Note 10).  The warrants had an exercise price of $0.01 per share and a life of five years.  All warrants were fully vested on the date of grant.  The fair value of the warrants was $520,000 and was charged to interest expense for the period from March 23, 2009 (inception) to December 31, 2009. In May 2010, the Company reverse split the shares of common stock covered by these warrants on a .44 to 1 basis to 1,760,000 shares with an exercise price of $.023 as a result of the reverse stock split.
 
 The following assumptions were used in arriving at the fair value of the above noted warrants:
 
 Expected dividend yield


0
%Expected volatility


70
%Average risk free interest rate


1.67
%Expected life (in years)


2.5
 
 For the three months ended June 30, 2010, the Company granted 39,106,857 warrants to various individuals in conjunction with the individuals lending the Company working capital (Notes 9 and 10) or in conjunction with the assignment of the merger rights with a public company. The warrants have an exercise price of $.50 and a life of five years. All warrants were fully vested on the date of the grant. The Company has determined through a Black Scholes analysis that the fair value of the warrants was zero at the time of issue.
  18
 
 The following assumptions were used in arriving at the fair value of the above noted warrants:
 
 Expected dividend yield


0
%Expected volatility


67
%Average risk free interest rate


1.79
%Expected life (in years)


5.0
 
 For the three months ended September 30, 2010, the Company granted 1,515,000 warrants to various individuals in conjunction with the individuals lending the Company funds for working capital (Notes 9 and 10). The warrants have an exercise price of $.50 and a life of five years. All warrants were fully vested on the date of the grant. The Company has determined through a Black Scholes analysis that the fair value of the warrants was zero at the time of issue.
 
 The following assumptions were used in arriving at the fair value of the above noted warrants:
 
 Expected dividend yield


0
%Expected volatility


68.64
%Average risk free interest rate


1.27
%Expected life (in years)


5.0
 
 For the three months ended December 31, 2010, the Company granted 553,000 warrants to various individuals in conjunction with the individuals lending the Company funds for working capital. 150,000 of the warrants have an exercise price of $.01 and a life of 5 years, and the remaining 403,000 of the warrants have an exercise price of $.50 and a life of five years. All warrants were fully vested on the date of the grant. The Company has determined through a Black Scholes analysis that the fair value of the warrants was zero at the time of issue.
 
 The following assumptions were used in arriving at the fair value of the above noted warrants:
 
 Expected dividend yield


0
%Expected volatility


63.07
%Average risk free interest rate


2.01
%Expected life (in years)


5.0
 
 For the three months ended March 31, 2011, the Company granted 1,457,500 warrants to various individuals in conjunction with loans made to the Company by the individuals for working capital (1,125,000) and for consulting (332,500). Of the warrants, 580,000 have an xercise price of $.01 and a life of 5 years, and the remaining 877,500 of the warrants have an exercise price of $.50 and a life of five years. All warrants were fully vested on the date of the grant. The Company has determined through a Black Scholes analysis that the fair value of the warrants was $23,200 at the time of issue.
 
 The following assumptions were used in arriving at the fair value of the above noted warrants:
 
 Expected dividend yield


0
%Expected volatility


68.53
%Average risk free interest rate


2.24
%Expected life (in years)


5.0
  19
 
 A summary of the Company’s warrant activity and related information is as follows:
 
 Warrant Summary

Warrants


Weighted Average

Exercise PriceOutstanding, January 1, 2010


1,760,000
(A)

$
.0227Granted


41,174,857


$
0.498Merger with uKarma


142,272


$
10.47Exercised


-


$
-Forfeited/Expired


-


$
-Outstanding, December 31, 2010


43,077,129


$
.5134Granted


1,457,500


$
.3050Exercised


-Forfeited/Expired


(22,480
)

$
11.12Outstanding, March 31, 2011


44,512,149


$
.4995
 
 (A)
The original warrant granted was 4,000,000 which is in equivalent of 1,766,000 after the .44-for-1 reverse stock split.
 
 At March 31, 2011, there were 44,512,149 warrants outstanding and exercisable.  These warrants had a weighted average exercise price of $.4995 and a weighted average remaining life of 50.75 months.
 
 Stock Option Plan:
 
 Upon merger with uKarma on August 17, 2010, the Company assumed uKarma’s existing stock option plan, the Deferred Stock and Restricted Stock Plan (the “Plan”), under which employees, officers, directors, consultants and other service providers may be granted non-qualified and/or incentive stock options. Generally, all options granted expire five years from the date of grant.  All options have an exercise price equal to or higher than the fair value of the Company’s stock on the date the options are granted.  Options generally vest over three years with the exception of the initial grants of 2010, which vested immediately.
 
 A summary of the status of stock options issued by the Company as of March 31, 2011 is presented in the following table. Shares have been adjusted to reflect uKarma’s reverse stock split of 11.120904 to 1 effective as of the date of merger:
 
 NumberofShares


WeightedAverage

ExercisePriceOutstanding at beginning of year 2011


13,451,980


$
0.503Granted


-Exercised/Expired/Cancelled


-Outstanding at March 31, 2011


13,451,980


$
0.503Exercisable at March 31, 2011


12,892,480


$
0.503
 
 The fair value of the stock options 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. The Company has determined through a Black Scholes analysis that the fair value of the options was zero at the time of issue.
  20
 
 The following assumptions were used in arriving at a fair value of the options:
 
 Weighted average fair value per options granted

$
0.00Risk free interest rate


1.27
%Expected dividend yield


0
%Expected lives

60 monthsForfeiture rate


0
%Expected volatility


68.64
%
 
 These stock options have a weighted average remaining life of 52.9 months.The intrinsic value is not greater than the grant price.
 
 Note 15: Quarterly adjustments
 
 On May 10, 2011 our Principal Executive Officer, Principal Financial Officer and the Chairman of our Audit Committee concluded that our previously issued consolidated financial statements for the three months ended March 31, 2010, the six months ended June 30, 2010 and the nine months ended September 30, 2010 should no longer be relied upon.  The consolidated financial statements for the three months ended March 31, 2010 and for the six months ended June 30, 2010 were included in amendments to our Current Report on Form 8-K which was originally filed with the Securities and Exchange Commission on August 16, 2010.  The amendments were filed with the Securities and Exchange Commission on August 16, 2010 and October 15, 2010, respectively.  The consolidated financial statements for the nine months ended September 30, 2010 were included in our Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on November 22, 2010.  The errors in the consolidated quarterly financial statements include the following:
 
 (i)
The notes payable were understated by $359,405;
 (ii)
Expenses incurred by related parties on behalf of the “Company” were misstated; and
 (iii)
Dividends to Innolog’s former sole stockholder were misstated.
  21
 
 The effects of the adjustments are illustrated below:
 
 Originally

Adjustment

RestatedReported

Required

AmountsThree months endedMarch 31, 2010Consolidated Balance SheetTotal Assets

$
4,866,665

(i) Increase in deposit of $19,846

$
4,886,511Total Liabilities

$
7,995,244

(i) increase in notes payable of $359,405

$
8,354,649Total Stockholder’s Equity

$
(3,128,579
)
(ii) increase in dividend paid of $77,185

$
(3,468,138
)(ii) increase in accumulated deficit of $264,018Consolidated Statement of OperationsNet Loss

$
(436,043
)
(ii) increase in other expense of $264,018

$
(700,061
)(ii) increase in net loss of $264,018Consolidated Statement of  Stockholder’s EquityCommon Stock

$
20,000

No adjustment

$
20,000Preferred Stock

$
0

No adjustment

$
0Additional Paid in Capital

$
520,000

No adjustment

$
520,000Accumulated Deficit

$
(3,247,317
)
(ii) increase in dividends paid of $77,185

$
(3,586,876
)(ii) increase in net loss of $264,018Six months endedJune 30, 2010Consolidated Balance SheetTotal Assets

$
4,365,000

(i) Increase in deposit of $19,846

$
4,384,846Total Liabilities

$
7,039,209

(i) increase in notes payable of $359,405

$
7,398,614Total Stockholder’s Equity

$
(2,674,209
)
(ii) increase in dividend paid of $415,150

$
(3,013,769
)(ii) decrease in accumulated deficit of $75,590Consolidated Statement of OperationsNet Loss

$
(553,772
)
(ii) increase in other expense of $151,523

$
(478,182
)(ii) decrease in bad debt expense of $227,113(ii) decrease in net loss of $75,590Consolidated Statement of  Stockholder’s EquityCommon Stock

$
20,000

No adjustment

$
20,000Preferred Stock

$
36,965

No adjustment

$
36,965Additional Paid in Capital

$
852,683

No adjustment

$
852,683Accumulated Deficit

$
(3,583,857
)
(ii) increase in dividends paid of $415,150

$
(3,923,417
)(ii) decrease in net loss of $75,590Nine Months EndedSeptember 30, 2010Consolidated Balance SheetTotal Assets

$
1,189,321

(i) Increase in deposit of $19,846

$
1,209,167Total Liabilities

$
7,738,380

(i) increase in notes payable of $359,405

$
8,097,785Total Stockholder’s Equity

$
(6,549,059
)
(ii) increase in dividend paid of $415,150

$
(6,888,619
)(ii) decrease in accumulated deficit of $75,590Consolidated Statement of OperationsNet Loss

$
(4,432,622
)
(ii) increase in other expense of $7,885

$
(4,357,032
)(ii) decrease in bad debt expense of $83,475(ii) decrease in net loss of $75,590Consolidated Statement of  Stockholder’s EquityCommon Stock

$
13,630

No adjustment

$
13,630Preferred Stock

$
37,365

No adjustment

$
37,365Additional Paid in Capital

$
862,653

No adjustment

$
862,653Accumulated Deficit

$
(7,462,707
)
(ii) increase in dividends paid of $415,150

$
(7,802,267
)(ii) decrease in net loss of $75,590
  22
 
 The Company intends to file an amended Form 8-K and an amended Form 10-Q as soon as practicable. The adjustments disclosed above have been included in our consolidated financial statements for the year ended December 31, 2010 and three months ended March 31, 2011.
 
 Note 16: Subsequent Events
 
 On April 27, 2011, the Company borrowed $25,000 from a trust. The loan carried a flat fee of $2,500 and a maturity date of May 5, 2011.
 
 On April 29, 2011 and May 5, 2011 the Company borrowed funds from a former stockholder. The total amount borrowed was $50,000. The loans carried a flat fee of $2,500 on each loan and a maturity date of May 29, 2011 and June 5, 2011, respectively.
 
 On May 6, 2011, the Company borrowed $20,000 from a related party.The loan carried a flat fee of $2,000 and a maturity date of June 6, 2011.
  23





Item 2: Management’s discussion and analysis of financial condition and results of operations





The following discussion and analysis of the results of operations and financial condition of Innolog Holdings Corporation and its wholly owned subsidiaries, Innolog Group Corporation, and Innovative Logistics Techniques, Inc., for the three months ended March 31, 2011 and 2010 should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included in the Current Report on Form 10-K that we filed with the Securities and Exchange Commission on May 18, 2011.  References to “the Company,” “we,” “our,” or “us” in this discussion refer to Innolog Holdings Corporation and its subsidiaries.





Our discussion includes forward-looking statements.  When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” or the negative of these terms and similar expressions identify forward-looking statements.  Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to our industry, our operations and results of operations and any businesses that we may acquire.  Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.  Some, but not all, of these risks include, among other things:





·
whether we will continue to receive the services of certain officers and directors;





·
whether we can implement our business plan by acquiring other businesses compatible with ours;





·
whether budgetary pressures in the federal and state governments will result in a reduction in spending which will be disadvantageous to us;





·
whether we can obtain funding when and as we need it; and





·
other uncertainties, all of which are difficult to predict and many of which are beyond our control.





Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.





Overview





We are a holding company designed to make acquisitions of companies in the government services industry.Our first acquisition, Innovative Logistics Techniques, Inc. is a solutions orientedprovider of logistics services primarily to agencies of the U.S. government, but also to state and local agencies and to private businesses.  We provide tools to our customers, which allow them to manage the flow of goods, information or other resources through the integration of information, transportation, inventory, warehousing, material handling and security.  Our goal is to expand our business, not only through the acquisition of new contracts but also through the acquisition of companies in the government services industry. Our home office is located in Fairfax, Virginia, although we have three additional offices located in Washington D.C., Tennessee and Florida.





The federal government is the largest consumer of services and solutions in the United States. We believe that the federal government’s spending will continue to increase in the next several years, driven by the expansion of national security and homeland security programs, the continued need for sophisticated intelligence gathering and information sharing, increased reliance on technology service providers due to shrinking ranks of government technical professionals and the continuing impact of federal procurement reforms.  For example, federal government spending on information technology has consistently increased in each year since 1980.  INPUT, an independent federal government market research firm, expects this trend to continue, with federal government spending on information technology forecasted to increase from approximately $76 billion in federal fiscal year 2009 to $90 billion in federal fiscal year 2014.  Moreover, this data may not fully reflect government spending on classified intelligence programs, operational support services to our armed forces and complementary technical services, which include sophisticated systems engineering.





Across the national security community, we see the following trends that we believe will continue to drive increased spending and dependence on technology support contractors:





o
Increased Spending on Defense and Intelligence to Combat Terrorist Threats





o
Increased Spending on Cyber Security





o
Continuing Focus on Information Sharing, Data Interoperability and Collaboration




24





o
Reliance on Technology Service Providers





o
Inherent Weaknesses of Federal Personnel Systems





Critical Accounting Policies and Estimates





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





While our significant accounting policies are more fully described in Note 4 to our consolidated financial statements, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this discussion and analysis:





Contract Revenue Recognition:





Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred plus a proportionate amount of fees earned. Revenue on fixed-price contracts is recognized on the percentage-of-completion method based on costs incurred in relation to total estimated costs. Revenue on time-and-materials contracts is recognized at contractual rates as hours and out of pocket expenses are incurred. Anticipated losses on contracts are recognized in the period they are first determined. In accordance with industry practice, amounts relating to long-term contracts, including retainages, are classified as current assets although an undeterminable portion of these amounts is not expected to be realized within one year. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.





Allowance for Doubtful Accounts:




The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. Estimated losses are based on historicalcollection experience coupled with a review of the current status of existing receivables.  The allowance for doubtful accounts amounted to $89,112 at March 31, 2011 and at December 31, 2010.





Long-Lived Assets:





The Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable.  An impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying amount. If impairment is indicated, the amount of the loss to be recorded is based on an estimate of the difference between the carrying amount and the fair value of the asset.  Fair value is based upon discounted estimated cash flows expected to result from the use of the asset and its eventual disposition and other valuation methods.





Goodwill:





In accordance with FASB ASC 350, “Intangibles – Goodwill and Other”, goodwill is tested for impairment at least annually. Goodwill was written off during the nine months ended September 30, 2010. There was no impairment loss recorded for the period ended March 31, 2010.


25





Income Taxes:





The Company applies the provisions of FASB ASC 740, “Income Tax” which clarifies the accounting for uncertainty in tax positions. FASB ASC 740 requires the recognition of the impact of a tax position in the financial statements if that position is more likely than not to be sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. At March 31, 2011, the Company has no unrecognized tax benefits.





The Company files a consolidated federal income tax return. Income taxes are accounted for using the asset and liability method under FASB ASC 740, whereby deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities, and their respective tax basis, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized as income in the period that includes the enactment date. Estimates of the realization of deferred tax assets are based-on the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.





Stock Based Compensation:





The Company accounts for stock based compensation in accordance with FASB ASC 505-50, “Equity Based Payments to Non-Employees”.  Under the fair value recognition provisions of FASB ASC 505-50, the Company measures stock based compensation cost at the grant date based on the fair value of the award and recognizes expense over the requisite service period.





Fair Value Measurements:





FASB ASC 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value.   That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:





Level 1:  Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.





Level 2:  Inputs to the valuation methodology include:


·
quoted prices for similar assets or liabilities in active markets;


·
quoted prices for identical or similar assets or liabilities in inactive markets;


·
inputs other than quoted prices that are observable for the assets or liability;


·
inputs that are derived principally from or corroborated by observable market data by correlation or other means.




If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.





Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.





The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.





The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:





The carrying values of accounts receivable, accounts payable, accrued expenses, notes payable, and the line of credit payable approximate fair value due to the short term maturities of these instruments.





Contingent consideration payable is based on the revenues and earnings projections of Innovative discounted by the rate of the seller note.


26


The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.




The Company has determined that the contingent consideration liability falls within level three of the hierarchy.   The balance was written down to zero during 2010.
 
 Recent Accounting Pronouncements:
 
 Management does not believe that any recently issued, but not yet effective accounting standards, if adopted, will have   a material effect on our financial statements.




Results of Operations





Comparison of Three Months Ended March 31, 2011 and 2010





The following table sets forth the results of our operations for the periods indicated:




Three Months

Ended March 31,

2011

(unaudited)


% of

Sales


Three Months Ended

March 31,

2010

(unaudited)


% of

SalesContract Revenue

$
1,303,706



100.0



1,712,729



100.0Direct Costs


633,651



48.6



764,063



44.6Other Operating Expenses


941,515



72.2



1,341,512



78.3Bad debt expense, affiliate


27,000



2.1



-



-Operating Loss


(298,460
)


(22.9
)


(392,846
)


(22.9
)Other income


-







170



-Other Expense


(356,114
)


(27.3
)


(307,385
)


(17.9
)Loss Before Income Tax


(654,574
)


(50.2
)


(700,061
)


(40.9
)Income Tax Expense










-Net Loss

$
(654,574
)


(50.2
)


(700,061
)


(40.9
)


Contract Revenues.  Revenues for the three month period ended March 31, 2011 decreased by 23.9% over the previous year.  The majority of this decrease is attributed to a decrease in short term contracts where the Company had sub contractors supplying most of the work in the prior year, thereby generating a very small margin to the Company.  It is our plan to replace these contracts with more profitable contracts in the future.





Direct Costs.  Direct costs increased slightly as a percentage of revenue for the three months ended March 31, 2011, due to a decrease in revenue with some costs remaining constant.





Other Operating Expenses.  Operating expenses include indirect contract costs, management fees paid to an affiliate in 2010 and costs not allocable to contracts.  Overall, for the three months period ended March 31, 2011, these expenses decreased by 29.8% from the previous year. The decrease occurred mostly in indirect contract costs in the areas of general and administrative expenses, rent, and fringe benefits.




Bad Debt Expense. Bad debt expense resulted from advances to the Company’s prior sole stockholder, Galen Capital Corporation, which could not be repaid. This is a one time expense and is not expected to occur in the future.





Operating Loss.  The Company decreased its operating loss by 24% in the three months ended March 31, 2011 from the previous year. This was due to a decrease in indirect contract costs as discussed above.


27





Other Income.  There was no other income for the three months ended March 31, 2011.





Other Expenses.  Other expenses for the three months ended March 31, 2011were made up of interest expense of $356,114.  For the three months ended March 31, 2010, interest expense was $74,385 and merger expenses were $233,000. Interest increased due to an increase in debt.





Net Loss.  Our net loss for the period decreased 6.5%.  For the three months ended March 31, 2011 and March 31, 2010, our net loss was $654,574 and $700,061, respectively. The decrease in net loss resulted from the Company’s cost cutting programs and the elimination of contracts deemed to be not sufficiently profitable. This was offset by a increase in interest expense.





Liquidity and Capital Resources





Cash Flows





Net cash used inoperating activities was $145,682 for the three months ended March 31, 2011.  Cash was used primarily to support operating losses.  Net cash flow provided by operating activities was $349,942 for the three months ended March 31, 2010. During the period ended March 31, 2010, cash was provided primarily as a result of an increase in accounts payable and accrued expenses in 2010.





Net cash flow used in investing activities was $1,413 for the three months ended March 31, 2011 and $126,451for the three months ended March 31, 2010.  In 2011, cash was used in investing activities for equipment purchases.  In 2010, these funds were used as payment for the purchase of Innovative Logistics Techniques, Inc.





Net cash flow provided by financing activities was $147,095 for the three months ended March 31, 2011 and zero for the three months ended March 31, 2010. Receipts of cash flow from financing activities during the three months ended March 31, 2011 primarily consisted of borrowings from and payments to related and non related party lenders.





Material Impact of Known Events on Liquidity





Other than as discussed herein, there are no known events that are expected to have a material impact on our short-term or long-term liquidity.





Capital Resources





We have financed our operations primarily through cash flows from operations and borrowings.  Since the Company is currently still operating at a negative cash flow, continued significant short term borrowings are necessary to cover working capital needs.  Typically, these loans are provided by our affiliates or other individuals although they are under no obligation to provide funding to us.





Aside from needing cash for our operations, we may require additional cash due to changes in business conditions or other future developments, including any investments or acquisitions we may decide to pursue.  To the extent it becomes necessary to raise additional cash in the future, we may seek to raise it through the sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or loans, issuance of common stock or a combination of the foregoing.  We currently do not have any binding commitments for, or readily available sources of, additional financing.  However, we are in discussions with several sources for financing commitments.  We cannot provide any assurances that we will be able to secure the additional cash or working capital we may require to continue our operations.





At March 31, 2011 we had cash on hand of zero.  We will need significant additional financing to fund our operations over the next 12 months.  The Company has sustained substantial operating losses since inception, and had a stockholders’ deficit (defined as total assets minus total liabilities) of $8,893,311 and $8,326,637 at March 31, 2011 and December 31, 2010, respectively.  There are many delinquent claims and obligations, such as payroll taxes, employee income tax withholdings, employee benefit plan contributions, delinquent loans payable and accounts payable, that could ultimately cause the Company to cease operations.





We may not have sufficient cash flows to fund our operations over the next twelve months without the completion of additional financing.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.





Because of our historic net losses and negative working capital position, our independent auditors, in their report on our financial statements for the year ended December 31, 2010, expressed substantial doubt about our ability to continue as a going concern.


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Contractual Obligations and Off-Balance Sheet Arrangements





Loan and Line of Credit





In March 2009, Innolog Holdings Corporation and Innovative Logistics Techniques, Inc. entered into an agreement with eight individuals, some of which are directors of the Company, to borrow up to $2,000,000 under a loan due on demand.  The loan is secured by the assets of both borrowers. Repayment of the loan is at the lenders’ demand. In order to make the loan, the lenders borrowed $1,499,384 from Eagle Bank. The promissory note to Eagle Bank matured in March 2011. The loan is in the process of renewal. In March 2009, Innolog Holdings Corporation entered into a $500,000 line of credit with Eagle Bank due on demand.  The line of credit is guaranteed by eight individuals, some of which are directors of the Company.  The line of credit bears interest at the prime rate plus 1%.  At March 31, 2011, the interest rate was 5%.  At March 31, 2011, both the loan and the line of credit were outstanding in the amounts of $1,499,384 and $497,570, respectively.





Loans From Former Stockholder





During the three months ended March 31, 2011, we received a loan totaling $12,500 from a former stockholder which was repaid. As of March 31, 2011 total loans outstanding from this stockholder totaled $245,350.





Loans From Related Parties





During the three months ended March 31, 2011, we incurred new related party loans totaling $100,000.  Total notes payable to related parties as of March 31, 2011 are $580,000.





Loans From Individuals





During the three months ended March 31, 2011, we borrowed $287,500 from various individuals not related to us.  Loans from unrelated individuals, totaling $530,000, were outstanding as of March 31, 2011.





Contractual Obligations





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





The following table summarizes our contractual obligations as of March 31, 2011, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.





Total


Less than 1

year


1-3 Years


3-5 Years


5 Years +Contractual Obligations:Bank Indebtedness

$
497,570



497,570





$
-


$
-Other Indebtedness


2,854,734



2,529,734



325,000



-



-Operating Leases


333,000



172,000



161,000Totals:

$
3,685,304



3,199,304



486,000


$
-


$
-





Off-Balance Sheet Arrangements





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


29





Item 3: Quantitative and Qualitative Disclosures about Market Risk





As a smaller reporting company we are not required to provide this information.





Item 4: Controls and Procedures.





Evaluation of Disclosure Controls and Procedures





As of March 31, 2011, we carried out an evaluation, under the supervision of and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.





Based on that evaluation, our principal executive officer and principal financial officer has concluded that as of March 31 2011, our disclosure controls and procedures were not effective due to the following material weaknesses.  A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses in our disclosure controls and procedures:





1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.





2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.





3. We do not have review and supervision procedures for financial reporting functions. The review and supervision function of internal control relates to the accuracy of financial information reported.  The failure to review and supervise could allow the reporting of inaccurate or incomplete financial information. Due to our size and nature, review and supervision may not always be possible or economically possible. Management evaluated the impact of our significant number of audit adjustments and has concluded that the control deficiency that resulted represented a material weakness.





4. We do not have adequate and qualified accounting staff to perform the accounting functions.





To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.





Remediation of Material Weaknesses





In April 2011, we retained the services of an outside accounting firm with experience in financial reporting to assist us with the Company’s accounting and the process of implementing internal controls to remediate these material weaknesses. Written documentation of the internal controls of financial reporting will be prepared after our material weaknesses have been eliminated and our disclosure controls and procedures are effective.





We anticipate that our internal controls will be implemented, tested, deficiencies remediated and


·
documented by the end of 2011.




30





Changes in Internal Controls





During the quarter covered by this report, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting except as noted above.





In April 2011, we retained the services of an outside accounting firm with financial reporting expertise to oversee and prepare the Company’s financial reporting. The changes to be made by these individuals to our internal control over financial reporting included the following:





·
Timely filing of reporting information.


·
Review of financial reporting information by personnel with sufficient experience.


·
Proper application of generally accepted accounting principles.





PART II - OTHER INFORMATION





Item 1: Legal Proceedings.





Not applicable.  There has been no change to the legal proceedings discussed in our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on May 18, 2011.





Item 1A: Risk Factors.





As a smaller reporting company we are not required to provide this information.





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





None





Item 3: Defaults Upon Senior Securities.





Loans from a former shareholder in the amount of $245,350 plus accrued interest of $9,297, loans from related parties in the amount of $75,000 plus accrued interest of $20,051, and loans from individuals not related  in the amount of $317,500 have matured and are in default.  As of the date of this filing, none of the noteholders has made a demand for repayment.





Item 4: Removed and Reserved.





Item 5: Other Information.





Not applicable.


31


Item 6: Exhibits.


The Exhibit Table below lists those documents that we are required to file with this report.





Number

Description2.1

Amended and Restated Merger Agreement by and among the Company  and Innolog Holdings Corporation as amended dated August 11, 2010(2)3.1

Amended and Restated Articles of Incorporation (1)3.2

Bylaws (2)3.3

Certificate of Amendment of the Articles of Incorporation (2)3.4

Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (2)3.5

Articles of Merger between GCC Merger Sub Corporation and Innolog Group Corporation filed August 18, 2010 with the Secretary of State of Nevada (3)10.1

Promissory Note dated January 10, 2011 in the principal amount of $125,000 issued by Innolog Holdings Corporation  in favor of Evan Gappelberg. *10.2

Promissory Note dated February 1, 2011 in the principal amount of $100,000 issued by Innolog Holdings Corporation  in favor of Evan Gappelberg. *10.3

Promissory Note dated February 7, 2011 in the principal amount of $75,000 issued by Innolog Holdings Corporation  in favor of Kay M. Gumbinner Trust*10.4

Promissory Note dated February 9, 2011 in the principal amount of $25,000 issued by Innolog Holdings Corporation  in favor of Kay M. Gumbinner Trust*10.5

Promissory Note dated February 15, 2011 in the principal amount of $50,000 issued by Innolog Holdings Corporation  in favor of Kay M. Gumbinner Trust*10.6

Extension Agreement dated February 26, 2011 issued by Innolog Holdings Corporation in favor of Kay M Gumbinner Trust.10.7

Extension Agreement dated March 25, 2011 issued by Innolog Holdings Corporation in favor of Kay M Gumbinner Trust10.8

Extension Agreement dated April 19, 2011 issued by Innolog Holdings Corporation in favor of Kay M Gumbinner Trust10.9

Security Agreement dated March 25, 2011 issued by Innolog Holdings Corporation in favor of Kay M Gumbinner Trust10.10

Promissory Note dated February 10, 2011 in the principal amount of $150,000 issued by Innolog Holdings Corporation  in favor of Harry Jacobson. *10.11

Promissory Note dated March 21, 2011 in the principal amount of $50,000 issued by Innolog Holdings Corporation  in favor of Harry Jacobson. *10.12

Promissory Note dated March 21, 2011 in the principal amount of up to $200,000 issued by Innolog Holdings Corporation  in favor of  Atlas Advisors LLC *21

Subsidiaries of Innolog Holdings Corporation (5)031.1

Rule 13a-14(a)/15d-14(a) Certification*31.2

Rule 13a-14(a)/15d-14(a) Certification*32.1

Section 906 Certification*


* Filed herewith.


(1)
Filed on February 12, 2007 as an exhibit to the Company’s Registration Statement on Form SB-2, and incorporated herein by reference.





(2)
Filed on August 13, 2010 as an exhibit to the Company’s Current Report on Form 8-K, and incorporated herein by reference.





(3)
Filed on October 15, 2010 as an exhibit to the Company’s Amendment No. 3 to Current Report on Form 8-K and incorporated herein by reference.




32


SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





INNOLOG HOLDINGS CORPORATIONDated:
May 23,2011
By:
/s/ William P. DanielczykName:
William P. DanielczykTitle:
Executive Chairman of the BoardPrincipal Executive OfficerDated:
May 23, 2011
By:
/s/ Michael J. KaneName:
Michael J. KaneTitle:
TreasurerPrincipal Financial Officer




33