UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





(Mark
One)





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


For
the fiscal year ended December 31, 2008





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


For the
transition period from _______ to _______.





Commission
File Number 333-140633





UKARMA
CORPORATION


(Name of
small business issuer in its charter)





NEVADA
                
                68-048-2472(State
      or other jurisdiction of
                
                (I.R.S.
      Employer Identification No.)incorporation
      or organization)





499
      North Canon Drive, Suite 308Beverly
      Hills, CA
                
                90210(Address
      of principal executive offices)
                
                (Zip
      Code)




Issuer's
telephone number: (310)
998-8909





Securities
registered under Section 12(b) of the Exchange Act: none


Securities
registered under Section 12(g) of the Exchange Act: none





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o  No þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes þNo o





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes o No  þ





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained herein, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. þ





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


Large accelerated filer o
            
            Accelerated filer o
            
            Non-accelerated filer o
            
            Smaller reporting company þ(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 Act). Yes o  No þ





At June
30, 2008, the last business day of the registrant’s most recently completed
second fiscal quarter, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was $4,831,314, based on
a closing price of $0.35 per share and 13,803,754 shares of common
stock.





Number of
shares of common stock outstanding as of May 12, 2009: 33,121,961









TABLE
OF CONTENTS





PageFORWARD-LOOKING
      STATEMENTSPART
      IItem
      1.
              Business
              4Item
      2.
              Properties
              7Item
      3.
              Legal
      Proceedings
              8Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              8PART
      IIItem
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              9Item
      6.
              Selected
      Financial Data
              10Item
      7.
              Management's
      Discussion and Analysis of Financial Condition  and Results of
      Operations
              10Item
      8.
              Financial
      Statements and Supplementary Data
              15Item
      9.
              Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
              16Item
      9A.
              Controls
      and Procedures
              16PART
      IIIItem
      10.
              Directors,
      Executive Officers and Corporate Governance
              18Item
      11.
              Executive
      Compensation
              19Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              21Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              22Item
      14.
              Principal
      Accounting Fees and Services
              22PART
      IVItem
      15.
              Exhibits,
      Financial Statement Schedules
              23SIGNATURES




2




FORWARD-LOOKING
STATEMENTS





This
annual report on Form 10-K for the fiscal year ended December 31, 2008 contains
"forward-looking" statements including statements regarding our expectations of
our future operations.  For this purpose, any statements contained in
this Form 10-K that are not statements of historical fact may be deemed to be
forward-looking statements.  Without limiting the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "estimate," or
"continue," or comparable terminology are intended to identify forward-looking
statements.  These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within our control.  These
factors include, but are not limited to, economic conditions generally and in
the industries in which we may participate, competition within our chosen
industry, including competition from much larger competitors, technological
advances, and the failure by us to successfully develop business
relationships.  In light of these risks and uncertainties, you are
cautioned not to place undue reliance on these forward-looking
statements.  Except as required by law, we undertake no obligation to
announce publicly revisions we make to these forward-looking statements to
reflect the effect of events or circumstances that may arise after the date of
this report.  All written and oral forward-looking statements made
subsequent to the date of this report and attributable to us or persons acting
on our behalf are expressly qualified in their entirety by this
section.





When used
in this annual report, the terms the "Company," "uKarma," "we," "us," "our," and
similar terms refer to uKarma Corporation, a Nevada corporation.




3




PART
I





ITEM
1.  BUSINESS





Overview




We were
incorporated in Nevada on June 26, 2001 under the name “OM Capital Corporation,”
and changed our name to “uKarma Corporation” on April 20, 2004.





We
develop and market proprietary branded personal health and wellness products,
including fitness DVDs and mind, body, and spirit goods and services, for
fitness and health-conscious consumers.  Our product lines target the
rapidly growing tens of millions that are seeking to enrich their physical,
spiritual, and mental wellness.





We
launched our initial products, a fitness DVD series called Xflowsion, through an
infomercial and other marketing initiatives. The goal of the infomercial is to
generate initial working capital and build a community of loyal
customers.  From there, we plan on expanding our product offerings
into proprietary branded products primarily within the fitness/well-being
multimedia and nutraceutical markets.  As our brand image builds, we
intend to extend our brand systematically to other complementary consumer
products that meet our stringent product guidelines and are consistent with our
message of “total health and happiness for oneself and others.”





We began
to generate revenue in the second quarter of 2007.  Accordingly, we
are no longer a development stage since April 1, 2007.





Principal
Products and Services




Fitness
and Relationship-oriented DVDs




We plan
to offer complementary products within our target categories after we have
enough customers (approximately 10,000 customers) to warrant such product
extensions.  We expect to develop additional bundles of DVDs within
the fitness and personal development segments. The timing of this will depend on
the timing of our market penetration with Xflowsion.  We anticipate,
however, producing and marketing a series of other DVDs related to developing
and maintaining healthy relationships sometime after we obtain at least 10,000
customers.  As a result of Eric Paskel’s educational and clinical
expertise in this area, including an advanced degree in clinical psychology and
background in family therapy, he is extremely well-suited to cross-over
effectively from his yoga/fitness DVDs to this arena.  Each
relationship DVD will likely have a retail price of $19.95, similar to the
individual pricing for our fitness DVDs when not sold as part of a bundle of
products.




Yoga
Mats




One
product that we plan to launch is our series of yoga mats based on our
patent-pending designs.  These mats are currently in development, and
we will target a release date after we have built a base of customers that
warrants such a product offering.  We expect to offer a series of mats
that include features not currently offered with yoga mats sold in today’s
marketplace.





Additional
Multimedia Offerings




After we
build a strong customer base and establish Eric Paskel as a branded yoga/fitness
instructor, we plan to extend our media offerings into pod casting, web
broadcasting, and TV production.  For TV productions, we will consider
developing and producing original content of shows that are uplifting and
inspirational, as well as fitness/workout formats and reality shows focusing on
the behind-the-life of a yogi or guru.  We had an offer for Mr. Paskel
to appear in the “Biggest Loser” television program airing on the NBC television
network, but declined due to NBC’s insistence on controlling Mr. Paskel’s name
and likeness.  The “Biggest Loser” opportunity has created other
potential television opportunities that we are currently pursuing.  As
such, we engaged an agent and have been in negotiations with production
companies that have shown interest in our concepts for a reality TV
show.





Yoga/Fitness
Studio





We
entered into a lease for approximately 6,300 square feet of retail space to
house a yoga and fitness studio that will offer yoga, fitness, and Xflowsion
classes along with offering retail products for sale, retreats, teacher
training, and eventually weight loss packages including fitness classes,
counseling, and food.




Acquisition/Re-brandings




We will
seek out products and services that are consistent with our vision and business
objectives for possible acquisition and re-branding through
repackaging.  This strategy may enable us to get to market more
quickly with several product offerings, particularly complementary accessories
and nutraceuticals.  Moreover, we plan to identify and possibly
acquire synergistic companies that have innovative complementary products,
strong management, and solid distribution channels that will forward our
growth.




4




Distribution
and Sales





As we
build a customer base through our initial infomercial and other
direct–to-consumer marketing, we expect to increase brand equity and growth
through additional complementary product offerings, such as our patent-pending
yoga mats and nutraceuticals.  While infomercials will be the initial
focus for our channel distribution strategy, we expect to sell our products
through additional channels, including retail, early on.  We initially
offered our Xflowsion DVD series for sale in May 2007 for $39.95 plus $9.95
shipping and handling.  This pricing was made available to those who
had previously registered on www.xflowsion.com.  The pricing for the
Xflowsion DVD series was offered for 3 payments of $19.95, or $59.85, plus
$12.95 shipping and handling when our infomercial ran in May 2007.  We
began re-airing our updated and reedited Xflowsion infomercial nationally on
June 27, 2008.  Infomercials typically go through a period of on-air
testing and other means such as focus groups to obtain feedback that can be used
to make edits designed to elicit the greatest consumer response.  We
have been going through such a process and conducted a focus group during the
3rd
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 will use the feedback we
received from the focus group and on-air infomercial testing to tweak our
branding and edit our infomercial so we can maximize the potential response and
sales by consumers once we are in a financial position to do so and the economic
climate and seasonality of fitness product marketing is
appropriate.




DVD
Continuity Programs




We plan
to offer to our customers who purchase the initial Xflowsion DVD series (in
response to the infomercial either via the call center or website) the
opportunity to participate in an exclusive continuity program whereby the
customer will receive one new DVD every 1-2 months. We anticipate producing
multiple DVDs for our continuity program every quarter after we obtain
approximately 10,000 customers.  Since we shot and edited a total of 7
Xflowsion DVDs already and are selling 4 workout DVDs in our current Xflowsion
DVD series, we currently have 3 Xflowsion DVDs available for our continuity
program.





Web-based
Sales




We believe that our websites,
www.xflowsion.com and www.uKarma.com, will be an integral component of our
direct response television marketing (DRTV) campaigns.  Koeppel Direct
estimates that between 15-50% of DRTV purchases are now occurring on the web due
to the high percentage of people who surf the Internet and watch TV
concurrently.  Koeppel Direct also estimates that approximately 50% of
U.S. homes now have a high-speed broadband connection, enabling prospective
customers to easily view short clips of the infomercial or selected video and
lead them to a purchase decision.  The website may also serve as a
tool to further educate the consumer about our products and its
benefits.  Current traffic to www.xflowsion.com has been generated as
a result of receiving press coverage (www.xflowsion.com/press.html) in response to the airings of our
infomercial, to online marketing we initiated, and from word of
mouth.  We expect to drive additional traffic via the airings of our
infomercial, additional press coverage, and via online marketing including SEO
(search engine optimization), banner advertisements, and email
marketing.




Paid
Subscription Services




Once we
reach a critical mass of customers (approximately 50,000 unique individuals)
through our infomercial and begin to drive customers to our website through
other marketing activities, we expect to offer an online subscription service to
paying members.  The service may offer customers updated content on
health tips, yoga poses, healthy recipes, bulletins, live chats with
instructors, among others.





Viral
Marketing




In order
to expand our database, we expect to use viral marketing (marketing techniques
that use pre-existing social networks to produce increases in brand awareness
through self-replicating viral processes), such as offering daily inspirational
messages to our prospective customers who select this available
service.  These opt-in services are effective tools from which to then
offer products and services and advertise third-party paid
sponsors.  Alternatively, for an annual membership fee, those who sign
up for the service receive sponsor-free word-a-day emails.





Affiliate
Programs




The
uKarma Affiliate Partner Program is intended to allow our partners to earn a
commission by promoting uKarma products and/or brand links (text, images,
banners, products) our affiliates’ websites.  We are expected to
provide affiliates with a range of banners, coupons, and product links for each
product. Using web-based technology, we will be able to track visitors from each
affiliate site.  Affiliate sites could include online yoga and fitness
journals (i.e., www.yogajournal.com), as well as sites dedicated to selling
products from infomercials (i.e., www.asseenontv.com).  We have also
had dialog about utilizing existing affiliate networks via companies like
Pepperjam, affiliate.com, and others.




5




Retail
Sales




Our DRTV
campaign will be designed to be integrated with a retail strategy such that the
infomercial helps drive retail sales and build awareness for our product among
consumers.  We expect to take our Xflowsion DVD series to retail
stores after it has gained success in the direct-to-consumer market but prior to
the direct-to-consumer market being saturated.





Market
and Industry Overview




The
healthy lifestyles and personal development industry has grown in the last few
years to become a multi-billion dollar industry representing products in many
different segments.  According to LOHAS (Lifestyles of Health and
Sustainability -www.lohas.com/about.htm), the healthy lifestyle sector of the
marketplace includes natural organics, nutritional products, food and beverage,
dietary supplements, and personal care products.  LOHAS defines the
personal development segment of the marketplace to include mind, body, and
spirit products such as CDs, books, tapes, seminars, and yoga, fitness, weight
loss, and spiritual products and services.




·
            Americans
      now spend up to $27 billion annually on yoga products (as reported by
      NAMASTA, the North American Studio Alliance, http://www.namasta.com/,
      http://www.bikramyoga.com/News/TheColoradoan071005.htm), with the average
      yoga consumer spending an estimated $1,500 per year
      (http://www.yogajournal.com/views/769.cfm).





·
            Total
      U.S. sales for nutraceutical or dietary supplement products alone were
      estimated to be $77 billion in 2002
      (http://www.mindbranch.com/listing/product/R151-121.html). The term
      nutraceutical was coined in 1989 by the Foundation for Innovation in
      Medicine and is defined as any ingestible substance that may be considered
      a food or part of a food that provides health
  benefits.




The
instructional fitness DVD industry is highly competitive.  According
to Nielsen media research, DVD fitness titles sales rated by Nielsen VideoScan
reported in March 2004 that DVDs represented 51% of the sales for the top 30
fitness titles.  Over the past few years, the most popular fitness DVD
titles have related to pilates and yoga.  USA Today reported that,
according to Video Store Magazine Market Research, of the top 10 selling DVD
fitness titles of 2003, No. 1 in the top ten is Leslie Sansone: Walk Away the
Pounds: (168,000 Units) followed by #2 The Method Pilates Target Specific:
(150,000 Units); #3 The Method Pilates: (120,000 Units); #4 Pilates Conditioning
for Weight Loss: (117,000 Units); #5 Pilates for Dummies: (168,000 Units); #6
Crunch: Pick Your Spot Pilates: (105,000 Units); #7 Darrin's Dance Grooves:
(91,000 Units); #8 Cheer: (80,000 Units); #9 The Firm: Total Body Super Cardio
Mix: (73,000 Units); and #10 Yoga Conditioning for Weight Loss: (72,000
Units).





Competition




We
believe that the “mind, body, and spirit” market is comprised of very few large
competitors and also comprised of small, local, and regional
businesses.  Some of our competitors have greater financial and
marketing resources and greater brand recognition.  Some smaller
competitors may be able to more effectively personalize their relationships with
customers, thereby gaining a competitive advantage.  The largest and
most similar competitor within this market is Gaiam, Inc. (NASDAQ:
GAIA).  Gaiam is a lifestyle media company that creates media,
information, and products for individuals who seek to live healthier, more
rewarding, and sustainable lifestyles.




There are
numerous small, privately held companies in the lifestyle media space that offer
yoga, spiritual, and personal development DVDs, among others.  These
companies include Acorn Media Group (owned by Acacia), Sounds True, Revolution,
and Fitness Organica.  These companies offer mind, body, and spirit
products while being committed to being socially and environmentally responsible
as corporate citizens.





Our
fitness DVD sales business will face competition from the many companies that
already sell fitness DVDs via infomercials, in chain stores, through smaller
retailers, and on their own Internet sites or shopping websites such as ebay.com
and Yahoo! Shopping.  Many of our competitors who produce fitness DVDs
have greater financial and other resources than we do and will be able to
promote their products to a greater extent than we will and perhaps have
celebrity endorsements or participation that will enable them to attract more
buyers.  In addition, competing production companies may be able to
obtain more or better DVD content and have better promotional campaigns. Also,
the extent to which consumers choose to exercise in fitness centers or in other
manners without the aid of DVDs may reduce our sales, reduce our gross margins,
increase our operating expenses, and decrease our profit margins.




Although
we are entering a market that already contains many experienced companies with
greater resources, we believe that we may still be able to compete in the
market.  We believe that there is room in the marketplace for original
fitness DVDs that offer new information and types of exercise that are
specifically targeted to groups of people or to people with specific
interests.  This belief is based on informal research that our
management has done on the types of fitness DVDs available for purchase on the
Internet and in other locations, compared to discussions with approximately 30
people from various backgrounds and of different demographics regarding the
types of fitness DVDs that might appeal to them.  We plan to produce
and sell fitness DVDs to those mass market and niche markets.




Raw
Materials and Principal Suppliers




We have
no need for raw materials or suppliers.  When we develop our yoga
mats, we may need raw material suppliers such as an injection molding company
contract manufacturer. Our DVDs and CDs that are part of our Xflowsion product
offering are replicated by a DVD/CD replication company, and the guidebooks and
intro letters that are part of our Xflowsion products are printed at a printing
company.




6




Customers





The
marketing and sales of our Xflowsion DVD product has continued to be in the
test-marketing stage until we are able to get the version of our infomercial
that elicits the greatest response and makes sense to roll out
nationally.  As such, our customer base is limited in
size.   If we are able to establish a more substantial customer
base in the future, we may become dependent on a few major customers or
distributors.





Intellectual
Properties and Licenses





We have
applied and received for copyright protection for our seven Xflowsion DVDs and
other related Xflowsion products such as CDs and guidebooks.  We rely
upon a combination of nondisclosure and other contractual arrangements and trade
secret, and copyright and trademark laws to protect our proprietary
rights.  We enter into confidentiality agreements with our employees
and limit distribution of proprietary information.  However, we cannot
assure you that the steps taken by us in this regard will be adequate to deter
misappropriation of proprietary information or that we will be able to detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights.  We are subject to the risk of litigation alleging
infringement of third-party intellectual property rights.  Any such
claims could require us to spend significant sums in litigation, pay damages,
develop non-infringing intellectual property, or acquire licenses to the
intellectual property that is the subject of the asserted
infringement.




We have
filed for patent protection for our proprietary yoga mats.  We expect
to offer a series of mats with unique and proprietary features not currently
offered with yoga mats that are sold in the marketplace today.




We have
completed applications with the U.S. Patent and Trademark Office in order to
protect certain marks, including “uKarma.”  We have also filed and
received a trademark for “Xflowision.”  In addition, we have filed for
Slogan Mark protection for “The most fun you’ll ever have working out”, “The
most fun I’ve ever had working out”, “Mind Blowing fitness for every body”,
“Mind Blowing workouts for every body”, “Triple Training”, “Look Great Outside,
Feel Great Inside”, and “Ultimate Cross Training for mind body and
spirit”.  We have also filed trademarks for our DVD titles including
“Calm Down Dog,” “The Lean,” “Amazing Abs,” “Body Blast,” and “Kick Butt
Yoga.”  We also filed for trademarks for “Dreams Realized”,
“DreamsRealized.com”, and “The Karma Diet.”  The following trademarks
have been registered: uKarma, Xflowsion, Body Blast, Calm Down Dog, and The Most
Fun You’ll Ever Have Working Out.  The following trademarks have been
published: All U Need, Amazing Abs, Dreams Realized, Look Great Outside Feel
Great Inside, The Karma Diet, Triple Training, and The Most Fun I’ll Ever Have
Working out.  The others are currently pending.  Our
inability or failure to establish rights to these terms or protect our rights
may have a material adverse effect on our business, results of operations, and
financial condition.  We also own the copyright in the websites
www.ukarma.com and www.xflowsion.com.




Governmental
Approval and Regulation





Laws and
regulations directly applicable to Internet communications, commerce, and
advertising are becoming more prevalent.  Because we intend to sell
our DVDs through the Internet as one of its methods of distribution, we will be
subject to rules and regulations around the world that affect the business of
the Internet.  If and when we sell nutraceutical products, such
products are subject to a variety of FTC and FDA regulations which we would be
subject to as related to ingredients and advertising claims.





Research
and Development





Over the
past two fiscal years, we have conducted formal and informal research related to
the marketing of our Xflowsion products.  Included in that research
was a focus group that we conducted during the 3rd quarter
of 2008.  We recruited 4 test groups comprised of approximately 12-15
people per group who watched our infomercial for our Xflowsion DVD products and
provided their feedback via a questionnaire and group discussion.  We
also conducted more informal research on our product and marketing messaging in
our infomercial via listening to recorded customer calls at our telemarketing
company and via customer service emails sent via xflowsion.com.





Employees





We have a
total of 2 employees, both of whom are full-time employees.





ITEM
2.  PROPERTIES





Our
principal executive offices are located at 499 North Canon Drive, Suite 308,
Beverly Hills, California 90210.  The 6-month lease expired on March
31, 2009.  The minimum rent payable is $2,800 per month, which
automatically increases by six percent (6%) upon each annual anniversary date of
the lease or increased to the prevailing market rate at the time of the
anniversary date, whichever is greater.  Subsequent to March 31, 2009,
we extended the lease until April 15, 2009 and have continued the lease with an
identity plan which includes phone answering and mail service on a
month–to-month basis for approximately $300 per month.  We plan to
continue the identity plan until we are able to move into our new office at our
studio in Sherman Oaks, CA.  On April 25, 2008, we entered into a
lease agreement for the studio space in Sherman Oaks, which will be used to
offer Xflowsion, fitness and yoga classes, and retail items and incidental food.
The lease calls for $22,000 rent per month for five years commencing on the
earlier of either September 25, 2008, or the date the Company first opens the
studio for business.  Presently, the Company is in the process of
remodeling the studio.




7





ITEM
3.  LEGAL PROCEEDINGS





We know
of no material, existing or pending legal proceedings against us, nor are we
involved as a plaintiff in any material proceeding or pending
litigation.  There are no proceedings in which any of our directors,
officers, or affiliates, or any registered or beneficial holder of more than 5%
of our voting securities, or any associate of such persons, is an adverse party
or has a material interest adverse to our company.





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





None.




8




PART
II





ITEM
5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES





Market
Information





Our
common stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB") under
the symbol "UKMA."  The following table sets forth, for the periods
indicated, the reported high and low closing bid quotations for our common stock
as reported on the OTCBB.  The bid prices reflect inter-dealer
quotations, do not include retail markups, markdowns, or commissions, and do not
necessarily reflect actual transactions.





Quarter
      Ended
                    
                    High
      Bid
                    
                    
                    Low
      BidDecember
      31, 2008
                    
                    $
                    0.22
                    
                    
                    $
                    0.08September
      30, 2008
                    
                    $
                    0.35
                    
                    
                    $
                    0.14June
      30, 2008
                    
                    $
                    0.54
                    
                    
                    $
                    0.30March
      31, 2008
                    
                    $
                    *
                    
                    
                    $
                    *December
      31, 2007
                    
                    $
                    *
                    
                    
                    $
                    *September
      30, 2007
                    
                    $
                    *
                    
                    
                    $
                    *June
      30, 2007
                    
                    $
                    *
                    
                    
                    $
                    *March
      31, 2007
                    
                    $
                    *
                    
                    
                    $
                    *





* Our
common stock had no active trading market until June 17, 2008.




As of May
12, 2009, the closing sales price for shares of our common stock was $0.04 per
share on the OTCBB.





Holders





As of May
12, 2009, we had approximately 105 stockholders of record of our issued and
outstanding common stock based upon a shareholder list provided by our transfer
agent.





Dividend
Policy




We do not
currently intend to pay any cash dividends in the foreseeable future on our
common stock and, instead, intend to retain earnings, if any, for
operations.  Any decision to declare and pay dividends in the future
will be made at the discretion of our board of directors and will depend on,
among other things, our results of operations, cash requirements, financial
condition, contractual restrictions, and other factors that our board of
directors may deem relevant.





Securities
Authorized for Issuance under Equity Compensation Plans





The
following table sets forth, as of December 31, 2008, certain information related
to our compensation plans under which shares of our common stock are authorized
for issuance.




Equity Compensation Plan InformationPlan category
                                                            
                                                            Number of securities to be
                                                              issued upon exercise of
                                                              outstanding options,
                                                              warrants and rights
                                                              (a)
                                                            
                                                            Weighted-average
                                                              exercise price of
                                                              outstanding options,
                                                              warrants and rights
                                                              (b)
                                                            
                                                            Number of securities
                                                              remaining available for
                                                              future issuance under
                                                              equity compensation plans
                                                              (excluding securities
                                                              reflected in column (a))
                                                              (c)Equity
      compensation plans approved by security holders
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            —Equity
      compensation plans not approved by security holders
                                                            
                                                            5,250,000
                                                            (1)
                                                            $
                                                            0.20
                                                            
                                                            2,250,000
                                                            (2)Total
                                                            
                                                            5,250,000
                                                            
                                                            $
                                                            0.20
                                                            
                                                            2,250,000





(1)
              Includes
      outstanding options granted pursuant to our 2006 Stock Option, Deferred
      Stock and Restricted Stock Plan.(2)
              Includes
      shares remaining available for future issuance under our 2006 Stock
      Option, Deferred Stock and Restricted Stock
  Plan.




9




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





Recent
Sales of Unregistered Securities




During
the year ended December 31, 2008, we sold the following equity securities of the
Company that were not registered under the Securities Act of 1933, as amended,
and that were not previously disclosed in a quarterly report on Form 10-Q or on
a current report on Form 8-K:





During
our 2008 fiscal year, we sold an aggregate 2,893,147 restricted shares of our
common stock to 15 investors, all of whom were accredited investors, in exchange
for gross proceeds of $376,245 as part of an offering of shares of our common
stock that closed in February 2009.  This issuance was exempt from
registration under the Securities Act pursuant to Rule 506 of Regulation D
promulgated thereunder. We made this determination based on the investor’s
representations made in the purchase agreements.





ITEM
6.  SELECTED FINANCIAL DATA





Not
applicable.





ITEM
7.  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 uKarma Corporation for the fiscal years ending December 31, 2008
and 2007 should be read in conjunction with our financial statements 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, books and CDs,
nutraceuticals, and other products targeting the mass market and MBS
(Mind/Body/Spirit) consumers. We generated no revenues since inception through
the first quarter of 2007. We began to generate revenue in the second quarter of
2007.  Accordingly, we are no longer a development stage since April
1, 2007.





We
incurred net losses of approximately $122,488 in 2005, $1,397,922 in 2006, and
$1,849,636 in 2007. As of December 31, 2008, we had an accumulated deficit of
$6,089,201.  As a company in the early stage of development, our
limited history of operations makes prediction of future operating results
difficult. We believe that period-to-period comparisons of our operating results
should not be relied on as predictive of our future results.




Since
April 2004, we have dedicated our resources to developing our business plan and
producing items that will appeal to the “wellness” conscious consumer, such as
yoga and fitness DVDs. In May 2007, we began to
market and sell our initial Xflowsion products.We believe that our
success depends upon our ability to successfully produce, market, and distribute
such products along with having the necessary capital to operate and grow our
business. After test-marketing the initial version of our infomercial, we
recognized the need to shoot additional footage and to reedit it before airing
it again. Due to capital constraints, we had to wait until our registration
statement was declared effective by the Securities and Exchange Commission in
order to raise capital. Our registration statement was declared effective
on August 9, 2007, and we focused the remainder of 2007 raising capital and
preparing to update our infomercial and implement our marketing strategy in
2008.





We began
airing the reedited version of our Xflowsion infomercial nationally on June 27,
2008.  Infomercials typically go through a period of on-air testing
and other means such as focus groups to obtain feedback that can be used to make
edits designed to elicit the greatest consumer response.  We have been
going through such a process and conducted a focus group during the 3rd 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 have been using the feedback we
received from the focus group and on-air infomercial testing to tweak our
branding and edit our infomercial to maximize the potential response and sales
by consumers.  With the economic downturn and the fall season
typically not being the best time to sell fitness-oriented products, we did not
air our infomercial again during 2008.   In addition to our
infomercial, our Xflowsion DVD series has been approved for sale on QVC, the
home shopping television network, and we have finalized the economic terms of
our relationship with QVC.  While we expected that the first air date
on QVC would be sometime in January 2009, that airing has not yet
occurred.  It was indicated to us that the delay was due to economic
conditions and because our product would be less known to the QVC audience since
our infomercial was not airing on television.  We do expect at some
point that QVC will begin selling our Xflowsion DVD series.




10




We will
be utilizing online marketing for banner and email marketing, Search Engine
Optimization (SEO), affiliate marketing, and social media or “word of mouth”
marketing. Currently, we are in the process of finalizing agreements with two
direct response marketing companies on a revenue sharing basis in which the
marketing company(s) will incur the expense of marketing, and we would pay them
a percentage of the sales they generate.  We have already set up
landing pages for such campaigns at www.xflowsion22.com,
www.xflowsion23.com,
and www.xflowsion24.com.  We
also plan to increase our brand exposure and awareness of Xflowsion and drive
sales via a public relations campaign. Toward that end, Xflowsion has been
profiled in People Magazine, People.com, Fitness Magazine, TMZ, The National
Enquirer, and many other publications.  We have received strong media
interest and expect our products and brand to receive much upcoming press
coverage, including on the Extra TV show which has already shot a segment
featuring Xflowsion and a transformation story of an actress who used Xflowsion
to lose weight and get in shape.  We are encouraged by the response to
our Xflowsion DVD series in the media and with consumers and via our marketing
efforts.  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 and in some cases 2-3 years before they
elicit a national consumer response.





We are
also exploring many opportunities for a reality TV show that would exploit the
Xflowsion brand. We had an offer for Eric Paskel to appear in the “Biggest
Loser” television program airing on the NBC television network, but declined due
to NBC’s insistence on controlling Mr. Paskel’s name and likeness. The “Biggest
Loser” opportunity has created other potential television opportunities that we
are currently pursuing.  During the third quarter of 2008, we signed
with a talent agency to represent our reality TV show concept.  We
then met with several TV production companies and generated much
interest.  We are currently negotiating with a TV production company
to produce and shop our show to TV networks.  While there is no
guarantee that we will be successful in producing and airing a TV show
consistent with our products and brands, we believe that such a TV show would
expose our products to potentially millions of viewers





In
addition to beginning our marketing campaign for our Xflowsion DVD series, we
signed a lease to open a fitness and yoga studio in Sherman Oaks, California
that will offer Xflowsion, fitness, and yoga classes along with retail items,
teacher training and retreats, and food and beverages.  After
completing the architectural plans, we obtained a permit and began
construction.  Construction began during the 3rd quarter
of 2008 and as of the date of this report has not been
completed.  Along with having delays related to obtaining permits,
inspections, and other situations such as the Department of Water and Power
taking several weeks to install a power meter, the construction slowed as a
result of the economic climate and our capital needs.  Our general
contractor indicated to us that he was owed money on other jobs due to the
economy, and we believe that this caused the pace of construction to move slower
than it otherwise would have.  The economic climate and decline in the
stock market also affected our ability to raise capital and pay for the complete
construction costs.  Of an approximate $500,000 worth of tenant
improvement related costs, we have a current balance of approximately
$90,000.  We are actively seeking capital and estimate that we can
finish the remaining construction, which is comprised of finishing fixtures, a
countertop, and low voltage work related to a sound system and alarm, by paying
approximately $50,000.  This would include deferring some tenant
improvement items until a later point in time and negotiating a lower rate with
our contractor and other vendors.  We also expect that we will need no
less than $90,000 in working capital at the opening of the studio.  We
have been negotiating with our landlord to lower the monthly rent as well as
offering 3 free months of rent upon opening.  Per our lease for the
studio, rent was to begin on September 23, 2008.  We paid rent for
September and October in 2008 and agreed with the landlord to offset the rent
for November and December 2008 against the tenant improvement
allowance.  We have not paid rent since October 2008 both due to our
lack of capital and in an attempt to renegotiate terms that would better reflect
the state of the current commercial real estate market.  Our landlord
has indicated a willingness to reduce our monthly rent by approximately 25% and
is amenable to a certain number of free rent months once we
open.  There is no guarantee that we will be successful in having the
necessary capital or that our landlord will agree to a reduction of rent and
free rent.  As of the date of this report, our landlord has not served
a notice to vacate for being in default of paying rent, and there is no
guarantee that such a notice will not be served by our landlord.  If
we are able to raise the needed capital soon, we expect that our studio can be
opened within two weeks thereafter.





Along
with loaning additional funds to the Company, our CEO, Bill Glaser, has deferred
approximately $35,000 of his 2008 salary and will continue to defer his salary
in 2009 until the Company can better afford to pay it.





Critical
Accounting Policies and Estimates





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




11




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





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





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





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





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





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





Property and
Equipment: Property and equipment are valued at cost. Maintenance and
repair costs are charged to expenses as incurred. Depreciation is computed on
the straight-line method based on the estimated useful lives of the assets,
generally 5 to 7 years. Depreciation expense for the years ended December 31,
2008 and 2007 was $2,760 and $1,835, respectively.





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





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





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





Advertising Costs:
All costs associated with advertising and promoting the Company’s products and
services are expensed as incurred. Advertising expense for the years ended
December 31, 2008 and 2007 was $319,761 and $255,651, respectively.





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





Stock Based
Compensation:  Effective January 1, 2006, the Company adopted
the fair value recognition provisions of FASB Statement No. 123(R),
“Shares-Based Payment” (SFAS 123R), using the modified-prospective-transition
method.  Under that transition method, compensation cost recognized in
2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006 based of the grant date fair value
calculated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for all share-based payments granted subsequent to December
31, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R).  As a result of adopting SFAS 123(R) on
January 1, 2006, the Company reorganized pre-tax compensation expense related to
stock options of $232,115 and $190,056 for year ended December 31, 2008 and
2007, respectively.





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




12




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





In June
2008, the FASB issued FASB SP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.” SP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in SFAS No. 128, “Earnings per
Share.”  SP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning on or after December 15, 2008 and earlier
adoption is prohibited.  The Company is required to adopt SP EITF
03-6-1 in the first quarter of 2009 and is currently evaluating the impact that
SP EITF 03-6-1 will have on its financial statements.





In
December 2007, the FASB issued SFAS No. 160, “Non-Controlling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS
No. 160”). This statement requires that noncontrolling or minority interests in
subsidiaries be presented in the consolidated statement of financial position
within equity, but separate from the parents’ equity, and that the amount of the
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income. SFAS No. 160 will be effective for the Company’s fiscal
year after December 15, 2008. Currently, the Company does not anticipate that
this Statement will have a significant impact on its financial
statements.





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





Results
of Operations





The
following table sets forth the results of our operations for the years ended
December 31, 2008 and 2007:





Fiscal Year Ended December 31,2008
                
                
                2007Net
      Sales
                
                $
                86,339
                
                
                $
                82,427Cost
      of Sales
                
                
                4,048
                
                
                
                22,967Gross
      Profit
                
                
                82,291
                
                
                
                59,460Operating
      Expenses
                
                
                (2,741,075
                )
                
                
                (1,781,301
                )Operating
      Loss
                
                
                (2,658,784
                )
                
                
                (1,721,841
                )Interest
      Expense
                
                
                (16,758
                )
                
                
                (130,274
                )Net
      Loss Before Income Tax
                
                
                (2,675,542
                )
                
                
                (1,848,836
                )Provision
      for Income Taxes
                
                
                800
                
                
                
                800Net
      Loss
                
                
                (2,676,342
                )
                
                
                (1,849,636
                )





Net Sales.
 Net sales was
$86,339 in 2008, an increase of approximately 4.7% from $82,427 in
2007.  The increase is attributable to continued test marketing of our
infomercial, publicity of our Xflowsion DVD series in a variety of magazines,
and other marketing initiatives.





Cost of
Sales. 
Cost of sales was $4,048 in 2008, a decrease of approximately 82% from $22,967
in 2007.  The decrease is attributable to our inventory for such sales
being produced and expensed in 2007.





Gross
Profit. 
Gross profit was $82,291 in 2008, an increase of approximately 38% from $59,460
in 2007.  The increase is attributable to lower inventory costs and a
greater response to our marketing.




13




Operating
Expenses.Operating expenses in 2008 consisted of were $2,741,825 in
2008, an increase of approximately 54% from $1,781,301 in 2007. The increase was
due to to higher costs related to our studio design and construction along with
higher general and administrative, marketing, and consulting
expenses.





Operating
Loss.  Operating loss was $2,658,784 in 2008, an increase of
approximately 54% from an operating loss of $1,721,841in 2007.  The
increase in operating loss is attributable to higher costs related to our studio
design and construction along with higher general and administrative, marketing,
and consulting expenses.





Net
Loss.  Net loss was $2,676,342 in 2008, an increase of
approximately 45% from a net loss of $1,849,636 in 2007.  The increase
in net loss is attributable to higher costs related to our studio design and
construction along with higher general and administrative, marketing, and
consulting expenses .




Liquidity





Cash
Flows





Net cash
flow used in operating activities was $1,335,715 in 2008 while net cash flow
used in operating activities was $1,338,387 in 2007.  The slight
decrease in net cash flow from operating activities was mainly due to less cash
used for production services which were primarily offset by higher general and
administrative costs and expenses related to our studio design and
construction.





Net cash
flow used in investing activities was $383,563 in 2008 while net cash flow used
in investing activities was $432 in 2007.  The decrease in net cash
flow from investing activities was due to the design and construction costs
related to our yoga and fitness studio.





Net cash
flow provided by financing activities was $1,237,495 in 2008 while net cash flow
provided by financing activities was $1,719,481 in 2007.  The
decrease in net cash flow from financing activities was mainly due to less
capital raised in 2008 versus capital raised in 2007.





Material
Impact of Known Events on Liquidity





Our
obligation to perform tenant improvements of our yoga and fitness studio and
then begin operations is a cause of a decrease in our liquidity.  We
estimate that the completed construction costs for our studio will be
approximately $500,000 and then require approximately $55,000 per month to
operate once we open for business.  Due to our current liquidity, we
must raise additional capital in order to meet the aforementioned
obligations.





Capital
Resources





As
ofDecember 31,
2008, we had working capital of $(348,635).  To satisfy current
working capital needs, our CEO, Bill Glaser, loaned funds to the Company along
with raising capital via the sale of common stock.  Until we raise
sufficient capital via the sale of our common stock, there is no guarantee that
we will be able to meet current working capital needs if we do not receive
additional loans from either our CEO or other individuals.  We have
fully incurred the production cost of our Xflowsion DVD series and last version
of our infomercial, and have incurred approximately $400,000 worth of costs
related to the construction of our yoga and fitness studio.  We plan
to make financial investments in completing and opening our yoga and fitness
studio and in marketing of 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 January 1, 2009
will be approximately $1,005,000 as follows:





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





As of
December 31, 2008, we had cash equivalents of $28,781, which will meet our
capital requirements for approximately the next month.  We believe
that we need approximately an additional $976,219 to meet our capital
requirements over the next 12 months.  Our intention is to obtain this
money through debt and/or equity financings.




14




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 open and operate our yoga and fitness studio.




Our
independent certified public accountants have stated in their report dated May
12, 2009 included herein 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.





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
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Our
financial statements for the years ended December 31, 2008 and 2007 begin on the
following page.




15




UKARMA
CORPORATION


INDEX TO
FINANCIAL STATEMENTS





PagesReport
      of Independent Registered Public Accounting Firm
              F-2Balance
      Sheets as of December 31, 2008 and 2007
              F-3Statements
      of Operations for the Year Ended December 31, 2008 and
2007
              F-4Statements
      of Changes in Stockholders’ Equity
              F-5Statements
      of Cash Flows for the Year Ended December 31, 2008 and
2007
              F-6Notes
      to Financial Statements
              F-7




F-1




HAROLD Y. SPECTOR, CPA
              
              SPECTOR, WONG & DAVIDIAN, LLP
              
              80 SOUTH LAKE AVENUECAROL S. WONG, CPA
              
              Certified Public Accountants
              
              SUITE  723Z. DAVID DAVIDIAN, CPA
              
              (888) 584-5577
              
              PASADENA, CA 91101FAX  (626) 584-6447
  REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and
 Stockholders
of uKarma Corporation
 
 We have
audited the accompanying balance sheets of uKarma Corporation (“uKarma”) as of
December 31, 2008 and 2007, and the related statements of operations, changes in
stockholders’ equity, and cash flows for the years then ended. uKarma’s
management is responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of uKarma Corporation as of December
31, 2008 and 2007, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company's recurring losses raise substantial doubt about its
ability to continue as a going concern. Management’s plans regarding those
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
 
 /s/Spector,
Wong & Davidian, LLP
 Pasadena,
California
 May 11,
2009
  F-2


UKARMA
CORPORATION
 
 BALANCE
SHEETS
 
 As ofDecember 31,
                  
                  
                  December 31,2008
                  
                  
                  2007ASSETSCurrent
      AssetsCash
                  
                  $
                  1,781
                  
                  
                  $
                  483,564Accounts
      receivable
                  
                  
                  309Other
      receivables
                  
                  
                  26,691Prepaid
      expenses
                  
                  
                  70,863
                  
                  
                  
                  55,146Inventory
                  
                  
                  22,327
                  
                  
                  
                  23,547Total
      Current Assets
                  
                  
                  121,971
                  
                  
                  
                  562,257Property
      and equipment, net of accumulated depreciation of $4,689 for 2008, and
      $1,929 for 2007
                  
                  
                  391,514
                  
                  
                  
                  10,711Other
      AssetsProduction
      costs, net of accumulated amortization of $212,047 for 2008, and $99,393
      for 2007
                  
                  
                  407,038
                  
                  
                  
                  594,709Deposit
                  
                  
                  28,380
                  
                  
                  
                  3,734Patent
                  
                  
                  10,358
                  
                  
                  
                  10,358Total
      Other Assets
                  
                  
                  445,776
                  
                  
                  
                  608,801TOTAL
      ASSETS
                  
                  $
                  959,261
                  
                  
                  $
                  1,181,769LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  196,161
                  
                  
                  
                  56,987Accrued
      expenses
                  
                  
                  66,677
                  
                  
                  
                  22,800Notes
      payable to related party, including accrued interest of $22,637 for 2008
      and $10,488 for 2007
                  
                  
                  207,768
                  
                  
                  
                  194,119Total
      Current Liabilities
                  
                  
                  470,606
                  
                  
                  
                  273,906Stockholders'
      EquityCommon
      stock, $0.001 par value; 100,000,000 shares authorized; 29,768,292 and
      20,611,406  shares issued and outstanding in 2008 and 2007,
      respectively
                  
                  
                  29,768
                  
                  
                  
                  20,611Preferred
      stock, $0.001 par value; 20,000,000 shares authorized, none
      issued
                  
                  
                  -
                  
                  
                  
                  -Paid-in
      capital
                  
                  
                  6,548,088
                  
                  
                  
                  4,152,161Stock
      subscriptions
                  
                  
                  -
                  
                  
                  
                  147,200Accumulated
      deficit
                  
                  
                  (6,089,201
                  )
                  
                  
                  (3,412,109
                  )Total
      Stockholders' Equity
                  
                  
                  488,655
                  
                  
                  
                  907,863TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  959,261
                  
                  
                  $
                  1,181,769
 
 The
accompanying notes are an integral part of these financial
statements
  F-3
  UKARMA
CORPORATION
 
 STATEMENTS
OF OPERATIONS
 For
the years ended December 31, 2008 and 2007
 
 For year
                        
                        
                        For yearended December 31,
                        
                        
                        ended December 31,2008
                        
                        
                        2007Sales
                        
                        $
                        86,339
                        
                        
                        $
                        82,427Cost
      of  Sale
                        
                        
                        4,048
                        
                        
                        
                        22,967Gross
      Profit
                        
                        
                        82,291
                        
                        
                        
                        59,460Selling,
      General and Administrative Expenses
                        
                        
                        2,741,825
                        
                        
                        
                        1,781,301Operating
      Loss
                        
                        
                        (2,659,534
                        )
                        
                        
                        (1,721,841
                        )Other
      Income (Expenses)Gain
      on Sale of Securities
                        
                        
                        -
                        
                        
                        
                        3,279Interest
      Expense
                        
                        
                        (16,758
                        )
                        
                        
                        (130,274
                        )Total
      Other Income (Expense)
                        
                        
                        (16,758
                        )
                        
                        
                        (126,995
                        )Net
      Loss before Income Taxes
                        
                        
                        (2,676,292
                        )
                        
                        
                        (1,848,836
                        )Provision
      for Income Taxes
                        
                        
                        800
                        
                        
                        
                        800Net
      Loss
                        
                        $
                        (2,677,092
                        )
                        
                        $
                        (1,849,636
                        )Loss
      Per Share-Basic and Diluted
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.11
                        )Weighted
      Average Number of Shares
                        
                        
                        23,886,934
                        
                        
                        
                        16,943,898
 
 The
accompanying notes are an integral part of these financial
statements
  F-4
  UKARMA
CORPORATION
 STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
 
 
 AccumulatedOtherCommon Stock
                            
                            
                            Paid-in
                            
                            
                            Comprehensive
                            
                            
                            Stock
                            
                            
                            AccumulatedShares
                            
                            
                            Amount
                            
                            
                            Capital
                            
                            
                            Income
                            
                            
                            Subscriptions
                            
                            
                            Deficit
                            
                            
                            TotalBalance
      at December 31, 2006
                            
                            
                            15,218,734
                            
                            
                            $
                            15,219
                            
                            
                            $
                            2,046,030
                            
                            
                            $
                            12,000
                            
                            
                            $
                            55,000
                            
                            
                            $
                            (1,562,473
                            )
                            
                            $
                            565,776Stock
      subscriptions issued
                            
                            
                            220,000
                            
                            
                            
                            220
                            
                            
                            
                            54,780
                            
                            
                            
                            
                            
                            
                            
                            (55,000
                            )
                            
                            
                            
                            
                            
                            
                            -Sales
      of common stock
                            
                            
                            3,539,003
                            
                            
                            
                            3,539
                            
                            
                            
                            1,235,112
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,238,651Issuance
      of common stock forservices
                            
                            
                            592,926
                            
                            
                            
                            593
                            
                            
                            
                            151,767
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            152,360Stock
      option expenses
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            190,056
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            190,056Issuance
      of stock warrants
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            111,197
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            111,197Accumulated
      Other Comprehensive Income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (12,000
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (12,000
                            )Conversion
      loans in to common stock
                            
                            
                            1,040,743
                            
                            
                            
                            1,040
                            
                            
                            
                            363,219
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            364,259Stock
      subscriptions
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            147,200
                            
                            
                            
                            
                            
                            
                            
                            147,200Net
      Loss for the year endedDecember
      31, 2007
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (1,849,636
                            )
                            
                            
                            (1,849,636
                            )Balance
      at December 31, 2007
                            
                            
                            20,611,406
                            
                            
                            $
                            20,611
                            
                            
                            $
                            4,152,161
                            
                            
                            $
                            -
                            
                            
                            $
                            147,200
                            
                            
                            $
                            (3,412,109
                            )
                            
                            $
                            907,863Stock
      subscriptions issued
                            
                            
                            420,571
                            
                            
                            
                            421
                            
                            
                            
                            146,779
                            
                            
                            
                            
                            
                            
                            
                            (147,200
                            )
                            
                            
                            
                            
                            
                            
                            -Sales
      of common stock
                            
                            
                            5,349,575
                            
                            
                            
                            5,349
                            
                            
                            
                            1,230,646
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,235,995Issuance
      of common stock forServices
                            
                            
                            3,386,740
                            
                            
                            
                            3,387
                            
                            
                            
                            771,947
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            775,334Stock
      option expenses
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            232,115
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            232,115Stock
      warrant expenses
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            14,440
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            14,440Net
      Loss for the year endedDecember
      31, 2008
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (2,677,092
                            )
                            
                            
                            (2,677,092
                            )Balance
      at December 31, 2008
                            
                            
                            29,768,292
                            
                            
                            $
                            29,768
                            
                            
                            $
                            6,548,088
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            (6,089,201
                            )
                            
                            $
                            488,655
 
 The
accompanying notes are an integral part of these financial
statements
  F-5
 
 UKARMA
CORPORATION
 STATEMENTS
OF CASH FLOWS
 For
the Years ended December 31, 2008 and 2007
 
 For
      year ended
                  
                  
                  For
      year endedDecember 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Cash
      Flow from Operating Activities:Net
      loss
                  
                  $
                  (2,677,092
                  )
                  
                  $
                  (1,849,636
                  )Adjustment
      to reconcile net loss to net cash used by operating
      activities:Depreciation
                  
                  
                  2,760
                  
                  
                  
                  1,835Amortization
      of production costs
                  
                  
                  112,654
                  
                  
                  
                  99,393Issuance
      of stock for services
                  
                  
                  775,334
                  
                  
                  
                  152,360Stock
      option expenses
                  
                  
                  232,115
                  
                  
                  
                  190,056Stock
      warrant expenses
                  
                  
                  14,440
                  
                  
                  
                  111,197Non-cash
      interest expense
                  
                  
                  -
                  
                  
                  
                  104,073Gain
      on sale of investment
                  
                  
                  -
                  
                  
                  
                  (3,279
                  )(Increase)
      Decrease in:Trade
      accounts receivable
                  
                  
                  (309
                  )
                  
                  
                  -Other
      receivables
                  
                  
                  (26,691
                  )
                  
                  
                  -Prepaid
      expenses
                  
                  
                  (15,717
                  )
                  
                  
                  42,367Inventory
                  
                  
                  1,220
                  
                  
                  
                  (23,547
                  )Capitalized
      production costs
                  
                  
                  75,017
                  
                  
                  
                  (42,874
                  )Deposit
                  
                  
                  (24,646
                  )
                  
                  
                  (598
                  )Increase
      (Decrease) in:Accounts
      payable
                  
                  
                  139,174
                  
                  
                  
                  (151,432
                  )Accrued
      expenses
                  
                  
                  56,026
                  
                  
                  
                  31,698Net
      Cash Used by Operating Activities
                  
                  
                  (1,335,715
                  )
                  
                  
                  (1,338,387
                  )Cash
      Flow from Investing Activities:Purchase
      of property and equipment
                  
                  
                  (383,563
                  )
                  
                  
                  (8,711
                  )Sale
      of investment
                  
                  
                  -
                  
                  
                  
                  8,279Net
      Cash Used by Investing Activities
                  
                  
                  (383,563
                  )
                  
                  
                  (432
                  )Cash
      Flow from Financing Activities:Proceeds
      from notes payable tp others
                  
                  
                  -
                  
                  
                  
                  50,000Proceeds
      from notes payable to related party
                  
                  
                  36,500
                  
                  
                  
                  308,630Repayments
      to notes payable to related party
                  
                  
                  (35,000
                  )
                  
                  
                  (25,000
                  )Stock
      subscriptions
                  
                  
                  -
                  
                  
                  
                  147,200Proceeds
      from sale of stock
                  
                  
                  1,235,995
                  
                  
                  
                  1,238,651Net
      Cash Provided by Financing Activities
                  
                  
                  1,237,495
                  
                  
                  
                  1,719,481Net
      Increase (Decrease) in Cash
                  
                  
                  (481,783
                  )
                  
                  
                  380,662Cash
      Balance at Beginning of Year
                  
                  
                  483,564
                  
                  
                  
                  102,902Cash
      Balance at End of Year
                  
                  $
                  1,781
                  
                  
                  $
                  483,564Supplemental
      Disclosures:Interest
      Paid
                  
                  $
                  -
                  
                  
                  $
                  26,201Taxes
      Paid
                  
                  $
                  1,600
                  
                  
                  $
                  800Noncash
      Investment and Financing Activities:Conversion
      of notes payable and accrued interest into common stock
                  
                  $
                  -
                  
                  
                  $
                  260,186
 
 The
accompanying notes are an integral part of these financial
statements
  F-6
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
1 – NATURE OF OPERATIONS
 
 uKarma
Corporation (“the Company”) was incorporated under the name of OM Capital
Corporation in the State of Nevada on June 26, 2001.  On April 30,
2004, the Company changed its name to uKarma Corporation.  In 2006,
the Company relocated its headquarter to the State of California, and became a
California foreign corporation.
 
 uKarma
Corporation develops and markets proprietary branded personal health and
wellness  products, including fitness DVDs, nutraceuticals, and mind,
body, and spirit goods and services,  for fitness and health-conscious
consumers.  The company’s product lines target the rapidly growing
tens of millions that are seeking to enrich their physical, spiritual and mental
wellness.
 
 Through
infomercials and other marketing initiatives, uKarma launched its initial
products.  The goal of the  infomercials is
to  generate  initial  working  capital,
and  build  a  community  of  loyal  customers.  From
there, the company will expand its product offerings into proprietary branded
products and services primarily within the fitness/wellbeing multimedia and
nutraceutical markets.  As the brand image builds, the company intends
to extend its brand systematically to other complementary consumer products that
meet its stringent product guidelines and are consistent with its message of
“total health and happiness for oneself and others.”
 
 The
Company is currently constructing a studio that will offer Xflowsion, fitness
and yoga classes along with retail items, retreats and teacher training, and
food and beverages. The construction is expected to be completed in the second
quarter of 2009. In addition, the Company is working on a prototype of a
patent-pending proprietary yoga mat.
 
 The
company began to generate revenue in the second quarter of 2007; accordingly,
the Company ceased its development stage status commencing April 1,
2007.
 
 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).
 
 Use of Estimates: The
preparation of the accompanying financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make certain estimates and assumptions that directly affect the
results of reported assets, liabilities, revenue, and expenses. Actual results
may differ from these estimates.
 
 Revenue Recognition:
The Company generally recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. In instances where the final acceptance of the
product is specified by the customer, revenue is deferred until all acceptance
criteria have been met. Customers’ prepayments are deferred until products are
shipped and accepted by the customers.  No provisions were established
for estimated product returns and allowances based on the Company’s historical
experience.
 
 Cash Equivalents: For
purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
 
 Concentration of
Cash: The Company places its cash and cash equivalents with high quality
financial institutions. At times, cash balances may be in excess of the FDIC
insurance limits. Management considers the risk to be minimal.
  F-7
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
 
 Inventories:
Inventories consist of finished goods and are stated at the lower of cost or
market, using the first-in, first-out method.
 
 Property and
Equipment: Property and equipment are valued at cost. Maintenance and
repair costs are charged to expenses as incurred. Depreciation is computed on
the straight-line method based on the estimated useful lives of the assets,
generally 5 to 7 years. Depreciation expense for the years ended December 31,
2008 and 2007 was $2,760 and $1,835, respectively.
 
 Patents: The Company
capitalizes patent costs as incurred, excluding costs associated with Company
personnel, relating to patenting its technology. The majority of capitalized
costs represent legal fees related to a patent application. If the Company
elects to stop pursuing a particular patent application or determines that a
patent application is not likely to be awarded or elects to discontinue payment
of required maintenance fees for a particular patent, the Company, at that time,
records as expense the capitalized amount of such patent application or patent.
Awarded patents will be amortized over the shorter of the economic or legal life
of the patent.
 
 Fair Value of Financial
Instruments: All financial instruments are carried at amounts that
approximate estimated fair value.
 
 Income Taxes: Income
tax expense is based on pretax financial accounting income. Deferred tax assets
and liabilities are recognized for the expected tax consequences of temporary
differences between the tax bases of assets and liabilities and their reported
amounts.
 
 Advertising Costs:
All costs associated with advertising and promoting the Company’s products and
services are expensed as incurred. Advertising expense for the years ended
December 31, 2008 and 2007 was $319,761 and $255,651, respectively.
 
 Net Loss Per Share:
Basic net loss per share includes no dilution and is computed by dividing net
loss available to common stockholders by the weighted average number of common
stock outstanding for the period.  Diluted net loss per share does not
differ from basic net loss per share since potential shares of common stock are
anti-dilutive for all periods presented.  Potential shares consist of
restricted common stock, stock warrants, and stock options.
 
 Stock Based
Compensation:  Effective January 1, 2006, the Company adopted
the fair value recognition provisions of FASB Statement No. 123(R),
“Shares-Based Payment” (SFAS 123R), using the modified-prospective-transition
method.  Under that transition method, compensation cost recognized in
2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006 based of the grant date fair value
calculated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for all share-based payments granted subsequent to December
31, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R).  As a result of adopting SFAS 123(R) on
January 1, 2006, the Company reorganized pre-tax compensation expense related to
stock options of $232,115 and $190,056 for year ended December 31, 2008 and
2007, respectively.
  F-8
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
 
 The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123R and the EITF Issue No. 00-18, “Accounting For Equity Instruments
That Are Issued To Other Than Employees for Acquiring, Or In Conjunction With
Selling, Goods Or Services.” SFAS No. 123R states that equity instruments
that are issued in exchange for the receipt of goods or services should be
measured at the fair value of the consideration received or the fair value of
the equity instruments issued, whichever is more reliably measurable. Under the
guidance in Issue 00-18, the measurement date occurs as of the earlier of (a)
the date at which a performance commitment is reached or (b) absent a
performance commitment, the date at which the performance necessary to earn the
equity instruments is complete (that is, the vesting date).
 
 New
Accounting Pronouncements: In March 2008, Financial Accounting Standards
Board {“FASB”) issued Statement of Financial Accounting Standards (SFAS) No.
161, “Disclosures about
Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring companies to enhance disclosure about how these
instruments and activities affect their financial position, performance and cash
flows. SFAS 161 also improves the transparency about the location and amounts of
derivative instruments in a company’s financial statements and how they are
accounted for under SFAS 133. SFAS 161 is effective for financial statements
issued for fiscal years beginning after November 15, 2008 and interim periods
beginning after that date. As such, the Company is required to adopt these
provisions beginning with the quarter ending in February 2009. Adoption of SFAS
161 is not expected to have a material impact on the Company’s financial
statements.
 
 In June
2008, the FASB issued FASB SP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.” SP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in SFAS No. 128, “Earnings per
Share.”  SP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning on or after December 15, 2008 and earlier
adoption is prohibited.  The Company is required to adopt SP EITF
03-6-1 in the first quarter of 2009 and is currently evaluating the impact that
SP EITF 03-6-1 will have on its financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Non-Controlling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS
No. 160”). This statement requires that noncontrolling or minority interests in
subsidiaries be presented in the consolidated statement of financial position
within equity, but separate from the parents’ equity, and that the amount of the
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income. SFAS No. 160 will be effective for the Company’s fiscal
year after December 15, 2008. Currently, the Company does not anticipate that
this Statement will have a significant impact on its financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”
(“SFAS No.141(R)”). SFAS No. 141(R) will replace SFAS 141, and establishes
principles and requirements for how the acquirer in a business combination
reorganizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree; recognizes and measures the goodwill acquired in the business
combination or gain from a bargain purchase; and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. Currently, the Company does not anticipate that this
Statement will have a significant impact on its financial
statements.
  F-9
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
3 – GOING CONCERN
 
 The
Company's financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business.  In the near term,
the Company expects operating costs to continue to exceed funds generated from
operations.  As a result, the Company expects to continue to incur
operating losses, and the operations in the near future are expected to continue
to use working capital.
 
 Management
of the Company is actively increasing marketing efforts to increase revenues.
The ability of the Company to continue as a going concern is dependent on its
ability to meet its financing arrangement and the success of its future
operations. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going
concern.
 
 NOTE
4 – PREPAID EXPENSES
 
 Prepaid
expenses consisted of the following as of December 31,:
 
 2008
                      
                      
                      2007Prepaid
      Royalty
                      
                      $
                      68,581
                      
                      
                      $
                      55,146Prepaid
      Legal
                      
                      
                      2,282
                      
                      
                      
                      -Total
      Prepaid Expenses
                      
                      $
                      70,863
                      
                      
                      $
                      55,146
  On April
25, 2008, the Company entered into an agreement with a coauthor for its diet and
nutrition book that it is self-publishing and plans to market direct to
customers.  Pursuant to this agreement, the Company paid the coauthor
a $10,000 advance against future royalties.  The Company will pay the
coauthor a 5% royalty if uKarma acts as the publisher or a 2 1⁄2% royalty if the
Company engages a third-party publisher after the $10,000 advance is
recouped.
 
 On March
26, 2008, the Company entered into an agreement with an author to write a book
related to diet and nutrition that the Company plans to self publish and market
directly to consumers. Pursuant to the agreement, the author will be paid a
$40,000 advance on royalties with the following arrangement: $15,000 payable
upon execution of the agreement; $15,000 payable on or before the completion and
delivery of the first 50% of the book; and $10,000 on full completion, delivery,
and acceptance of the book.  The $40,000 advance on royalties is based on
the first 50,000 books sold. The author will receive a 5% royalty on sales above
50,000 books sold where the Company acts as the publisher and 2 1/2% royalty on
sales above 50,0000 books sold if the Company engages a third party publisher.
As of December 31, 2008, no advance payment has been paid.
 
 On April
19, 2006, the Company entered into an agreement with a consultant to provide
consulting and advisory services for the Company, to appear in the Company’s
yoga, health, and wellness film productions, to assist in scriptwriting for the
projects such as classes, interviews and introductions, to participate in the
projects rehearsals, and to assist in marketing and promoting the projects.
Accordingly, the Company shall pay a royalty of 8% on the first $300,000 and 10%
on above $300,000 on all gross revenue, net of returns, refunds, chargebacks,
taxes, and shipping and handling charges. As of December 31, 2008, there is a
balance of $58,581 after advancing $70,000 and deducting royalties to the 2008
sales. Future royalty obligations will be deducted from the current
balance.
  F-10
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
5 – PROPERTY AND EQUIPMENT
 
 Property
and Equipment consisted of the following as of December 31:
 
 2008
                      
                      
                      2007Furniture
      & Fixtures
                      
                      $
                      13,721
                      
                      
                      $
                      3,557Machinery
      & Equipment
                      
                      
                      12,525
                      
                      
                      
                      9,083Studio
      Leasehold Improvements
                      
                      
                      369,957
                      
                      
                      
                      -396,203
                      
                      
                      
                      12,640Accumulated
      Depreciation
                      
                      
                      (4,689
                      )
                      
                      
                      (1,929
                      )Property
      and Equipment, net
                      
                      $
                      391,514
                      
                      
                      $
                      10,711
 
 NOTE
6 – PRODUCTION COSTS
 
 The
Company capitalized costs incurred for recording seven fitness videos’ master
copies.  As of December 31, 2008, total costs of $619,085 were
capitalized.  All costs consisted of in-production costs
only.
 
 Commenced
on the second quarter of 2007, the costs were amortized on a straight-line
method over the estimated life of the recorded performances, which is five
years.  The Company recorded an amortization expense of $112,654 and
$99,393 for the years ended December 31, 2008 and 2007,
respectively.
 
 NOTE
7 – PATENT
 
 The
Company filed for a patent for three proprietary yoga mats, which it believes
provide unique functions and benefits compared to yoga mats on the market
today.  The patent is currently pending for approval.
 
 NOTE
8 – ACCRUED EXPENSES
 
 Accrued
expenses consisted of the following:
 
 December 31,
                    
                    
                    December 31,2008
                    
                    
                    2007Accrued
      Professional Fees
                    
                    $
                    15,000
                    
                    
                    $
                    15,000Accrued
      Salaries
                    
                    
                    41,404
                    
                    
                    
                    -Employee
      Reimbursable
                    
                    
                    6,955
                    
                    
                    
                    6,955Accrued
      Sales Tax
                    
                    
                    18
                    
                    
                    
                    45Accrued
      Income Tax
                    
                    
                    800
                    
                    
                    
                    800Others
                    
                    
                    2,500
                    
                    
                    
                    -Total
      Accrued Liabilities
                    
                    $
                    66,677
                    
                    
                    $
                    22,800
  F-11
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
9 – NOTES PAYABLE TO RELATED PARTY
 
 The notes
payable to related party bear interest at 7% per annum and are due on demand. As
of December 31, 2008, the balance was $207,768, including accrued interest of
$22,637. As of December 31, 2007, the balance was $194,119, including accrued
interest of $10,488.
 
 NOTE
10 – STOCKHOLDERS’ EQUITY
 
 During
the year ended December 31, 2008, the Board of Directors of the Company approved
the issuance of an aggregate 3,386,740 shares of the Company’s common stock to
various providers as consideration for their services to the Company. The shares
were valued and charged to operations at a price of $0.12 to $0.35 per share, or
$775,334 in the aggregate. The valuation was based on the closing trading price
and/or the public offering prior to June 2008 of $0.35 per share, with
discounts, if applicable as per the service agreements.
 
 During
the year ended December 31, 2008, the Company received $859,750 and sold
2,456,428 shares of the Company’s common stock pursuant to the August 6, 2007
offering at a price of $0.35 per share. The Company also sold 2,893,147 shares
of its common stock and received $376,245 in a self-private placement offering,
of which 111,111 shares were issued in 2008 and the remaining 2,782,036 shares
were issued in 2009.
 
 During
the year ended December 31, 2007, the Board of Directors of the Company approved
the issuance of an aggregate 592,926 shares of the Company’s common stock to
various providers as consideration for their services to the
Company.  The shares were valued and charged to operations at a price
of $0.25 to $0.35 per share, or $152,360 in the aggregate.  The
valuation was based on the 2006 private placement offering price of $0.25 per
share, and the 2007 offering price at $0.35 per common share.
 
 On August
14, 2007, the CEO agreed to convert $209,148 worth of his loans to the Company
($200,000 principal plus $9,148 accrued interest) into 836,592 shares of the
Company’s common stock.  In addition, on August 14, 2007, two
unrelated parties agreed to convert $51,038, including accrued interest, worth
of their notes payable into 204,151 shares of the Company’s common
stock.  The Board of Directors of the Company approved such
conversions on August 14, 2007.  The conversion was based on $0.25 per
share; however, since the selling price of each share of the Company’s common
stock was $0.35 per share, the difference, for an aggregate of $104,073, was
charged against interest expense.
 
 On August
6, 2007, the Company offered to sell up to 7,147,857 shares of common stock in a
direct public offering, at $0.35 per share.  As of December 31, 2007,
the Company received $1,238,651 and sold 3,539,003 shares of the Company’s
common stock. The Company also received proceeds of $147,200 for subscriptions
for 420,571 shares of the Company’s common stock that were issued in
2008.
  F-12
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
11 - PROVISION FOR INCOME TAXES
 
 Provision
of income tax consists of a minimum state franchise tax of $800 for the years
ended December 31, 2008 and 2007, respectively.
 
 The
Company has net operating loss carryforwards of approximately $6,058,451 and
$3,397,109 to reduce future federal and state taxable income as of December 31,
2008 and 2007, respectively. To the extent not utilized, the carryforwards will
begin to expire through 2028 for federal tax purposes and through 2018 for state
tax purposes. The Company’s ability to utilize its federal net operating loss
carryforwards is uncertain and thus a valuation reserve has been provided
against the Company’s net deferred tax assets.
 
 The
deferred tax asset as of December 31, 2008 and 2007 consists of the
following:
  2008
                          
                          
                          2007Tax
      Benefit on Net Operating Loss Carryforward
                          
                          $
                          2,120,458
                          
                          
                          $
                          1,188,988Less:
      Valuation Allowance
                          
                          
                          (2,120,458
                          )
                          
                          
                          (1,188,988
                          )Net
      Deferred Tax Asset
                          
                          $
                          -
                          
                          
                          $
                          -
 
 NOTE
12 – NET LOSS PER SHARE
 
 The
following table sets forth the computation of basic and diluted net loss per
share:
 
 For year ended
                                
                                
                                For year endedDecember 31,
                                
                                
                                December 31,2008
                                
                                
                                2007Numerator:Net
      Loss
                                
                                $
                                (2,677,092
                                )
                                
                                $
                                (1,849,636
                                )Denominator:Weighted
      Average of Common Shares
                                
                                
                                23,886,934
                                
                                
                                
                                16,943,898Basic
      and Diluted Net Loss per Share
                                
                                $
                                (0.11
                                )
                                
                                $
                                (0.11
                                )
 
 As the
Company incurred net losses for the years ended December 31, 2008 and December
31, 2007, the effect of dilutive securities totaling 250,000 and 2,914,286
equivalent shares, respectively, has been excluded from the calculation of
diluted loss per share because their effect was anti-dilutive.
 
 There
were also 6,527,000 and 5,827,000 shares out-of-money stock options and warrants
excluded from the calculation of diluted net loss per share for the years ended
December 31, 2008 and 2007, respectively, because their exercise prices were
greater than the average fair market price of the common stock.
  F-13
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
13 – 2006 STOCK OPTION PLAN
 
 On
January 1, 2006, the Board of Directors approved and adopted the 2006 Stock
Option, Deferred Stock and Restricted Stock Plan (the “Plan”) to provide the
issuance of non-qualified and/or incentive stock options to employees, officers,
directors and consultants and other service providers.  Generally, all
options granted expire ten years from the date of grant.  All options
have an exercise price equal to or higher than the fair market value of the
Company’s stock on the date the options were granted.  It is the
policy of the Company to issue new shares for stock option exercised and
restricted stock rather than issued treasury shares.  Options
generally vest over three years.  The Plan reserves 7,500,000 shares
of common stock under the Plan and is effective through December 31,
2015.
 
 A summary
of the status of stock options issued by the Company as of December 31, 2008 and
2007 is presented in the following table:
 
 2008
                  
                  
                  2007Weighted
                  
                  
                  
                  
                  
                  WeightedNumber
                  
                  
                  Average
                  
                  
                  Number
                  
                  
                  Averageof
                  
                  
                  Exercise
                  
                  
                  of
                  
                  
                  ExerciseShares
                  
                  
                  Price
                  
                  
                  Shares
                  
                  
                  PriceOutstanding
      at beginning of year
                  
                  
                  5,250,000
                  
                  
                  $
                  0.20
                  
                  
                  
                  5,250,000
                  
                  
                  $
                  0.20Granted
                  
                  
                  45,000
                  
                  
                  $
                  0.35
                  
                  
                  
                  -
                  
                  
                  
                  -Exercised/Expired/Cancelled
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at end of period
                  
                  
                  5,295,000
                  
                  
                  $
                  0.20
                  
                  
                  
                  5,250,000
                  
                  
                  $
                  0.20Exercisable
      at end of period
                  
                  
                  3,208,334
                  
                  
                  $
                  0.20
                  
                  
                  
                  2,250,000
                  
                  
                  $
                  0.20
 
 The fair
value of the stock option granted is estimated on the date of grant using the
Black-Scholes option valuation model. This model uses the assumptions listed in
the table below. Expected volatilities are based on the estimated volatility of
the Company’s common stock. The risk-free rate for periods within the expected
life of the option is based on the U.S. Treasury yield curve in effect at the
time of grant.
 
 2008
                    
                    
                    2007Weighted
      average fair value per option granted
                    
                    $
                    0.11
                    
                    
                    
                    N/ARisk-free
      interest rate
                    
                    
                    3.23
                    %
                    
                    
                    N/AExpected
      dividend yield
                    
                    
                    0
                    %
                    
                    
                    N/AExpected
      lives
                    
                    
                    5
                    
                    
                    
                    N/AExpected
      volatility
                    
                    
                    29.49
                    %
                    
                    
                    N/A
  F-14
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
13 – 2006 STOCK OPTION PLAN (CONTINUED)
 
 The
following table sets forth additional information about stock options
outstanding at December 31, 2008:
 
 WeightedAverage
                          
                          
                          WeightedRange of
                          
                          
                          
                          
                          Remaining
                          
                          
                          AverageExercise
                          
                          Options
                          
                          
                          Contractual
                          
                          
                          Exercise
                          
                          
                          OptionsPrices
                          
                          Outstanding
                          
                          
                          Life
                          
                          
                          Price
                          
                          
                          Exercisable$0.20-$0.35
                          
                          
                          5,295,000
                          
                          
                          
                          6.75
                          
                          
                          $
                          0.20
                          
                          
                          
                          3,208,3345,295,000
                          
                          
                          
                          6.75
                          
                          
                          $
                          0.20
                          
                          
                          
                          3,208,334
 
 As of
December 31, 2008, there was $292,926 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
Plan.  That cost is expected to be recognized over a weighted average
period of 1.49 years.
 
 As of
December 31, 2007, there was $566,102 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted under the
Plan.  That cost is expected to be recognized over a weighted average
period of 3.2 years.
 
 NOTE
14 – STOCK WARRANTS
 
 On
October 4, 2007, the Company issued stock purchase warrants to a service
provider for the right to purchase 80,000 shares of the Company’s common stock
at the price of $.25 per share.  The warrants have a term of five
years from the date of warrants issued.  The warrants were valued at
$0.19 per share using the Black-Scholes option pricing model.
 
 On
January 26, 2007, March 13, 2007, and March 29, 2007, the Company issued stock
purchase warrants to the CEO of the Company for the right to purchase 200,000,
250,000, and 125,000 shares of the Company, respectively, at the price of $0.25
per share.  The warrants have a term of five years from the date of
issue.  The warrants were valued at $0.19 per share using the
Black-Scholes option pricing model.
 
 The
assumptions used in the Black-Scholes option pricing model are as
follows:
 
 Decenber 31,
                      
                      
                      Decenber 31,2008
                      
                      
                      2007Weighted
      average fair value per warrant granted
                      
                      
                      N/A
                      
                      
                      $
                      0.19Risk-free
      interest rate
                      
                      
                      N/A
                      
                      
                      
                      4.60
                      %Expected
      dividend yield
                      
                      
                      N/A
                      
                      
                      
                      0.00
                      %Expected
      lives
                      
                      
                      N/A
                      
                      
                      
                      5.00Expected
      volatility
                      
                      
                      N/A
                      
                      
                      
                      100.00
                      %
 
 The
Company recognized $14,440 and $111,197 stock warrants expense for the years
ended December 31, 2008 and 2007, respectively.
  F-15
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
15 - LEASE AGREEMENTS
 
 In
September 2008, the Company relocated its corporate office from Santa Monica,
California to Beverly Hills, California and entered into a new lease agreement
that expired on March 31, 2009.  The lease calls for approximately
$2,800 rent per month during the term of the lease.
 
 On April
25, 2008, the Company entered into a lease agreement for a studio space in Los
Angeles, California, which will be used to offer Xflowsion, fitness and yoga
classes along with retail items and incidental food. The lease calls for $22,000
rent per month for five years commencing on the earlier of either September 25,
2008, or the date the Company first opens the studio for business. Presently,
the Company is in the process of remodeling the studio.
 
 As of
December 31, 2008, the minimum annual operating lease payments were as
follows:
 
 Year ended December 31,2009
                    
                    $
                    274,3802010
                    
                    
                    273,9602011
                    
                    
                    282,1802012
                    
                    
                    290,6432013
                    
                    
                    222,849$
                    1,344,012
 
 NOTE
16 – RELATED PARTY TRANSACTIONS
 
 During
the year ended December 31, 2008, the Company paid $23,500 to a director for his
consulting services to the Company.
 
 As of
December 31, 2008, the Company had an employee advance of $19,532 due from the
Company’s CEO. The Company also had accrued salary of $38,462 payable to the
CEO. The advance will be netted against the accrued salary payable when it is
reported to the Internal Revenue Service.
 
 In
addition, the Company had an employee reimbursable of $6,955 due to the
Company’s CEO. The reimbursable did not carry interest and payable on
demand.
 
 NOTE
17 – PENDING ACQUISITION
 
 On July
10, 2008, the Company signed a letter of intent to acquire Yoga Shelter, LLC.
The acquisition has been delayed due to market fluctuations, and the parties are
continuing dialog about exploring ways to work together and are planning to
revisit the acquisition or other ways to collaborate at a later time in the
future.
  F-16
  UKARMA
CORPORATION
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
18 – SUBSEQUENT EVENTS
 
 On
January 2, 2009, the Board of Directors approved the issuance of aggregate
685,571 shares of the Company’s common stock at a price of $0.08 per share to
two providers as consideration for legal services valued at $54,846 that was
rendered to the Company. On March 4, 2009, the Board of Directors approved the
issuance of an aggregate 1,739,831 shares of the Company’s common stock to two
providers as consideration for consulting services rendered to the
Company.
 
 Subsequent
to December 31, 2008, the Company received proceeds of $113,500 from the sale of
928,266 shares of the Company’s common stock.
 
 Subsequent
to December 31, 2008, the Company extended its office lease until April 15,
2009.  After April 15, 2009, the Company entered into an identity plan
at the same office location that includes telephone answering and mail services
for approximately $300 per month.
  F-17




ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





There
were no changes in or disagreements with our accountants on accounting and
financial disclosures during our last two fiscal years.





ITEM
9A.  CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Regulations
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
require public companies to maintain “disclosure controls and procedures,” which
are defined to mean a company’s controls and other procedures that are designed
to ensure that information required to be disclosed in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the SEC’s rules and
forms.  Our Chief Executive Officer and Chief Financial Officer
carried out an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report.  Based
on those evaluations, as of December 31, 2008, our CEO and CFO believe
that:





(i)
            our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed by us in the reports we file 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 the CEO and
      CFO, as appropriate, to allow timely decisions regarding required
      disclosure; and





(ii)
            our
      disclosure controls and procedures are
  effective.





Internal
Control over Financial Reporting





(a) Management’s
annual report on internal control over financial reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  Internal control over financial
reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act as a process designed by, or under the supervision of,
the Company’s principal executive officer and principal financial officer and
effected by the Company’s board of directors, management, and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;





·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company
      are being made only in accordance with authorizations of management and
      directors of the Company; and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of the Company’s assets that
      could have a material effect on the financial
  statements.





Because
of its inherent limitations, the Company’s internal control over financial
reporting may not prevent or detect misstatements.  Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and
presentation.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008.  In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework.





Based on
our assessment, management believes that, as of December 31, 2008, our
internal control over financial reporting is effective based on those
criteria.





This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.




16




(b)
Changes in internal control over financial reporting





There
were no changes in our internal control over financial reporting identified in
connection with the evaluation required by Rule 13a-15(d) or
Rule15d-15(d) promulgated under the Exchange Act that occurred during our
fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.




17


PART
III
 
 ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
 
 The
names, ages and biographical information of each of our directors and executive
officers as of December 31, 2008 are set forth below.
 
 Name
                
                Age
                
                Position Held
                
                Initial Election or
                  Appointment DateBill
      Glaser
                
                42
                
                Chairman,
      Chief Executive Officer and Interim Chief Financial
      Officer
                
                June
      2001Fred
      Tannous
                
                42
                
                Director
                
                June
      2001
  Business
Experience Descriptions
 
 Set forth
below is a summary of our executive officers’ and directors’ business experience
for the past 5 years.
 
 Bill
Glaser.Mr.
Glaser is currently our Chairman, Chief Executive Officer and acting Chief
Financial Officer.  Mr. Glaser began to devote his full time to uKarma
Corp beginning in July 2005.  From December 2000 to July 2005 Bill
served as President of Health Sciences Group, Inc., a manufacturer, marketer and
distributor of pharmaceuticals and nutrition based products.  He
worked closely with the CEO of Health Sciences to provide oversight in all
aspects of operations ranging from crafting and executing Health Sciences’
overall growth strategy to structuring debt and equity financings and seeking
and evaluating qualified acquisition candidates.  Prior to that, Mr. Glaser was founder
and Chief Executive Officer of Zenterprise, Inc., a corporate consulting firm,
which provided strategy, finance, and marketing services for both public and
private companies.  Prior, Mr. Glaser was a registered principal of a
regional stock brokerage firm where he gained diverse experience in finance,
management, marketing, sales, and public company
relations.  Previously, he was a registered representative at Drexel
Burnham Lambert and Smith Barney.  Mr. Glaser holds a Bachelor’s
degree in finance and economics from the Ithaca College - School of
Business.
  Fred
Tannous.  Mr. Tannous is currently our director.  He
had been the co-Chairman, Chief Executive Officer, and Treasurer of Health
Sciences Group from October 2000 to May 2007.  Previously, Mr. Tannous
was employed at DIRECTV, Inc. where he was involved in various capacities
including valuing, structuring, and executing strategic
investments.  Prior to joining DIRECTV, a wholly owned subsidiary of
Hughes Electronics Corporation, Mr. Tannous was with the corporate treasury
organization of Hughes where he assisted in conducting valuations and
effectuating financing transactions for the company’s satellite and network
communication units.  From February 1996 to May 1999, Mr. Tannous
served as Treasurer and Chief Financial Officer of Colorado Casino Resorts,
Inc., a gaming and lodging concern with operations in Colorado.  In
addition to overseeing the company’s finance and accounting operations, he was
accountable for all corporate finance and treasury
activities.  Previously, as principal of his own consulting firm, Mr.
Tannous consulted to several start-up ventures in various industries where he
was instrumental in developing business plans, advising on business strategy and
capital structure, and arranging venture financings.  Mr. Tannous
received an MBA in finance and accounting from the University of Chicago
Graduate School of Business.  He also holds a Masters and Bachelors
degree in Electrical Engineering from the University of Southern
California.
 
 Family
Relationships
 
 There are
no family relationships among our directors and executive officers.
  Involvement
in Certain Legal Proceedings
 
 None of
our directors or executive officers has, during the past five
years:
  ·
              Had any petition under the
      federal bankruptcy laws or any state insolvency law filed by or against,
      or had a receiver, fiscal agent, or similar officer appointed by a court
      for the business or property of such person, or any partnership in which
      he was a general partner at or within two years before the time of such
      filing, or any corporation or business association of which he was an
      executive officer at or within two years before the time of such
      filing;
  ·
              Been convicted in a criminal
      proceeding or a named subject of a pending criminal proceeding (excluding
      traffic violations and other minor
  offenses);
  ·
              Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining
      him from, or otherwise limiting, the following
      activities:
  (i)
              Acting as a futures commission
      merchant, introducing broker, commodity trading advisor, commodity pool
      operator, floor broker, leverage transaction merchant, any other person
      regulated by the Commodity Futures Trading Commission, or an associated
      person of any of the foregoing, or as an investment adviser, underwriter,
      broker or dealer in securities, or as an affiliated person, director or
      employee of any investment company, bank, savings and loan association or
      insurance company, or engaging in or continuing any conduct or practice in
      connection with such
activity;
  18
 
 (ii)
              Engaging in any type of business
      practice; or
  (iii)
              Engaging in any activity in
      connection with the purchase or sale of any security or commodity or in
      connection with any violation of federal or state securities laws or
      federal commodities laws;
  ·
              Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any federal or state authority barring, suspending, or otherwise limiting
      for more than 60 days the right of such person to engage in any activity
      described in (i) above, or to be associated with persons engaged in any
      such activity;
  ·
              Been found by a court of
      competent jurisdiction in a civil action or by the SEC to have violated
      any federal or state securities law, where the judgment in such civil
      action or finding by the SEC has not been subsequently reversed,
      suspended, or vacated; or
  ·
              Been found by a court of
      competent jurisdiction in a civil action or by the Commodity Futures
      Trading Commission to have violated any federal commodities law, where the
      judgment in such civil action or finding by the Commodity Futures Trading
      Commission has not been subsequently reversed, suspended, or
      vacated.
  Compliance
with Section 16(a) of the Securities Exchange Act of 1934
 
 Our
executive officers, directors, and persons who beneficially own more than 10% of
a registered class of our equity securities are not currently subject to Section
16(a) of the Exchange Act.
 
 Code
of Ethics
  We have
adopted a code of ethics that applies to our directors, executive officers,
including our Chief Executive Officer and Chief Financial Officer, and
employees.  A copy of our code of ethics is filed as Exhibit 14.1 with
our annual report on Form 10-KSB filed with the SEC on April 15,
2008.
 
 Recommendation
of Nominees to the Board
 
 There
were no changes to the procedures by which our stockholders may recommend
nominees to our board of directors.
 
 Audit
Committee; Audit Committee Financial Expert
 
 No
individual on our board of directors possesses all of the attributes of an audit
committee financial expert, and no one on our board of directors is deemed to be
an audit committee financial expert.  In forming our board of
directors, we sought out individuals who would be able to guide our operations
based on their business experience, both past and present, or their
education.  Mr. Glaser, our interim Chief Financial Officer, serves as
our financial expert regarding generally accepted accounting principals and
general application of such principles in connection with the accounting for
estimates and accruals, including an understanding of internal control
procedures and policies over financial reporting, and maintains sufficient
experience preparing auditing, analyzing or evaluating financial statements in
such depth and breadth as may be required of an audit committee financial
expert.  However, Mr. Glaser is not an elected director of the
company.  We recognize that having a person who possesses all of the
attributes of an audit committee financial expert would be a valuable addition
to our board of directors; however, we are not, at this time, able to compensate
such a person.  Therefore, we may find it difficult to attract such a
candidate.
 
 ITEM
11.  EXECUTIVE COMPENSATION
 
 The
following summary compensation table indicates the cash and non-cash
compensation earned during the years ended December 31, 2008, 2007, and
2006 by (i) our Chief Executive Officer (principal executive officer), (ii) our
Chief Financial Officer (principal financial officer), (iii) the three most
highly compensated executive officers other than our CEO and CFO who were
serving as executive officers at the end of our last completed fiscal year,
whose total compensation exceeded $100,000 during such fiscal year ends, and
(iv) up to two additional individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer at the end of our last completed fiscal year, whose total compensation
exceeded $100,000 during such fiscal year ends.
  19
 
 SUMMARY COMPENSATION TABLE
 
 Name and
                                                        Principal Position
                                                      
                                                      Year
                                                      
                                                      Salary
                                                        ($)
                                                      
                                                      Bonus
                                                        ($)
                                                      
                                                      Stock
                                                        Awards
                                                        ($)
                                                      
                                                      Option
                                                        Awards
                                                        ($)(1)
                                                      
                                                      Non-
                                                        Equity
                                                        Incentive
                                                        Plan
                                                        Compen-
                                                        sation
                                                        ($)
                                                      
                                                      Non-
                                                        qualified
                                                        Deferred
                                                        Compen-
                                                        sation
                                                        Earnings
                                                        ($)
                                                      
                                                      All
                                                        Other
                                                        Comp-
                                                        ensation
                                                        ($)
                                                      
                                                      Total
                                                        ($)Bill
      Glaser,
                                                      
                                                      2008
                                                      
                                                      $
                                                      211,538
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      190,110
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      9,000
                                                      (2)
                                                      $
                                                      410,648CEO
      and President
                                                      
                                                      2007
                                                      
                                                      $
                                                      250,000
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      178,171
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      9,000
                                                      (2)
                                                      $
                                                      437,1712006
                                                      
                                                      $
                                                      180,000
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      181,817
                                                      
                                                      —
                                                      
                                                      —
                                                      
                                                      $
                                                      9,000
                                                      (2)
                                                      $
                                                      370,817
 
 (1)
              The assumptions made in the
      valuation of these options can be found in Note 2 to our financial
      statements for the period ended December 31,
  2008.
 
 (2)
              Mr. Glaser receives a car
      allowance of $750 per month pursuant to his employment
      agreement
 
 Grants
of Plan-Based Awards
 
 We made
no grants of an award to a named executive officer during the year ended
December 31, 2008 under any plan.
 
 Employment
Agreements
 
 On
January 1, 2006, we entered into a five-year employment agreement with our Chief
Executive Officer, Bill Glaser.  This employment agreement provides
him with a salary of $180,000 per year.  The salary increases to
$250,000, $360,000 and $500,000 per year if we either (i) raise $1.0 million,
$2.5 million or $5 million in debt or equity financing in the aggregate,
respectively, or (ii) recognize $1.0 million, $2.5 million or $5 million in
cumulative gross revenues (i.e., the sum of all revenues recognized since
commencement of operations), respectively.  During 2007, pursuant to
the milestones met, Mr. Glaser’s salary was increased to $250,000 per
year.   He is also eligible for a performance bonus in an amount
equal to 5% of “Adjusted EBITDA” for each fiscal year.  “Adjusted
EBITDA” is earnings before interest, taxes, depreciation and amortization, but
adjusted to account for non-cash expenses and calculated from financial
statements in accordance with generally accepted accounting
principles.  He also received options to purchase 5,000,000 shares of
our common stock at $0.20 per share. These options are exercisable at the rate
of 500,000 on July 1, 2006, 1,000,000 on January 1, 2007, and 500,000 every six
months thereafter. These options were granted to Mr. Glaser based on the Board’s
view that they provided an appropriate incentive and compensation.  He
is entitled to participate in all medical, pension, dental, and life insurance
benefits that are in effect from time to time.  He also receives a car
allowance of $750 per month.
 
 We are
required to pay Mr. Glaser the greater of the remainder of his salary or
$250,000 if we enter into a change of control transaction within a month after
his termination.  All of his options will accelerate their vesting
upon such an event.
 
 Upon
termination without cause, we are required to pay Mr. Glaser the lesser of his
salary for the remainder of the term of the agreement and one-year’s
salary.  In addition, all five million options would automatically
vest. Mr. Glaser has agreed not to solicit any employee to terminate his
employment relationship with us during the term of Mr. Glaser’s employment
agreement or a 12-month period thereafter.  Pursuant to the terms of
his employment agreement, all proprietary information will be kept confidential
by Mr. Glaser, and inventions developed during the course of his employment will
belong to the Company.
  Outstanding
Equity Awards at December 31, 2008
 
 OPTION AWARDS
                          
                          STOCK AWARDSName
                          Number of
                            securities
                            underlying
                            unexercised
                            options (#)
                            Exercisable
                          
                          Number of
                            securities
                            underlying
                            unexercised
                            options (#)
                            Unexercis-
                            able
                          
                          Equity
                            Incentive
                            Plan
                            Awards:
                            Number of
                            Securities
                            underlying
                            unexercised
                            unearned
                            options (#)
                          
                          Option
                            exercise
                            price ($)
                          
                          Option
                            expiration
                            date
                          
                          Number
                            of shares
                            or units
                            of stock
                            that
                            have not
                            vested
                            (#)
                          
                          Market
                            value
                            of
                            shares
                            or units
                            of
                            stock
                            that
                            have
                            not
                            vested
                            ($)
                          
                          Equity
                            incentive
                            plan
                            awards:
                            number
                            of
                            unearned
                            shares,
                            units or
                            other
                            rights
                            that have
                            not
                            vested
                            (#)
                          
                          Equity
                            incentive
                            plan
                            awards:
                            Market
                            or payout
                            value of
                            unearned
                            shares,
                            units or
                            other
                            rights
                            that have
                            not
                            vested
                            (#)Bill
      Glaser
                          3,000,000
                          
                          
                          2,000,000
                          
                          —
                          
                          $
                          0.20
                          
                          01/01/2016
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —Fred
      Tannous
                          —
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —
                          
                          
                          —
                          
                          —
  20
 
 Option
Exercises and Stock Vested
 
 There
were no exercises of stock options, SARs, and similar instruments, or vesting of
stock, during our fiscal year ended December 31, 2008 for any of our named
executive officers.
 
 Director
Compensation
 
 Directors
do not currently receive compensation for their services as directors, but we
plan to reimburse them for expenses incurred in attending board
meetings.
 
 Compensation
Committee Interlocks and Insider Participation
 
 We do not
currently have a compensation committee.  During our fiscal year ended
December 31, 2008, our entire Board of Directors participated in deliberations
concerning executive officer compensation.
 
 During
the fiscal year ended December 31, 2008:
 
 (i) none
of our executive officers served as a member of the compensation committee (or
other board committee performing equivalent functions or, in the absence of any
such committee, the entire board of directors) of another entity, one of whose
executive officers served on our compensation committee;
 
 (ii) none
of our executive officers served as a director of another entity, one of whose
executive officers served on our compensation committee; and
 
 (iii)
none of our executive officers served as a member of the compensation committee
(or other board committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of another entity, one of
whose executive officers served as a member of our board of
directors.
 
 ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
 
 Securities
Authorized for Issuance under Equity Compensation Plans
 
 Please
see the section titled “Securities Authorized for Issuance under Equity
Compensation Plans” under Item 5 above.
 
 Security
Ownership of Certain Beneficial Owners and Management
 
 The
following table sets forth information regarding the beneficial ownership of our
common stock as of May 12, 2009 for each of our directors and officers; all
directors and officers as a group; and each person known by us to beneficially
own five percent or more of our common stock.  Beneficial ownership is
determined in accordance with SEC rules.  Unless otherwise indicated
in the table, the persons and entities named in the table have sole voting and
sole investment power with respect to the shares set forth opposite the
shareholder’s name.
  Name and Address of Beneficial Owner (1)
                    
                    Number of
                      Shares of
                      Common Stock
                      Beneficially
                      Owned (2)
                    
                    Percentage of
                      Outstanding
                      Shares of
                      Common
                      Stock (2)(3)Named
      Executive Officers and Directors:Bill
      Glaser
                    
                    
                    11,433,708
                    (4)
                    36.7
                    %Fred
      Tannous
                    
                    
                    1,000,000
                    
                    3.2
                    %All
      Officers and Directors as a Group (2 persons)
                    
                    
                    12,433,708
                    
                    39.9
                    %
  (1)
                Unless otherwise indicated, the
      address of each beneficial owner listed below is 499 North Canon Drive,
      Suite 308, Beverly Hills, CA
  90210.
 
 (2)
                Under Rule 13d-3, a beneficial
      owner of a security includes any person who, directly or indirectly,
      through any contract, arrangement, understanding, relationship, or
      otherwise has or shares: (i) voting power, which includes the power to
      vote, or to direct the voting of shares; and (ii) investment power, which
      includes the power to dispose or direct the disposition of
      shares.  Certain shares may be deemed to be beneficially owned
      by more than one person (if, for example, persons share the power to vote
      or the power to dispose of the shares).  In addition, shares are
      deemed to be beneficially owned by a person if the person has the right to
      acquire the shares (for example, upon exercise of an option) within 60
      days of the date as of which the information is provided.  In
      computing the percentage ownership of any person, the amount of shares
      outstanding is deemed to include the amount of shares beneficially owned
      by such person (and only such person) by reason of these acquisition
      rights.  As a result, the percentage of outstanding shares of
      any person as shown in this table does not necessarily reflect the
      person's actual ownership or voting power with respect to the number of
      shares of common stock actually
  outstanding.
  21
 
 (3)
                The percentage of class
      beneficially owned is based on 33,124,461 shares of common stock
      outstanding on May 12,
2009.
  (4)
                3,000,000 of these shares
      represent the number of shares of common stock that Mr. Glaser has the
      right to purchase upon exercise of options, and 575,000 of these shares
      represent the number of shares of common stock issuable upon exercise of
      warrants held by Mr.
Glaser.
 
 Change
of Control
  We have
no knowledge of any arrangements, including any pledge by any person of our
securities, the operation of which may at a subsequent date result in a change
of control of the Company.
 
 ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 
 Transactions
with Related Persons
 
 The
following describes all transactions since the beginning of our last fiscal
year, and all proposed transactions, in which we were or are to be a participant
and the amount involved exceeds $120,000, and in which any related person had or
will have a direct or indirect material interest:
 
 Director
Independence
 
 Our board
of directors has determined that it currently has 1 member who
qualifies as "independent" as the term is used in the listing standards of the
NASDAQ Stock Market.  The independent director is Fred
Tannous.
 
 ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 The
following table sets forth fees billed to us by our auditors during the fiscal
years ended December 31, 2008 and 2007 for: (i) services rendered for the audit
of our annual financial statements and the review of our quarterly financial
statements, (ii) services by our auditor that are reasonably related to the
performance of the audit or review of our financial statements and that are not
reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered. "Audit Related Fees" consisted of consulting regarding accounting
issues.  "All Other Fees" consisted of fees related
  December 31, 2008
                            
                            
                            December 31, 2007(i)
                            Audit
      Fees
                            
                            $
                            33,000
                            
                            
                            $
                            25,000(ii)
                            Audit
      Related Fees
                            
                            
                            0
                            
                            
                            
                            0(iii)
                            Tax
      Fees
                            
                            
                            1,000
                            
                            
                            
                            1,000(iv)
                            All
      Other Fees
                            
                            
                            0
                            
                            
                            
                            0Total
      fees
                            
                            $
                            34,000
                            
                            
                            $
                            26,000
 
 Pre-Approval
Policies and Procedures of the Audit Committee
 
 We do not
currently have an audit committee of our board of directors.
  22
  PART
IV
  ITEM
15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
 Financial
Statements; Schedules
 
 Our
financial statements for the years ended December 31, 2008 and 2007 begin
on page F-1 of this annual report on Form 10-K.  We are not required
to file any financial statement schedules.
 
 Exhibits
 
 The
Exhibit Table below lists those documents that we are required to file with this
annual report on Form 10-K.
  Exhibit No.
                
                Description3.1
                
                Amended
      and Restated Certificate of Incorporation, as currently in effect
      (1)3.2
                
                Bylaws,
      as currently in effect (1)4.1
                
                Form
      of Warrant (1)10.1
                
                Employment
      Agreement between the Company and Bill Glaser, dated January 1, 2006
      (1)10.2
                
                Consulting
      Agreement between the Company and Eric Paskel, dated April 19, 2006
      (1)10.3
                
                Consulting
      Agreement between the Company and Craig Kulman, dated February 13, 2006
      (1)10.4
                
                Consulting
      Agreement between the Company and Len Panzer, dated February 28, 2006
      (1)10.5
                
                Consulting
      Agreement between the Company and Jeremy Koff, dated May 5, 2006
      (1)10.6
                
                Production
      Agreement between the Company and The Tribal Vision Group, LLC d/b/a Yoga
      Tribe and Culture Productions, dated June 15, 2006 (1)10.7
                
                Marketing
      Agreement between the Company and Synthesis Marketing, dated October 11,
      2006 (1)10.8
                
                Marketing
      Agreement between the Company and Much and House Public Relations, dated
      October 11, 2006 (1)10.9
                
                Production
      Agreement between the Company and Caudill and Associates, dated November
      13, 2006 (1)10.10
                
                Option
      Agreement between Fred Tannous and Bill Glaser, dated January 17, 2005
      (1)10.11
                
                Promissory
      Note issued to Bill Glaser, dated November 10, 2006 (1)10.12
                
                Promissory
      Note issued to Bill Glaser, dated January 26, 2007 (1)10.13
                
                Warrant
      issued to Bill Glaser, dated January 26, 2007 (1)10.14
                
                Promissory
      Note issued to Bill Glaser, dated March 13, 2007 (2)10.15
                
                Common
      Stock Warrant issued to Bill Glaser, dated March 13, 2007
    (2)10.16
                
                Demand
      Promissory Note issued to Bill Glaser, dated March 29, 2007
      (2)10.17
                
                Common
      Stock Warrant issued to Bill Glaser, dated March 29, 2007
    (2)10.18
                
                Demand
      Promissory Note issued to Bill Glaser, dated April 30, 2007
      (2)10.19
                
                Amendment
      to Option Agreement, dated July 9, 2007
(3)
  23
 
 10.20
                
                Notice
      of Exercise of Option, dated July 9, 2007 (3)10.21
                
                Demand
      Promissory Note issued to Bill Glaser, dated July 23,
    2007(3)10.22
                
                Conversion
      Agreement between the small business issuer and Bill Glaser, dated August
      14, 2007 (4)10.23
                
                Video
      Distribution Agreement, dated September 25, 2007 (5)10.24
                
                Paskel
      Book Agreement, dated April 25, 2008 (8)10.25
                
                Glaser
      Book Agreement, dated April 25, 2008 (8)10.26
                
                Aronson
      Book Agreement, dated March 26, 2008 (8)10.27
                
                Lease,
      dated April 25, 2008 (7)10.28
                
                First
      Amendment to Lease, dated October 31, 2008 *14.1
                
                Code
      of Ethics (6)23.1
                
                Consent
      of Independent Registered Public Accounting Firm for Registration
      Statement on Form S-8 (No. 333-146642 *31.1
                
                Rule
      13a-14(a) / 15d-14(a)(4) Certification by the Chief Executive Officer
      *31.2
                
                Rule
      13a-14(a) / 15d-14(a)(4) Certification by the Chief Financial Officer
      *32.1
                
                Section
      1350 Certification by the Chief Executive Officer and Chief Financial
      Officer *
 
 *
              Filed
      herewith.(1)
              Incorporated
      herein by reference to our Form SB-2 filed with the SEC on February 12,
      2007.(2)
              Incorporated
      herein by reference to our Form SB-2 Amendment No. 1 filed with the SEC on
      June 28, 2007.(3)
              Incorporated
      herein by reference to our Form SB-2 Amendment No. 4 filed with the SEC on
      August 6, 2007.(4)
              Incorporated
      herein by reference to our Form 10-QSB filed with the SEC on August 20,
      2007.(5)
              Incorporated
      herein by reference to our Form 8-K filed with the SEC on October 4,
      2007.(6)
              Incorporated
      herein by reference to our Form 10-KSB filed with the SEC on April 15,
      2008.(7)
              Incorporated
      herein by reference to our Form 8-K filed with the SEC on May 1,
      2008(8)
              Incorporated
      herein by reference to our Form 10-Q filed with the SEC on August 19,
      2008.
  24
 
 SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) 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.
 
 UKARMA
      CORPORATION/s/ Bill GlaserBill
      Glaser, Chief Executive OfficerDate:
      May 14, 2009
 
 In
accordance with the Securities Exchange of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
 
 NAME
                
                TITLE
                
                DATE/s/ Bill Glaser
                
                Chairman of the Board, Chief Executive Officer (Principal Executive
                  Officer), and Interim Chief Financial Officer (Principal Financial and
                  Accounting
      Officer)
                
                May
      14, 2009Bill
      Glaser/s/ Fred Tannous
                
                Director
                
                May
      14, 2009Fred
      Tannous
  25