UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended June 30,
2010





 ̈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 organization)
              
              (IRS
      Employer
                Identification
      No.)





499
North Canon Drive, Suite 308


Beverly
Hills, CA 90210


(Address
of principal executive offices)





(310)
998-8909


(Registrant's
telephone number, including area code)





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





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





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





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


(Do not
check if a smaller reporting company)





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





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each issuer's classes of common stock, as of
the latest practicable date:  52,794,482 issued and outstanding as of
August 10, 2010.





UKARMA
CORPORATION


TABLE OF
CONTENTS


TO
QUARTERLY REPORT ON FORM 10-Q


FOR
QUARTER ENDED JUNE 30, 2010




PagePART
      I
              FINANCIAL
      INFORMATIONItem
      1.
              Financial
      Statements
              
              1Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              2Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              7Item
      4.
              Controls
      and Procedures
              
              7PART
      II
              OTHER
      INFORMATIONItem
      1.
              Legal
      Proceedings
              
              8Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              8Item
      3.
              Defaults
      Upon Senior Securities
              
              8Item
      5.
              Other
      Information
              
              8Item
      6.
              Exhibits
              
              9Signatures
              
              10





PART
I - FINANCIAL INFORMATION





Item
1.  Financial Statements.





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




1




UKARMA
CORPORATION
 
 BALANCE
SHEETS (unaudited)
 
 As ofJune 30,
                  
                  
                  December 31,2010
                  
                  
                  2009ASSETSCurrent
      assets:Cash
                  
                  $
                  18,678
                  
                  
                  $
                  85Due
      from stockholder
                  
                  
                  149,673
                  
                  
                  
                  46,172Merger
      and acquisition receivable
                  
                  
                  14,500
                  
                  
                  
                  100,000Prepaid
      expenses
                  
                  
                  67,320
                  
                  
                  
                  67,380Inventory
                  
                  
                  18,108
                  
                  
                  
                  18,476Total
      current assets
                  
                  
                  268,279
                  
                  
                  
                  232,113Property
      and equipment, net of accumulated depreciation of $12,297 for 2010, and
      $9,742 for 2009
                  
                  
                  15,687
                  
                  
                  
                  18,242Production
      costs, net of accumulated amortization of $397,773 for 2010, and $335,864
      for 2009
                  
                  
                  221,312
                  
                  
                  
                  283,221TOTAL
      ASSETS
                  
                  $
                  505,278
                  
                  
                  $
                  533,576LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
      liabilities:Accounts
      payable
                  
                  $
                  275,321
                  
                  
                  $
                  318,396Accrued
      expenses
                  
                  
                  308,202
                  
                  
                  
                  176,546Notes
      payable to unrelated parties, including accrued interest of $561 for 2010,
      and $319 for 2009
                  
                  
                  8,561
                  
                  
                  
                  10,819Total
      current liabilities
                  
                  
                  592,084
                  
                  
                  
                  505,761Stockholders'
      equity (deficiency):Common
      stock, $0.001 par value; 100,000,000 shares authorized;
      52,794,482  shares issued and outstanding in 2010 and 2009,
      respectively
                  
                  
                  52,795
                  
                  
                  
                  52,795Preferred
      stock, $0.001 par value; 20,000,000 shares authorized, none
      issued
                  
                  
                  -
                  
                  
                  
                  -Paid-in
      capital
                  
                  
                  8,128,564
                  
                  
                  
                  7,807,670Accumulated
      deficit
                  
                  
                  (8,268,165
                  )
                  
                  
                  (7,832,650
                  )Total
      stockholders' equity (deficiency)
                  
                  
                  (86,806
                  )
                  
                  
                  27,815TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                  
                  $
                  505,278
                  
                  
                  $
                  533,576
 
 The
accompanying notes are an integral part of these financial
statements
  F-1
 
 UKARMA
CORPORATION
 
 STATEMENTS
OF OPERATIONS
 For
the three and six months ended June 30, 2010 and 2009 (unaudited)
 
 For three months ended
                          
                          
                          For six months endedJune 30,
                          
                          
                          June 30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009Sales
                          
                          $
                          75
                          
                          
                          $
                          4,392
                          
                          
                          $
                          784
                          
                          
                          $
                          17,823Cost
      of  sales
                          
                          
                          16
                          
                          
                          
                          371
                          
                          
                          
                          367
                          
                          
                          
                          1,144Gross
      profit
                          
                          
                          59
                          
                          
                          
                          4,021
                          
                          
                          
                          417
                          
                          
                          
                          16,679Selling,
      general and administrative expenses
                          
                          
                          216,911
                          
                          
                          
                          223,166
                          
                          
                          
                          428,611
                          
                          
                          
                          754,067Operating
      loss
                          
                          
                          (216,852
                          )
                          
                          
                          (219,145
                          )
                          
                          
                          (428,194
                          )
                          
                          
                          (737,388
                          )Other
      income (expense):Interest
      expense
                          
                          
                          (2,681
                          )
                          
                          
                          (7,068
                          )
                          
                          
                          (6,521
                          )
                          
                          
                          (14,567
                          )Total
      other income (expense)
                          
                          
                          (2,681
                          )
                          
                          
                          (7,068
                          )
                          
                          
                          (6,521
                          )
                          
                          
                          (14,567
                          )Net
      loss before income taxes
                          
                          
                          (219,533
                          )
                          
                          
                          (226,213
                          )
                          
                          
                          (434,715
                          )
                          
                          
                          (751,955
                          )Provision
      for income taxes
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          800
                          
                          
                          
                          800Net
      loss
                          
                          $
                          (219,533
                          )
                          
                          $
                          (226,213
                          )
                          
                          $
                          (435,515
                          )
                          
                          $
                          (752,755
                          )Loss
      per share - basic and diluted
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.02
                          )Weighted
      average number of shares
                          
                          
                          52,794,482
                          
                          
                          
                          37,420,288
                          
                          
                          
                          52,794,482
                          
                          
                          
                          34,624,054
 
 The
accompanying notes are an integral part of these financial
statements
  F-2
 
 UKARMA
CORPORATION
 
 STATEMENTS
OF CASH FLOWS
 For
the six months ended June 30, 2010, and 2009 (unaudited)
 
 For six months endedJune,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (435,515
                  )
                  
                  $
                  (752,755
                  )Adjustment
      to reconcile net loss to net cash used by operating
      activities:Depreciation
                  
                  
                  2,555
                  
                  
                  
                  2,498Amortization
      of production costs
                  
                  
                  61,909
                  
                  
                  
                  61,909Issuance
      of stock for services
                  
                  
                  -
                  
                  
                  
                  304,791Issuance
      of stock for loan fees
                  
                  
                  -
                  
                  
                  
                  6,000Stock-based
      compensation
                  
                  
                  95,894
                  
                  
                  
                  99,458(Increase)
      decrease in:Trade
      accounts receivable
                  
                  
                  -
                  
                  
                  
                  309Payroll
      tax refund receivable
                  
                  
                  -
                  
                  
                  
                  6,739Employee
      advances
                  
                  
                  -
                  
                  
                  
                  19,532Prepaid
      expenses
                  
                  
                  60
                  
                  
                  
                  3,406Inventory
                  
                  
                  368
                  
                  
                  
                  3,769Deposit
                  
                  
                  -
                  
                  
                  
                  6,380Increase
      (decrease) in:Accounts
      payable
                  
                  
                  (43,075
                  )
                  
                  
                  53,050Accrued
      expenses
                  
                  
                  131,898
                  
                  
                  
                  127,417Refundable
      good faith deposit
                  
                  
                  -
                  
                  
                  
                  50,000Net
      cash used by operating activities
                  
                  
                  (185,906
                  )
                  
                  
                  (7,497
                  )Cash
      flows from investing activities:Due
      from stockholder
                  
                  
                  (103,501
                  )
                  
                  
                  (7,000
                  )Purchase
      of property and equipment
                  
                  
                  -
                  
                  
                  
                  (121,900
                  )Net
      cash used by investing activities
                  
                  
                  (103,501
                  )
                  
                  
                  (128,900
                  )Cash
      flows from financing activities:Proceeds
      from notes payable
                  
                  
                  -
                  
                  
                  
                  26,354Repayments
      of note payable
                  
                  
                  (2,500
                  )
                  
                  
                  (30,499
                  )Proceeds
      from pending merger
                  
                  
                  310,500
                  
                  
                  
                  -Proceeds
      from sale of stock
                  
                  
                  -
                  
                  
                  
                  139,000Net
      cash provided by financing activities
                  
                  
                  308,000
                  
                  
                  
                  134,855Net
      increase (decrease) in cash
                  
                  
                  18,593
                  
                  
                  
                  (1,542
                  )Cash
      at beginning of year
                  
                  
                  85
                  
                  
                  
                  1,781Cash
      at end of period
                  
                  $
                  18,678
                  
                  
                  $
                  239Supplemental
      disclosures:Interest
      paid
                  
                  $
                  6,279
                  
                  
                  $
                  -Taxes
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Noncash
      investment and financing activities:Conversion
      of notes payable and accrued interest into common stock
                  
                  $
                  -
                  
                  
                  $
                  202,735Conversion
      of accrued compensation into common stock
                  
                  $
                  -
                  
                  
                  $
                  144,231
 
 The
accompanying notes are an integral part of these financial
statements
  F-3
 
 UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE
1 – NATURE OF OPERATIONS
 
 uKarma
Corporation (the “Company”) was incorporated under the name of OM Capital
Corporation in the State of Nevada on June 26, 2001.  On April 30,
2004, the Company changed its name to uKarma Corporation.  In 2006,
the Company relocated its headquarters 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 is
to  generate  initial  working  capital
and  build  a  community  of  loyal  customers.  From
there, the Company expects to expand its product offerings into proprietary
branded products primarily within the fitness and well-being multimedia and
nutraceutical markets.  As the brand image builds, the Company intends
to extend its brand systematically to other complementary consumer products that
meet its stringent product guidelines and are consistent with its message of
“total health and happiness for oneself and others.”
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP).
 
 Presentation of Interim
Information: The financial information at June 30, 2010 and for the three
and six months ended June 30, 2010 and 2009 are unaudited but include all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial information set
forth herein, in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information.
Accordingly, such information does not include all of the information and
footnotes required by GAAP for annual financial statements. For further
information refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2009.
 
 The
balance sheet as of December 31, 2009 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by U.S. GAAP for complete financial
statements.
 
 The
results for the three and six months ended June 30, 2010 may not be indicative
of results for the year ending December 31, 2010 or any future
periods.
 
 Use of Estimates: The
preparation of the accompanying financial statements in conformity with U.S.
GAAP requires management to make certain estimates and assumptions that directly
affect the results of reported assets, liabilities, revenue, and expenses.
Actual results may differ from these estimates.
 
 Revenue Recognition:
The Company generally recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. In instances where the final acceptance of the
product is specified by the customer, revenue is deferred until all acceptance
criteria have been met. Customers’ prepayments are deferred until products are
shipped and accepted by the customers. At June 30, 2010 and December 31, 2009,
no provisions were established for estimated product returns and allowances
based on the Company’s historical experience.
  F-4
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Concentration of
Cash: The Company places its cash with high quality financial
institutions. At times, cash balances may be in excess of the FDIC’s insurance
limits. Management considers the risk to be minimal.
 
 Inventories:
Inventories consist of finished goods and are stated at the lower of cost or
market, using the first-in, first-out method.
 
 Property and
Equipment: Property and equipment are valued at cost. Maintenance and
repair costs are charged to expense 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 June 30,
2010 and 2009 was $1,277 and $1,278, respectively. Depreciation expense for the
six months ended June 30, 2010 and 2009 was $2,555 and $2,498,
respectively.
  Production
Costs :Production costs
incurred for the master copies of the fitness videos are capitalized as an asset
since the costs will be recovered from future sales. The asset is amortized over
the estimated lives of the fitness videos using a revenue forecast method. As of
June 30, 2010 and December 31, 2009, total costs of $619,085 were capitalized.
    Fair Value of Financial
Instruments: All financial instruments are carried at amounts that
approximate estimated fair value.
 
 Income Taxes: The
Company accounts for income taxes in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income
Taxes” (“FASB ASC 740”). Under FASB ASC 740, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial statement reported
amounts at each period end, based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The provision for
income taxes represents the tax expense for the period, if any, and the change
during the period in deferred tax assets and liabilities. At June 30, 2010 and
December 31, 2009, the Company has established a full reserve against all
deferred tax assets.
 
 FASB ASC
740 also provides criteria for the recognition, measurement, presentation and
disclosure of uncertain tax positions. A tax benefit from an uncertain position
may be recognized only if it is “more likely than not” that the position is
sustainable upon examination by the relevant taxing authority based on its
technical merit.
 
 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 and
six months ended June 30, 2010 was negligible. Advertising expense for the three
months and six months ended June 30, 2009 was $6,952 and $15,987,
respectively.
 
 Net Loss per Share:
The Company applies FASB ASC 260, “Earnings per Share.” Basic earnings (loss)
per share is computed by dividing earnings (loss) available to common
stockholders by the weighted-average number of common shares outstanding.
Diluted earnings (loss) per share is computed similar to basic earnings (loss)
per share except that the denominator is increased to include additional common
shares available upon exercise of stock options and warrants using the treasury
stock method, except for periods for which no common share equivalents are
included because their effect would be anti-dilutive.
  F-5
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 Stock-Based
Compensation:  The Company applies FASB ASC 718, “Stock
Compensation”, when recording stock based compensation.  The fair
value of each stock option award is estimated on the date of grant using the
Black-Scholes option valuation model.  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.  The Company recognized pre-tax compensation
expense related to stock options of $47,947 and $95,894 for three months and six
months ended June 30, 2010, respectively.  The Company recognized
pre-tax compensation expense related to stock options of $47,947 and $99,458 for
the three and six months ended June 30, 2009, respectively.
 
 The
Company accounts for stock issued to non-employees in accordance with the
provisions of FASB ASC 505-50 “Equity Based Payments to Non-Employees” (“FASB
ASC 505-50”) and EITF Issue No. 00-18, “Accounting For Equity Instruments
That Are Issued To Other Than Employees for Acquiring, Or In Conjunction With
Selling, Goods Or Services.” FASB ASC 505-50 states that equity
instruments that are issued in exchange for the receipt of goods or services
should be measured at the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Under the guidance in Issue 00-18, the measurement date occurs as of the earlier
of (a) the date at which a performance commitment is reached or (b) absent a
performance commitment, the date at which the performance necessary to earn the
equity instruments is complete (that is, the vesting date).
 
 New Accounting
Pronouncements: 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.
  NOTE
3 – GOING CONCERN
 
 The
Company's financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business.  In the near term,
the Company expects operating costs to continue to exceed funds generated from
operations.  As a result, the Company expects to continue to incur
operating losses, and the operations in the near future are expected to continue
to use working capital.
 
 Management
of the Company is actively increasing marketing efforts to increase revenues.
The ability of the Company to continue as a going concern is dependent on its
ability to meet its financing arrangement and the success of its future
operations. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going
concern.
 
 NOTE
4 – PREPAID EXPENSES
 
 Prepaid
expenses consisted of the following:
 
 On April
25, 2008, the Company entered into an agreement with a coauthor for its diet and
nutrition book that it is self publishing and plans to market direct to
customers.  Pursuant to this agreement, the Company paid the coauthor
a $10,000 advance against future royalties.  The Company will pay the
coauthor a 5% royalty if the Company acts as the publisher or a 2 1⁄2% royalty if
the Company engages a third party publisher after the $10,000 advance is
recouped.  As of June 30, 2010 and December 31, 2009, the advance
payment of $10,000 is included in prepaid expenses.
  F-6
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE
4 – 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 June 30, 2010 and December 31, 2009, no advance
payment had been paid.
 
 On April
19, 2006, the Company entered into an agreement with a consultant to provide
consulting and advisory services for the Company, to appear in the Company’s
yoga, health, and wellness film productions, to assist in scriptwriting for the
projects such as classes, interviews and introductions, to participate in the
projects rehearsals, and to assist in marketing and promoting the projects.
Accordingly, the Company shall pay a royalty of 8% on the first $300,000 and 10%
on above $300,000 on all gross revenue, net of returns, refunds, chargebacks,
taxes, and shipping and handling charges. As of June 30, 2010 and December 31,
2009, there is a balance of $57,320 and $57,380, respectively, after advancing
$70,000 and deducting royalties from sales. Future royalty obligations will be
deducted from the current balance.
 
 NOTE
5 – PROPERTY AND EQUIPMENT
 
 Property
and Equipment consisted of the following:
 June 30,
                      
                      
                      December 31,2010
                      
                      
                      2009Furniture
      & Fixtures
                      
                      $
                      15,459
                      
                      
                      $
                      15,459Machinery
      & Equipment
                      
                      
                      12,525
                      
                      
                      
                      12,52527,984
                      
                      
                      
                      27,984Accumulated
      Depreciation
                      
                      
                      (12,297
                      )
                      
                      
                      (9,742
                      )Property
      and Equipment, net
                      
                      $
                      15,687
                      
                      
                      $
                      18,242
 
  F-7
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE 6
– ACCRUED EXPENSES
 
 Accrued
expenses consisted of the following:
 
 June 30,
                    
                    
                    December 31,2010
                    
                    
                    2009Accrued
      professional fees
                    
                    $
                    18,500
                    
                    
                    $
                    28,700Accrued
      salaries
                    
                    
                    288,102
                    
                    
                    
                    146,246Accrued
      income tax
                    
                    
                    1,600
                    
                    
                    
                    1,600Total
      accrued liabilities
                    
                    $
                    308,202
                    
                    
                    $
                    176,546
 
 NOTE 7
– NOTES PAYABLE
 
 The notes
payable to unrelated parties bear interest at 6% per annum and are due on
demand. As of June 30, 2010, the balance was $8,561, including accrued interest
of $561.  As of December 31, 2009, the amount outstanding was $10,819,
including accrued interest of $319.
 
 NOTE 8
– STOCKHOLDERS’ EQUITY
 
 During
the six months ended June 30, 2010, the Company did not issue any
shares.
 
 During
the six months ended June 30, 2009, the Board of Directors of the Company
approved the issuance of an aggregate 3,639,653 shares of Company’s common stock
to various providers in consideration of their services to the Company. 
The shares were valued and charged to operations based on the closing trading
price on the grant date, or $304,791 in the aggregate.
 
 On June
11, 2009, the Board of Directors of the Company approved the issuance of an
aggregate 17,348,271 restricted shares of common stock to its Chief Executive
Officer in consideration for cancellation of debt and deferred and accrued
compensation owed by the Company to the CEO pursuant to a Conversion Agreement
entered into between the Company and the CEO on June 11, 2009.  The
shares were valued based on the closing bid price on the grant date, or $346,966
in the aggregate.
 
 On June
11, 2009, the Board of Directors of the Company approved the issuance of an
aggregate 300,000 restricted shares of common stock to an individual in
connection with a loan made by him to the Company. The shares were valued based
on the closing bid price on the grant date, or $6,000 in the
aggregate.
 
 Through
June 30, 2009, the Company received $139,000 and sold 1,288,266 shares of the
Company’s common stock at a price of $0.06 to $0.15 per share in a self-private
placement offering.
  F-8
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE 9
– MERGER AND ACQUISITION
 
 On
October 19, 2009, the Company and Galen Capital Corporation (“GCC”) entered into
a Merger Agreement dated as of October 15, 2009 (“Agreement”) for a merger
between GCC and a subsidiary of the Company to be formed prior to closing such
that following the merger (“Merger” or “Transaction”), GCC would be a wholly
owned subsidiary of the Company.  This followed a previously executed
Letter of Intent between the Company and GCC dated June 11, 2009.
 
 As
consideration for the transaction, the Company would issue to GCC security
holders that number of shares of common stock on a fully diluted basis
(“Shares”) such that, following such issuance, GCC security holders would hold
95% of the Company’s outstanding common stock on a fully diluted
basis.  GCC common stock would be exchanged for the Company’s common
stock.  GCC’s convertible preferred stock, options, and warrants would
be exchanged for the equivalent of the Company’s preferred stock, options, and
warrants. In addition, GCC agreed to pay the Company an amount equal to
$275,000.
  On
December 22, 2009, the Company amended the Merger Agreement with GCC. Under the
amended agreement, the closing date was changed to May 15, 2010. (See note 13.)
GCC also agreed to pay the Company an amount equal to $475,000 (“Cash Payment”),
which replaced the previous agreement amount of $275,000.  As of June
30, 2010, $460,500 of the Cash Payment had been paid to uKarma as a
non-refundable deposit along with $36,000 of expenses. As of June 30, 2010
and December 31, 2009, the Company recorded a receivable of $14,500 and
$100,000, respectively, for the deposit.
 
 NOTE
10 – NET LOSS PER SHARE
 
 The
following table sets forth the computation of basic and diluted net loss per
share:
 
 For three months ended
                          
                          
                          For six months endedJune 30,
                          
                          
                          June 30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009Numerator:Net
      Loss
                          
                          $
                          (219,533
                          )
                          
                          $
                          (226,213
                          )
                          
                          $
                          (435,515
                          )
                          
                          $
                          (752,755
                          )Denominator:Weighted
      Average of Common Shares
                          
                          
                          52,794,482
                          
                          
                          
                          37,420,288
                          
                          
                          
                          52,794,482
                          
                          
                          
                          34,624,054Basic
      and Diluted Net Loss per Share
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.02
                          )
 
 There
were no dilutive securities for the three months and six months ended June 30,
2010 and June 30, 2009.
 
 For the
three and six months ended June 30, 2010 and 2009, there were 7,977,000 and
11,777,000 shares, respectively, of out-of-the-money stock options and warrants
excluded from the calculation because they are anti-dilutive.
  F-9
  UKARMA
CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS
(unaudited)
 
 NOTE
11 – STOCK WARRANTS
 
 During
the six months ended June 30, 2010, 3,800,000 warrants expired.
 
 As of
June 30, 2010, the Company’s remaining outstanding and exercisable warrants were
for the purchase of 2,682,000 shares of the Company’s common
stock.  The warrants have exercise prices ranging from $0.25 to $1.00
and will expire through October 2012.
 
 No stock
warrant expense was recognized for the three months and six months ended June
30, 2010 and June 30, 2009.
 
 NOTE
12 – LEGAL DISPUTE
 
 On June
17, 2009, Jeffrey Fischer (the “Landlord”) filed a complaint against uKarma
Corporation and Bill Glaser, our Chief Executive Officer, in the Los Angeles
Superior Court in Los Angeles, California. The Landlord claimed that we owe back
rent on the lease of our yoga and fitness studio in Sherman Oaks, California and
sought to recover $222,859.97 and evict us from the subject property. We denied
liability and contend that the Landlord never reimbursed us for a tenant
improvement allowance of $165,000 pursuant to the lease along with other
breaches by the Landlord. The judge in the cased denied a writ of attachment
motion that was submitted by the Landlord.  A settlement could not be
reached between the parties, and as such the Company vacated the property on
September 30, 2009.  On December 2, 2009, the Landlord filed a First
Amended complaint naming the Company, Mr. Glaser, and Fred Tannous, a director
of the Company, and a number of unrelated parties and adding additional causes
of actions and damages totaling $1,066,660.00.  The Company filed a demurer
that was heard and sustained by the court on March 2, 2010.  The Landlord
filed a Second Amended Complaint on April 23, 2010, and the Company filed a
demurer and Motion to Strike that was heard by the court on July 19,
2010.  The judge sustained our demurrer without leave to amend on two
causes of action in the Landlord’s complaint and sustained the remainder of the
demurrer.  On July 23, 2010, Landlord filed a Third Amended Complaint,
and the Company in turn filed another demurrer and Motion to Strike, which is
expected to be heard by the Court sometime in September 2010.  If any
part of the complaint survives the judge’s ruling to our demurer and Motion to
Strike, we plan to defend such claims that we believe are false and frivolous
along with initiating legal action against the Landlord for full recovery of all
tenant improvements incurred to date along with other damages.
 
 NOTE
13 – SUBSEQUENT EVENTS
  
  On August
3, 2010, the Company agreed to cancel an employment agreement with its Chief
Executive Officer and warrants to purchase 575,000 shares of common stock and
options to purchase 5,000,000 shares of common stock held by the
CEO.  In exchange, the Company will not be repaid for advances made to
the CEO in the amount of $168,173 as of August 3, 2010.  These
advances are reflected on the balance sheet as “Due from
stockholder.”
 
 On August
9, 2010, the Company entered into a Contribution Agreement with its newly formed
wholly owned subsidiary, Awesome Living, Inc., in which all of the Company’s
assets and liabilities (with the exception of those liabilities related to
public company expenses such as transfer agent, EDGAR filing, etc.) were
transferred and assumed by Awesome Living, Inc in exchange for 10,558,896 shares
of common stock of Awesome Living, Inc.
 
 On August
11, 2010, the Company executed an amendment to the Merger Agreement with
GCC.  Pursuant to the Agreement, Innolog Holdings Corporation, which
had formerly been a subsidiary of Galen, is contemplated to merge with the
Company and not GCC.  The Cash Payment changed to $525,000 from
$475,000 along with an additional $12,500 of expenses.
 
 On August
12, 2010, the Company established a record date of August 12, 2010 for a
planned spinoff of its wholly owned subsidiary, Awesome Living,
Inc.  It is contemplated that for every 5 shares of common stock of
the Company owned on the record date, each shareholder will receive 1 share of
common stock of Awesome Living, Inc. upon the effectiveness of the
spinoff.
    F-10




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





Forward
Looking Statements





The
following discussion and analysis of the results of operations and financial
condition of uKarma Corporation should be read in conjunction with our financial
statements as of and for the quarter ended June 30, 2010 and the notes to those
financial statements that are included elsewhere in this report.  Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations, and intentions.  Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth under
the Forward-Looking Information and Business sections in this
report.  We use words such as “anticipate,” “estimate,” “plan,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking
statements.





Overview





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





We
incurred net losses of approximately $122,488 in 2005, $1,397,922 in 2006,
$1,849,636 in 2007, 2,676,342 in 2008, and $1,743,449 in 2009. As of December
31, 2009, we had an accumulated deficit of $7,832,650.  Our limited
history of operations makes prediction of future operating results difficult. We
believe that period-to-period comparisons of our operating results should not be
relied on as predictive of our future results.





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





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





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


2


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




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





In
addition, we entered into an amendment to the merger agreement in which Galen
has agreed to pay the Company an amount equal to $475,000 (“Cash Payment”). As
of June 30, 2010, $460,500 of the Cash Payment had already been paid to the
Company as a non-refundable deposit along with $36,000 worth of
expenses.





On August
11, 2010, we entered into an amendment to the merger agreement with Galen in
which the parties agreed that Innolog Holdings Corporation (“IHC”), formerly a
subsidiary of Galen, will merge with Merger Sub, and Galen will no longer be
merging with Merger Sub.  In addition, the Cash Payment was increased
to $525,000 along with an additional $12,500 of expenses.





Our
obligations to close the Transaction will be subject to certain conditions of
the other party that must be satisfied or waived, including, among other things,
IHC shall pay the remaining portion of the Cash Payment and IHC shareholders
shall vote to approve the merger transaction.  IHC’s obligations to
close the Transaction will be subject to certain conditions of the other party
that must be satisfied or waived, including, among other things, Galen shall
have certain persons appointed as Company officers and directors.  The
Agreement may be terminated by any party if the closing does not occur by August
31, 2010 provided such terminating party is not in breach of this
Agreement.  The Company and IHC are targeting a closing on August 13,
2010 or August 16, 2010.  If the closing does not occur by August 31,
2010, both parties may agree to negotiate terms to extend the closing
date.  However, there can be no assurance that IHC will pay the
remaining cash balance currently due, or that the Transaction will close by
a certain date.





On August
9, 2010, our operating business’ assets and liabilities were transferred into
our newly formed wholly owned subsidiary, Awesome Living, Inc., in anticipation
of being spun-off to our current shareholders on a pro-rata basis. As such, we
believe that this transaction is beneficial for our shareholders as we will be
able to receive capital without selling shares and without taking on debt. Our
then-current shareholders are also expected to own the same pro-rata ownership
in the spun-off operating business while also retaining some ownership of the
Company.





We expect
that once Awesome Living is spun-off, we will be in a position to begin raising
capital so we can begin marketing our Xflowsion DVD products along with other
products that we plan to develop and acquire.





Critical
Accounting Policies and Estimates





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





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


3


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





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





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


Stock-Based
Compensation:  The Company applies FASB ASC 718, “Stock
Compensation”, when recording stock based compensation.  The fair
value of each stock option award is estimated on the date of grant using the
Black-Scholes option valuation model.  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.  The Company recognized pre-tax compensation
expense related to stock options of $47,947 and $95,894 for three months and six
months ended June 30, 2010, respectively.  The Company recognized
pre-tax compensation expense related to stock options of $47,947 and $99,458 for
the three and six months ended June 30, 2009, respectively.
 
 The
Company accounts for stock issued to non-employees in accordance with the
provisions of FASB ASC 505-50 “Equity Based Payments to Non-Employees” (“FASB
ASC 505-50”). and EITF Issue No. 00-18, “Accounting For Equity Instruments
That Are Issued To Other Than Employees for Acquiring, Or In Conjunction With
Selling, Goods Or Services.” FASB ASC 505-50 states that equity
instruments that are issued in exchange for the receipt of goods or services
should be measured at the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
Under the guidance in Issue 00-18, the measurement date occurs as of the earlier
of (a) the date at which a performance commitment is reached or (b) absent a
performance commitment, the date at which the performance necessary to earn the
equity instruments is complete (that is, the vesting date).
  Production
Costs :Production costs
incurred for the master copies of fitness videos are capitalized as an asset
since the costs will be recovered from future sales. The asset is amortized over
the estimated lives of the fitness videos using a revenue forecast
method.
 4
 Results
of Operations





Comparison of Six Months
ended June 30, 2010 and June 30, 2009





Net sales.
For the six months
ended June 30, 2010, net sales decreased 95.6% relative to the six months ended
June 30, 2009, from $17,823 to $784.  The decrease from the first half
of 2009 to the first half of 2010 is primarily attributable to us not initiating
marketing for our DVD products during the first half of 2010 due to capital
constraints.





Cost of
sales. Cost
of sales for the six months ended June 30, 2010 was $367 compared to $1,144 for
the six months ended June 30, 2009, a decrease of approximately
68.0%.   The decrease in our cost of sales is attributable to
lower sales as a result of not initiating marketing for our DVD
products.




Gross
profit.  Gross profit for the six months ended June 30, 2010 was
$417 compared to $16,679 for the six months ended June 30, 2009, representing
gross margins of approximately 53.2% and 93.6%,
respectively.  The decrease in gross margin percentages is
attributable to selling DVDs at wholesale prices instead of retail prices due to
our decreased marketing efforts as a result of capital
constraints.





Operating
expenses.
For the six months ended June 30, 2010, total operating expenses were $428,611,
while total operating expenses for the six months ended June 30, 2009 were
$754,067, representing a decrease of approximately 43.2%.   The
decrease in operating expenses is primarily due to us not marketing our product.
In addition, during the six months ended June 30, 2009, we incurred
non-recurring charges for finders’ fees and investor relations of approximately
$325,000.





Net income
(loss).  We had a net loss of $435,515 for the six months ended June
30, 2010 compared to a net loss of $752,755 for the six months ended June 30,
2009.





Comparison of Three Months
ended June 30, 2010 and June 30, 2009





Net sales.
For the three
months ended June 30, 2010, net sales decreased 98.3% relative to the three
months ended June 30, 2009, from $4,392 to $75.  The decrease from the
first quarter of 2009 to the first quarter of 2010 is primarily attributable to
us not initiating marketing for our DVD products during the first half of 2010
due to capital constraints.





Cost of
sales. Cost
of sales for the three months ended June 30, 2010 was $16 compared to $371 for
the three months ended June 30, 2009, a decrease of approximately
95.7%.   The decrease in our cost of sales is attributable to
lower sales due to us not initiating marketing for our DVD products during
the first half of 2010 due to capital constraints





Gross
profit.  Gross profit for the three months ended June 30, 2010 was
$59 compared to $4,021 for the three months ended June 30, 2009, representing
gross margins of approximately 78.7% and 91.6%, respectively.  The
decrease in gross margin percentages is attributable to selling DVDs at
wholesale prices instead of retail prices due to our decreased marketing efforts
as a result of capital constraints.


5


Operating
expenses.
For the three months ended June 30, 2010, total operating expenses were
$216,911, while total operating expenses for the three months ended June 30,
2009 were $233,166, representing a decrease of approximately 7.0%.  
The decrease in operating expenses is due to higher legal expenses offset by
reduced office, consulting, and accounting expenses.





Net income
(loss).  We had net loss of $219,533 for the three months ended June
30, 2010 compared to a net loss of $226,213 for the three months ended June 30,
2009.





LIQUIDITY





Cash
Flows





Net cash
used in operating activities was $185,906 for the six months ended June 30, 2010
while net cash used in operating activities was $7,497 for the six months ended
June 30, 2009.  The increase in net cash used in operating activities
between the two quarters was mainly due to having cash available during 2010
while, in 2009, expenses were deferred and/or minimized.





Net cash
used in investing activities was $103,501 for the six months ended June 30, 2010
while net cash used in investing activities was $128,900 for the six months
ended June 30, 2009.  The decrease in net cash used in investing
activities between the periods was due to an increase in cash due from a
shareholder in 2010 offset by cash used in the purchase of property and
equipment in 2009.





Net cash
provided by financing activities was $308,000 for the six months ended June 30,
2010 while net cash provided by financing activities was $134,855 for the
six months ended June 30, 2009.  The increase in cash flow
from financing activities was mainly due to cash received pursuant to the
terms of a merger agreement between the Company and Innolog Holdings
Corporation.





CAPITAL
RESOURCES





As
ofJune 30, 2010,
we had negative working capital of $(323,805).  To satisfy current
working capital needs, we received capital from a planned merger with Innolog
Holdings Corporation.  There is no guarantee that we will be able to
meet current working capital needs if we do not receive additional infusions of
cash via loans, stock sales, revenues, or other sources.  We have
fully incurred the production cost of our Xflowsion DVD series and last version
of our infomercial, and plan to make financial investments in marketing our
Xflowsion DVD series for the next six months.  We expect to incur
substantial losses over the next two years.





We
estimate that our expenses over the next 12 months beginning on July1, 2010 will
be approximately $650,000 as follows:





General
      and Administrative
                
                $
                200,000Infomercial
      Production
                
                
                100,000Inventory
                
                
                30,000Media
      (Airtime)
                
                
                50,000Marketing/Publicity
                
                
                150,000Legal
                
                
                50,000DVD/CD
      Production
                
                
                50,000Accounting
                
                
                20,000





As of
June 30, 2010, we had cash equivalents of $18,678.  We believe that we
need approximately an additional $631,322 to meet our capital requirements over
the next 12 months.  Our intention is to obtain this money through
debt and/or equity financings.





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


6


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





CONTRACTUAL
OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS





Contractual
Obligations





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





The
following table summarizes our contractual obligations as of June 30, 2010, and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





Payments Due by PeriodTotal
                  
                  
                  Less than
                    1 year
                  
                  
                  1-3 Years
                  
                  
                  3-5 Years
                  
                  
                  5 years +Contractual Obligations:Bank
      Indebtedness
                  
                  $
                  ―
                  
                  
                  $
                  ―
                  
                  
                  $
                  ―
                  
                  
                  $
                  ―
                  
                  
                  $
                  ―Other
      Indebtedness
                  
                  
                  8,561
                  
                  
                  
                  8,561
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―Operating
      Leases
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―Totals:
                  
                  $
                  8,561
                  
                  
                  $
                  8.561
                  
                  
                  $
                  ―
                  
                  
                  $
                  ―
                  
                  
                  $
                  ―





Off-Balance
Sheet Arrangements





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





Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.





Not
applicable.





Item
4.  Controls and Procedures.





Disclosure
Controls and Procedures





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





Changes
in Internal Control over Financial Reporting





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


7


PART
II - OTHER INFORMATION





Item
1.  Legal Proceedings.





On June
17, 2009, Jeffrey Fischer (the “Landlord”) filed a complaint against uKarma
Corporation and Bill Glaser, our Chief Executive Officer, in the Los Angeles
Superior Court in Los Angeles, California. The Landlord claimed that we owe back
rent on the lease of our yoga and fitness studio in Sherman Oaks, California and
sought to recover $222,859.97 and evict us from the subject property. We denied
liability and contend that the Landlord never reimbursed us for a tenant
improvement allowance of $165,000 pursuant to the lease along with other
breaches by the Landlord. The judge in the cased denied a writ of attachment
motion that was submitted by the Landlord.  A settlement could not be
reached between the parties, and as such the Company vacated the property on
September 30, 2009.  On December 2, 2009, the Landlord filed a First
Amended complaint naming the Company, Mr. Glaser, and Fred Tannous, a director
of the Company, and a number of unrelated parties and adding additional causes
of actions and damages totaling $1,066,660.00.  The Company filed a demurer
that was heard and sustained by the court on March 2, 2010.  The Landlord
filed a Second Amended Complaint on April 23, 2010, and the Company filed a
demurer and Motion to Strike that was heard by the court on July 19,
2010.  The judge sustained our demurrer without leave to amend on two
causes of action in the Landlord’s complaint and sustained the remainder of the
demurrer.  On July 23, 2010, the Landlord filed a Third Amended
Complaint, and the Company in turn filed another demurrer and Motion to Strike,
which is expected to be heard by the Court sometime in September
2010.  If any part of the complaint survives the judge’s ruling to our
demurer and Motion to Strike, we plan to defend such claims that we believe are
false and frivolous along with initiating legal action against the Landlord for
full recovery of all tenant improvements incurred to date along with other
damages.





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





None.





Item
3.  Defaults upon Senior Securities.





None.





Item
5.  Other Information.





(a)          Option and Warrant
Cancellation Agreement





On August
3, 2010, the Company entered into an Option and Warrant Cancellation Agreement
(“Cancellation Agreement”) with its Chief Executive Officer, Bill
Glaser.  At the time of execution of this agreement, Mr. Glaser held
options to purchase up to 5,000,000 shares of the Company’s common stock
(“Options”) and warrants to purchase up to 575,000 shares of the Company’s
common stock (“Warrants”).  Mr. Glaser also owed $168,173 to the
Company (“Debt”) and had an effective employment agreement with the Company,
which was entered into on April 13, 2006.  Pursuant to the terms of
the Option and Warrant Cancellation Agreement, the Options and Warrants were
terminated in exchange for the Company’s forgiveness of the Debt.  Mr.
Glaser’s employment agreement with the Company was also terminated, but he
continues to serve as our Chief Executive Officer, President, and Interim Chief
Financial Officer. A copy of
the Cancellation Agreement is filed with this report as Exhibit 10.1 and is
incorporated by reference herein.  The foregoing description of the
Cancellation Amendment does not purport to be complete and is qualified in its
entirety by reference to the full text of the Cancellation
Amendment.





Contribution
Agreement





On August
9, 2010, the Company entered into a Contribution Agreement (“Contribution
Agreement”) with Awesome Living, Inc. (“Awesome Living”).  The Company
agreed to transfer to Awesome Living all of the Company’s
assets.  Awesome Living also agreed to assume all liabilities and
obligations except for certain liabilities and to issue 10,558,896 shares of its
common stock to the Company, which constituted 100% of the total outstanding
capital of Awesome Living at the closing, which occurred on August 9, 2010.
A
copy of the Contribution Amendment is filed with this report as Exhibit 10.2 and
is incorporated by reference herein.  The foregoing description of the
Contribution Amendment does not purport to be complete and is qualified in its
entirety by reference to the full text of the Contribution
Amendment.





Amended Merger
Agreement





On August
11, 2010, the Company entered into an Amended and Restated Merger Agreement
(“Amended Merger Agreement”) with its subsidiary, GCC Merger Sub Corporation
(“Company Sub”), and with Galen Capital Corporation (“Galen”) and Galen’s former
subsidiary, Innolog Holdings Corportion (“Innolog”).  The Amended
Merger Agreement amends and restates the Merger Agreement (“Original Agreement”)
entered into between the Company, Company Sub, and Galen on October 15, 2009,
which was attached as an exhibit to our Quarterly Report on Form 10-Q filed with
the Commission on November 23, 2009, which Original Agreement was subsequently
amended on December 18, 2009 (“First Amendment”), which was attached as an
exhibit to our Annual Report on Form 10-K filed with the Commission on April 14,
2010.  The descriptions of the Original Agreement and First Amendment
are incorporated herein by reference.  Pursuant to the Amended Merger
Agreement, the Company will acquire Innolog by the merger of Company Sub
and Innolog, and the contemplated merger will not occur between Company Sub
and Galen.  Further, the cash consideration paid to the Company for
the transaction increased from $475,000 to $525,000, the additional $50,000 of
which will be paid by Innolog to the Company’s subsidiary, Amazing Living,
Inc. upon closing of the contemplated transaction.
 
 A copy of
the Amended Merger Amendment is filed with this report as Exhibit 10.3 and is
incorporated by reference herein.  The foregoing description of the
Amended Merger Amendment does not purport to be complete and is qualified in its
entirety by reference to the full text of the Amended Merger
Amendment.


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


8


Item
6.  Exhibits.





Exhibit
                Number
              
              Description3.1
              
              Certificate
      of Incorporation, as currently in effect *3.2
              
              Bylaws,
      as currently in effect (1)10.1
              
              Option
      and Warrant Cancellation Agreement between uKarma Corporation and Bill
      Glaser, dated August 3, 2010 *10.2
              
              Contribution
      Agreement between uKarma Corporation and Awesome Living, Inc., dated
      August 9, 2010 *10.3
              
              Amended
      and Restated Merger Agreement between Galen Capital Corporation, Innolog
      Holdings Corporation, uKarma Corporation, and GCC Merger Sub Corporation,
      dated August 11, 2010 *31.1
              
              Section 302
      Certification by the Corporation’s Chief Executive Officer
    *31.2
              
              Section 302
      Certification by the Corporation’s Chief Financial Officer
    *32.1
              
              Section 906
      Certification by the Corporation’s Chief Executive Officer
    *32.2
              
              Section 906
      Certification by the Corporation’s Chief Financial Officer
    *








*
            Filed
      herewith.





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


9


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:
      August 12, 2010
              By:
              /s/ Bill GlaserBill
      GlaserChief
      Executive Officer and President
                (Principal
      Executive Officer) and
                Interim
      Chief Financial Officer
                (Principal
      Financial and Accounting
Officer)


10