UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington
D.C. 20549





FORM
10-Q




(Mark
One)




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





For
the quarterly period ended December 31, 2010





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





For
the transition period from _________________ to _________________





Commission
File No.: 333-137210





ZEVOTEK,
INC.


(Exact
name of registrant as specified in its charter)





Delaware
            
            05-0630427(State or other jurisdiction of
              incorporation or organization)
            
            (I.R.S. Employer
              Identification No.)





900
Southeast Ocean Blvd


Suite
130D


Stuart,
FL 34994


(Address
of principal executive offices)





Issuer’s
telephone number:   (772) 600-2676







Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 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   x  No  
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes 
o
   No  o





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





Large accelerated filter 
       ̈
            
            Accelerated filter 
       ̈Non-accelerated filter 
       ̈
            (Do not check if a smaller reporting company)
            Smaller reporting company
      x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.  Yes    o
  No   x





APPLICABLE
ONLY TO CORPORATE ISSUERS


As of
February 18, 2011, there were 509,666,982 shares of our common
stock outstanding.





Transitional
Small Business Disclosure Format:    Yes    ̈
  No   x













Quarterly
Report on Form 10-Q for the




Quarterly
Period Ended December 31, 2010




Table of
Contents




PagePART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements
                
                3Condensed
      Consolidated Balance Sheets as of December 31, 2010 (unaudited) and June
      30, 2010
                
                3Condensed
      Consolidated Statements of Operations for the Three and Six Months
      Ended December 31, 2010 and 2009 (unaudited):
                
                4Condensed
      Consolidated Statement of Changes in Deficiency in Stockholders’ Equity
      for Period June 30, 2009 to December 31, 2010 (unaudited):
                
                5Condensed
      Consolidated Statements of Cash Flows for the Six Months Ended
      December 31, 2010 and 2009 (unaudited):
                
                6Notes
      to Unaudited Condensed Consolidated Financial Statements December 31,
      2010:
                
                7Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                
                16Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                
                20Item
      4  Controls and Procedures
                
                20PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
                
                21Item
      1A Risk Factor
                
                21Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                21Item
      3. Defaults upon Senior Securities
                
                21Item
      4. Removed and Reserved
                
                21Item
      5. Other Information
                
                21Item
      6. Exhibits
                
                21CERTIFICATION
      PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002CERTIFICATION
      PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


2




PART
1:                  FINANCIAL
INFORMATION





ITEM
1 – FINANCIAL STATEMENTS


ZEVOTEK, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS





December 31,
                    
                    
                    June 30,2010
                    
                    
                    2010(unaudited)ASSETSCurrent
      assets:Cash
                    
                    $
                    21,173
                    
                    
                    $
                    132,517Accounts
      receivable
                    
                    
                    2,265
                    
                    
                    
                    6,269Inventory
                    
                    
                    92,631
                    
                    
                    
                    98,247Prepayments
      and other current assets
                    
                    
                    8,822
                    
                    
                    
                    17,993Total
      current assets
                    
                    
                    124,891
                    
                    
                    
                    255,026Other
      assets:Security
      deposit
                    
                    
                    5,000
                    
                    
                    
                    5,000Licensing
      agreement
                    
                    
                    40,000
                    
                    
                    
                    40,000Total
      assets
                    
                    $
                    169,891
                    
                    
                    $
                    300,026LIABILITIES
      AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                    
                    $
                    689,690
                    
                    
                    $
                    705,855Advances
      payable
                    
                    
                    862,862
                    
                    
                    
                    820,389Convertible
      notes payable and demand notes (net of debt discount of $15,158 and
      $53,692 as of December 31, 2010 and June 30, 2010,
      respectively)
                    
                    
                    134,563
                    
                    
                    
                    182,557Customer
      deposits
                    
                    
                    24,351
                    
                    
                    
                    24,351Total
      current liabilities
                    
                    
                    1,711,466
                    
                    
                    
                    1,733,152Long
      term portion of convertible notes payable (net of debt discount of
      $158,644 and $22,916 as of December 31, 2010 and June 30, 2010,
      respectively)
                    
                    
                    117,352
                    
                    
                    
                    21,084Deficiency
      in stockholders' equity:Series
      A Preferred stock, $0.00001 par value; 10,000,000 shares authorized;
      50,000 shares issued and outstanding as of December 31, 2010 and June 30,
      2010.
                    
                    
                    1
                    
                    
                    
                    1Series
      B Preferred stock, $0.00001 par value; 1,000,000 shares authorized;
      1,000,000 shares issued and outstanding as of December 31, 2010 and June
      30, 2010
                    
                    
                    10
                    
                    
                    
                    10Common
      stock, $0.00001 par value, 5,000,000,000 shares authorized; 391,984,575
      and 173,596,998 shares issued and 391,982,575 and 173,594,998 shares
      outstanding as of December 31, 2010 and June 30, 2010,
      respectively
                    
                    
                    3,920
                    
                    
                    
                    1,736Common
      stock to be issued
                    
                    
                    6,073
                    
                    
                    
                    30,000Treasury
      stock, 2,000 shares as of December 31, 2010 and June 30,
    2010
                    
                    
                    —
                    
                    
                    
                    —Additional
      paid in capital
                    
                    
                    4,541,130
                    
                    
                    
                    3,999,068Accumulated
      deficit
                    
                    
                    (6,210,061
                    )
                    
                    
                    (5,485,025
                    )Total
      deficiency in stockholders' equity
                    
                    
                    (1,658,927
                    )
                    
                    
                    (1,454,210
                    )Total
      liabilities and deficiency in stockholders' equity
                    
                    $
                    169,891
                    
                    
                    $
                    300,026





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


3




ZEVOTEK,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three Months Ended
                      December 31,
                    
                    
                    Six Months EndedDecember31,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009REVENUES:Sales
                    
                    $
                    2,544
                    
                    
                    $
                    5,077
                    
                    
                    $
                    7,884
                    
                    
                    $
                    5,077Cost
      of sales
                    
                    
                    1,671
                    
                    
                    
                    1,521
                    
                    
                    
                    4,812
                    
                    
                    
                    1,521Gross
      profit
                    
                    
                    873
                    
                    
                    
                    3,556
                    
                    
                    
                    3,072
                    
                    
                    
                    3,556OPERATING
      EXPENSES:Selling
                    
                    
                    107,479
                    
                    
                    
                    86,571
                    
                    
                    
                    245,183
                    
                    
                    
                    86,571General
      and administrative
                    
                    
                    143,382
                    
                    
                    
                    121,246
                    
                    
                    
                    332,355
                    
                    
                    
                    323,031Total
      operating expense
                    
                    
                    250,861
                    
                    
                    
                    207,817
                    
                    
                    
                    577,538
                    
                    
                    
                    409,602Loss
      from operations
                    
                    
                    (249,988
                    )
                    
                    
                    (204,261
                    )
                    
                    
                    (574,466
                    )
                    
                    
                    (406,046
                    )OTHER
      (EXPENSE):Interest,
      net
                    
                    
                    (28,529
                    )
                    
                    
                    (10,827
                    )
                    
                    
                    (55,334
                    )
                    
                    
                    (24,572
                    )Amortization
      of beneficial conversion feature
                    
                    
                    (46,486
                    )
                    
                    (110,548
                    )
                    
                    
                    (95,236
                    )
                    
                    (189,279
                    )Total
      other expense
                    
                    
                    (75,015
                    )
                    
                    
                    (121,375
                    )
                    
                    
                    (150,570
                    )
                    
                    
                    (213,851
                    )Net
      loss before provision for income taxes
                    
                    
                    (325,003
                    )
                    
                    
                    (325,636
                    )
                    
                    
                    (725,036
                    )
                    
                    
                    (619,897
                    )Income
      taxes
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —NET
      LOSS
                    
                    $
                    (325,003
                    )
                    
                    $
                    (325,636
                    )
                    
                    $
                    (725,036
                    )
                    
                    $
                    (619,897
                    )Net
      loss per common share, basic and fully diluted
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.02
                    )Weighted
      average number of common shares outstanding, basic and fully
      diluted
                    
                    
                    278,224,009
                    
                    
                    
                    63,826,203
                    
                    
                    
                    235,045,382
                    
                    
                    
                    40,167,624




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


4





ZEVOTEK,
INC.


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT


For
the Period from June 30, 2009 to December 31, 2010


(UNAUDITED)





Preferred stock
                
                
                
                
                
                
                
                
                Common
                
                
                
                
                
                
                
                
                AdditionalSeries A
                
                
                Series B
                
                
                Common stock
                
                
                Stock To
                
                
                Treasury stock
                
                
                Paid in
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Be Issued
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                TotalBALANCE,
      June 30, 2009
                
                
                50,000
                
                
                $
                1
                
                
                
                1,000,000
                
                
                $
                10
                
                
                
                8,804,619
                
                
                $
                88
                
                
                $
                30
                
                
                
                2,000
                
                
                $
                —
                
                
                $
                2,728,469
                
                
                $
                (4,146,023
                )
                
                $
                (1,417,425
                )Common
      stock issued for services rendered
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                6,670,600
                
                
                
                66
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                276,230
                
                
                
                —
                
                
                
                276,296Common
      stock issued for accrued expenses
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,500,000
                
                
                
                15
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                489,734
                
                
                
                —
                
                
                
                489,749Conversion
      of debt and accrued interest for common stock
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                155,698,350
                
                
                
                1,557
                
                
                
                (30
                )
                
                
                —
                
                
                
                —
                
                
                
                309,569
                
                
                
                —
                
                
                
                311,096Common
      stock issued for officer’s compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                350,000
                
                
                
                4
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                10,496
                
                
                
                —
                
                
                
                10,500Fair
      value of beneficial conversion feature
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                44,000
                
                
                
                —
                
                
                
                44,000Common
      stock to be issued to former officer for accrued
    compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                571,429
                
                
                
                6
                
                
                
                30,000
                
                
                
                —
                
                
                
                —
                
                
                
                140,570
                
                
                
                —
                
                
                
                170,576Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (1,339,002
                )
                
                
                (1,339,002
                )BALANCE,
      June 30, 2010
                
                
                50,000
                
                
                $
                1
                
                
                
                1,000,000
                
                
                $
                10
                
                
                
                173,594,998
                
                
                $
                1,736
                
                
                $
                30,000
                
                
                
                2,000
                
                
                $
                —
                
                
                $
                3,999,068
                
                
                $
                (5,485,025
                )
                
                $
                (1,454,210
                )Common
      stock issued for services rendered and to be rendered
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                56,490,210
                
                
                
                565
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                161,878
                
                
                
                —
                
                
                
                162,443Common
      stock issued for accounts payable
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                4,428,572
                
                
                
                44
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                79,956
                
                
                
                —
                
                
                
                80,000Conversion
      of debt and interest,for common stock
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                149,962,702
                
                
                
                1,500
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                52,446
                
                
                
                —
                
                
                
                53,946Common
      stock issued to officer and board members
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2,250,000
                
                
                
                22
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                31,478
                
                
                
                —
                
                
                
                31,500Fair
      value of beneficial conversion feature
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                192,430
                
                
                
                —
                
                
                
                192,430Common
      stock issued to former officer for accrued compensation
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                5,255,952
                
                
                
                53
                
                
                
                (23,927
                )
                
                
                —
                
                
                
                —
                
                
                
                23,874
                
                
                
                —
                
                
                
                —Shares
      issued in satisfaction of fraction shares resulting from 1 for 20 reverse
      stock split
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                141
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (725,036
                )
                
                
                (725,036
                )BALANCE,
      December 31, 2010
                
                
                50,000
                
                
                $
                1
                
                
                
                1,000,000
                
                
                $
                10
                
                
                
                391,982,575
                
                
                $
                3,920
                
                
                $
                6,073
                
                
                
                2,000
                
                
                $
                —
                
                
                $
                4,541,130
                
                
                $
                (6,210,061
                )
                
                $
                (1,658,927
                )





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.


5





ZEVOTEK,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


Six
Months Ended December 31, 2010 and 2009


(UNAUDITED)





2010
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                
                $
                (725,036
                )
                
                $
                (619,897
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Common
      stock issued for services rendered
                
                
                159,243
                
                
                
                183,966Common
      stock issued for interest
                
                
                1,813
                
                
                
                —Common
      stock issued for officer’s compensation
                
                
                —
                
                
                
                10,500Common
      stock issued to board members as remuneration
                
                
                31,500
                
                
                
                —Amortization
      of beneficial conversion feature
                
                
                95,236
                
                
                
                189,279Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                4,004
                
                
                
                (6,485
                )Inventory
                
                
                5,616
                
                
                
                (28,520
                )Prepayments
      and other current assets
                
                
                12,371
                
                
                
                (35,694
                )Accounts
      payable and accrued expenses
                
                
                69,006
                
                
                
                76,795Net
      cash used in operating activities
                
                
                (346,247
                )
                
                
                (230,056
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:
                
                
                —
                
                
                
                —CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from advances payable
                
                
                234,903
                
                
                
                352,056Net
      cash provided by financing activities
                
                
                234,903
                
                
                
                352,056Net
      increase (decrease) in cash and cash equivalents
                
                
                (111,344
                )
                
                
                122,000Cash
      and cash equivalents, beginning of period
                
                
                132,517
                
                
                
                —Cash
      and cash equivalents, end of period
                
                $
                21,173
                
                
                $
                122,000SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW:Interest
      paid
                
                $
                —
                
                
                $
                —Taxes
      paid
                
                $
                —
                
                
                $
                —NON
      CASH INVESTING AND FINANCING ACTIVITIES:Common
      stock issued for services to be rendered
                
                $
                3,200
                
                
                $
                —Common
      stock issued for settlement of accrued liabilities
                
                $
                110,000
                
                
                $
                489,749Exchange
      of convertible debenture for advances payable
                
                $
                192,430
                
                
                $
                44,000Interest
      transfer to convertible note
                
                $
                2,821
                
                
                $
                —Debt
      and accrued interest converted for shares of common stock
                
                $
                52,133
                
                
                $
                152,212





The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.




6




ZEVOTEK,
INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2010





NOTE
A - SUMMARY OF ACCOUNTING POLICIES





A summary
of the significant accounting policies applied in the preparation of the
accompanying unaudited condensed consolidated financial statements
follows.





Business and Basis of
Presentation





ZEVOTEK,
INC. (“Company” or “Registrant”) was organized on December 19, 2005 under the
state laws of Delaware with an original name of “The Diet Coffee Company.” On
June 25, 2008, the Company changed its name to Zevotek, Inc.





The
Company’s wholly owned subsidiary is Ionic Bulb.com, Inc., a Delaware
corporation formed on August 21, 2007, through which we sell the Ionic Bulb, a
patented air purifier that silently emits negative ions using a microchip placed
inside a 10,000-hour energy saving compact fluorescent light bulb (CFL). The
Ionic Bulb is an eco-easy maintenance-free inexpensive alternative that is
designed to clean the air in a 100 square foot area of unpleasant odors and
indoor air pollutants that you breathe. We sell the Ionic Bulb through specialty
retail shops, TV commercials, Amazon.com and newionicbulb.com, and we market the
Ionic Bulb to major U.S. retail stores. We acquired exclusive worldwide sales
and manufacturing rights to a U.S. patented new product named Gung H2O that
reduces water use in the home. We plan to sell Gung H20 to major U.S. retail
stores and directly to American consumers using TV ads and Internet
marketing.





General





The
accompanying unaudited condensed consolidated financial statements of Zevotek,
Inc. have been prepared pursuant to the rules and regulations of the United
States Securities and Exchange Commission and instructions to Form 10Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
The consolidated balance sheet of the Company, as of June 30, 2010, was derived
from the Company’s audited consolidated balance sheet as of that date. All other
condensed consolidated financial statements contained herein are unaudited and
reflect all adjustments which are, in the opinion of management, necessary to
summarize fairly the financial position of the Company and the results of the
Company’s operations and cash flows for the periods presented. All of these
adjustments are of normal recurring nature. All intercompany balances and
transactions have been eliminated in consolidation. These unaudited condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company’s Form 10-K for
the year ended June 30, 2010.





Reverse Stock
Split





Effective
June 26, 2008, the Company authorized for its common stock a 50:1 reverse stock
split. Also, par value for the Preferred Stock and Common stock was changed to
$.00001 per share. All preferred and common stock and related information have
been retroactively restated.





On
September 24, 2010, the Company filed a certificate of amendment to our
Certificate of Incorporation with the Secretary of State of the State of
Delaware in order to effectuate a reverse split on a 1 to 20 basis (the “Reverse
Split”).  On October 6, 2010, Financial Industry Regulatory Authority
(“FINRA”) approved the Reverse Split and each holder of common stock received 1
share of the Company’s common stock for each 20 shares of the Company’s common
stock they owned. The Company did not issue fractional shares in connection with
the foregoing stock split.  Fractional shares were rounded up to the
nearest whole share.  All per share numbers reflected in this
quarterly report on Form 10-Q are reflective of the Reverse Split.





Revenue
Recognition





For
revenue from product sales, the Company recognizes revenue in accordance
with Accounting Standards Codification 605, “Revenue Recognition SEC
Staff Accounting Bulletin Topic 13” (“ASC 605”). ASC 605 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive
evidence that an arrangement exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectability is reasonably assured.
Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded. The Company defers any
revenue for which the product has not been delivered or is subject to refund
until such time that the Company and the customer jointly determine that the
product has been delivered or no refund will be required.




ASC 605
incorporates Accounting Standards Codification 605-25, “Revenue Recognition
Multiple Element Arrangements”.  ASC 605-25 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets.


7





Consideration Paid to
Customers





The
Company offers our customers certain incentives in the form of cooperative
advertising arrangements, product markdown allowances, trade discounts, cash
discounts, and slotting fees. Markdown allowances, trade discounts, cooperative
advertising program participation and cash discounts are all recorded as
reductions of net sales.  No customer incentives are included in sales for
the three and six months ended December 31, 2010 and 2009.




Use of
Estimates





The
preparation of the financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.





Foreign Currency
Translation





The
Company translates the foreign currency assets and liabilities at current
exchange rates, and related revenue and expenses are translated at average
exchange rates in effect during the period. Resulting translation adjustments
are recorded as a separate component in stockholders' equity. Foreign currency
translation gains and losses are included in the statement of
operations.





Cash and Cash
Equivalents





For the
purpose of the accompanying unaudited condensed consolidated financial
statements, all highly liquid investments with a maturity of three months or
less are considered to be cash equivalents.





Inventories / Cost of Goods
Sold





The
Company has adopted a policy to record inventory at the lower of cost or market
determined by the first-in-first-out method. The elements of cost that comprise
inventory and cost of goods sold are FOB shipping point costs, freight and
destination charges, customs and importation fees and taxes, customer broker
fees (if any) and other related costs. Warehousing costs are charged to cost of
goods in the period the costs are incurred. The Company provides inventory
allowances based on estimates of obsolete inventories.





Inventories
consist of finished products available for sale to distributors and customers.
At December 31, 2010 and June 30, 2010, finished goods inventory was $92,631 and
$98,247, respectively.





Allowance for doubtful
accounts





The
Company maintains an allowance for doubtful accounts to reduce amounts to their
estimated realizable value, including reserves for customer and other receivable
allowances and incentives. In estimating the provision for doubtful accounts,
the company considers a number of factors including age of the accounts
receivable, trends and ratios involving the age of the accounts receivable and
the customer mix of each aging categories.  As of December 31, 2010
and June 30, 2010, the allowance for doubtful accounts was $0.





Property and
Equipment





Property
and equipment are stated at cost. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the
respective accounts and the net difference less any amount realized from
disposition, is reflected in earnings. For financial statement purposes,
property and equipment would be recorded at cost and depreciated using the
straight-line method over their estimated useful lives.





Impairment of long lived
assets





The
Company has adopted Accounting Standards Codification 360 "Property, Plant
and Equipment" (“ASC 360”). The Statement requires that long-lived assets and
certain identifiable intangibles held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undercounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360 also
requires assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.





Advertising





The
Company charges the costs of advertising to expenses as incurred.  The
Company charged $44,373 and $55,904 to operations for the three months ended
December 31, 2010 and 2009, respectively. The Company charged $131,053 and
$69,331 to operations for the six months ended December 31, 2010 and 2009,
respectively.


8





Comprehensive Income
(Loss)





The
Company adopted Accounting Standards Codification subtopic 220-10,
“Comprehensive Income” (“ASC 220-10”). ASC 220-10 establishes standards for the
reporting and displaying of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances from non-owners
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. ASC 220-10
requires other comprehensive income (loss) to include foreign currency
translation adjustments and unrealized gains and losses on available for sale
securities. The Company does not have any items of comprehensive income in the
periods presented, that are not already presented in the statement of
operations.




Income
Taxes




The
Company has adopted Accounting Standards Codification 740, “Income
Taxes” (“ASC 740”) which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statement or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between
financial statements and the tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. Temporary differences between taxable income reported for financial
reporting purposes and income tax purposes are insignificant, except basis
difference related to certain debts.




Effective
January 1, 2007 the Company adopted an amendment to the requirements of ASC 740.
The amended standard prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.




ASC
740-10-25-5 “Income Taxes—Overall—Recognition—Basis Recognition Threshold”,
(“Tax Position Topic”) provides guidance to address uncertainty in tax positions
and clarifies the accounting for income taxes by prescribing a minimum
recognition threshold, i.e. “more-likely-than-not”, that the income tax
positions must achieve before being recognized in the financial statements. In
addition, the Tax Position Topic requires expanded annual disclosures, including
a roll forward of the beginning and ending aggregate unrecognized tax benefits
as well as specific detail related to tax uncertainties for which it is
reasonably possible the amount of unrecognized tax benefit will significantly
increase or decrease within twelve months.




As a
result of implementing ASC 740, there has been no adjustment to the Company’s
financial statements and the adoption of ASC 740 did not have a material effect
on the Company’s unaudited condensed consolidated financial statements for the
three and six months ended December 31, 2010.




Research and
Development




The
Company accounts for research and development costs in accordance with the
Financial Accounting Standards Board's Accounting Standards
Codification 730 "Research and Development" (“ASC 730”). Under
ASC 730, all research and development costs must be charged to expense as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company had no
expenditures on research and product development for three and six months ended
December 31, 2010 and 2009, respectively.




Stock Based
Compensation




Effective
January 1, 2006, the Company adopted the requirements of ASC 505
“Equity” and ASC 718-10 “Stock Compensation”, under the modified
prospective transition method. The standards require the measurement of
compensation cost at the grant date, based upon the estimated fair value of the
award, and requires amortization of the related expense over the employee’s
requisite service period.




Under
ASC 718-10, stock based compensation cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award. ASC 718-10 also requires an entity to calculate the pool of
excess tax benefits available to absorb tax deficiencies recognized subsequent
to adoption of ASC 718-10 (the “APIC pool”). The Company has evaluated its
APIC pool and has determined that it was immaterial as of January 1, 2006.
ASC 718-10 also amends ASC 230 “Cash Flows”, to require that excess
tax benefits that had been reflected as operating cash flows be reflected as
financing cash flows.




The
Company made no employee stock-based compensation grants before June 30, 2008
and during the years ended June 30, 2010 and 2009 and during the three and six
months ended December 31, 2010; therefore it has no unrecognized stock
compensation related liabilities or expense unvested or vested.





Loss per
Share




The
Company has adopted Accounting Standards Codification subtopic 260-10, Earnings
Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic loss per share has been
calculated based upon the weighted average number of common shares outstanding.
Stock options and warrants would have been excluded as common stock equivalents
in the diluted loss per share because there effect is anti-dilutive on the
computation.


9





Potentially
dilutive shares of common stock realizable from the conversion of our
convertible debentures of 4,100,750,393 and 3,991,633 shares, respectively at
December 31, 2010 and 2009, are excluded from the computation of diluted net
loss per share as their inclusion would be anti-dilutive.




Concentration of Credit
Risk




Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with high credit quality institutions. At times, such investments may be in
excess of the FDIC insurance limit.





Reclassifications




Certain
reclassifications have been made in prior year's financial statements to conform
to classifications used in the current year.





Recent Accounting
Pronouncements





The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its consolidated financial
condition or the results of its operations.




NOTE
B - GOING CONCERN MATTERS





The
accompanying unaudited condensed consolidated statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
accompanying unaudited condensed consolidated financial statements for the three
and six months ended December 31, 2010, the Company incurred net losses of
$325,003 and $725,036, respectively.  At December 31, 2010, the
Company had a working capital deficit of $1,586,575 and accumulated losses of
$6,210,061. The Company is in default of principal and accrued interest on
certain convertible notes payable.





The
Company is actively pursuing additional convertible debt financing through
discussions with its current lenders.  The Company cannot predict
whether the additional financing will be in the form of equity or debt, or be in
another form.  The Company may not be able to obtain the necessary
additional capital on a timely basis, on acceptable terms, or at
all.  In any of these events, the Company may be unable to implement
its current plans for expansion, repay its debt obligations as they become due,
or respond to competitive pressures, any of which circumstances would have a
material adverse effect on its business, prospects, financial conditions and
result of operations. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of
time




The
Company's existence is dependent upon management's ability to develop profitable
operations. Management anticipates the Company may attain profitable status and
improve its liquidity through the continued developing, marketing and selling of
its products and additional investment in the Company. The accompanying
unaudited condensed consolidated financial statements do not include any
adjustments that might result should the Company be unable to continue as a
going concern.





NOTE
C – LICENSING AGREEMENT AND DISTRIBUTION AGREEMENT





On
February 24, 2009, the Company entered into an Exclusive License and Sales
Agreement whereby the Company has worldwide exclusive rights to manufacture,
market use, sell, distribute and advertise a patented ionic
bulb.





In
exchange for the exclusive license, the Company issued 2,500,000 shares of its
common stock.  The license was valued at the market price of the
underlying security.




NOTE
D- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities are as follows:


December 31,
                    2010
                    (unaudited)
                  
                  
                  June 30,
                    2010Accounts
      payable
                  
                  $
                  55,133
                  
                  
                  $
                  101,379Accrued
      professional fees
                  
                  
                  113,995
                  
                  
                  
                  95,000Accrued
      payroll and payroll taxes
                  
                  
                  163,523
                  
                  
                  
                  156,817Old
      disputed accounts payable
                  
                  
                  136,405
                  
                  
                  
                  136,405Accrued
      interest
                  
                  
                  124,549
                  
                  
                  
                  76,291Other
      accrued liabilities
                  
                  
                  96,085
                  
                  
                  
                  139,963Total
                  
                  $
                  689,690
                  
                  
                  $
                  705,855




NOTE
E – ADVANCES PAYABLE




As of
December 31, 2010 and June 30, 2010, the Company owed $862,862 and $820,389,
respectively, to a note holder for cash advanced to the Company for operating
purposes.  The advances accrue interest at 10% per annum and are
repayable on demand.


10





NOTE F
- CONVERTIBLE NOTES PAYABLE AND DEMAND NOTES





December 31,
                  2010
                  (unaudited)
                
                
                June 30,
                  2010Notes
      Payable:Convertible
      term note (a)
                
                $
                3,423
                
                
                $
                3,423Convertible
      term note (b)
                
                
                1,923
                
                
                
                1,923Convertible
      term note (c)
                
                
                50,000
                
                
                
                50,000Convertible
      term note (d)
                
                
                13,743
                
                
                
                13,907Convertible
      term note (e)
                
                
                49,425
                
                
                
                65,225Convertible
      term note (f)
                
                
                11,132
                
                
                
                11,132Convertible
      term note (g)
                
                
                43,000
                
                
                
                44,000Convertible
      term note (h)
                
                
                192,430
                
                
                
                —Convertible
      term note (i)
                
                
                34,141
                
                
                
                49,140Convertible
      term note (j)
                
                
                26,500
                
                
                
                41,500425,717
                
                
                
                280,250Less:
      discount on debt
                
                
                (173,802
                )
                
                
                (76,608
                )251,915
                
                
                
                203,642Less:
      current portion
                
                
                (134,563
                )
                
                
                (182,558
                )Long
      term debt
                
                $
                117,352
                
                
                $
                21,084




a)
            On May 14, 2008, the Company
      entered into convertible term notes bearing interest at 10% per annum with
      a maturity date of May 14, 2010.   At any time at the
      option of the note holder, principal and interest payments may be paid in
      common stock at a conversion price of $0.0001 per share (see below). The
      Company is in default of payment of principal and interest on the note and
      the Company is in discussions with the note holders about amending the
      conversion terms to cure the
default.


b)
            On May 27, 2008, the Company
      entered into a convertible term note bearing interest at 10% per annum
      with a maturity date of May 27, 2010.   At any time at the
      option of the note holder, principal and interest payments may be paid in
      common stock at a conversion price of $0.0001 per share (see
      below).  The Company is in default of payment of principal and
      interest on the note and the Company is in discussions with the note
      holder about amending the conversion terms to cure the
      default.


c)
            On January 1, 2008, the Company
      entered into a convertible term note for the principal amount of $50,000
      bearing interest at 7% per annum with a maturity date of June 30,
      2008.  This note is convertible into common stock at 90% of the
      common stock closing price at June 30, 2008, or approximately 18,500
      shares of common stock.  The Company is in default of payment of
      principal and interest on the note and the Company is in discussions with
      the note holder about amending the conversion terms to cure the
      default.


d)
            On January 8, 2009, the Company
      entered into convertible term notes bearing interest at 10% per annum with
      a maturity date of January 8, 2011.   At any time at the
      option of the note holder, principal and interest payments may be paid in
      common stock at a conversion price of $0.0001 per share (see
      below).


e)
            On March 9, 2009, the Company
      entered into convertible term notes bearing interest at 10% per annum with
      a maturity date of March 9, 2011.   The notes were
      subsequently amended on January 8, 2011 to extend the maturity date to
      January 8, 2012. At any time at the option of the note holder, principal
      and interest payments may be paid in common stock at a conversion price of
      $0.0001 per share (see
below).


f)
            Of the convertible term notes
      entered into on May 14, 2008, certain notes having a principal amount of
      $11,132 as of December 31, 2010 and 2009 were not amended with respect to
      their conversion price and, at any time at the option of the note holder,
      principal and interest payments may be paid in common stock at a
      conversion price of $0.001 per share (see below). The Company is in
      default of payment of principal and interest on the note and the Company
      is in discussions with the note holder about amending the conversion terms
      to cure the default.


g)
            On July 28, 2009, the Company
      entered into a convertible term note bearing interest at 10% per annum
      with a maturity date of July 28, 2011.   At any time at the
      option of the note holder, principal and interest payments may be paid in
      common stock at a conversion price of $0.0001 per share (see
      below).


h)
            On
      August 6, 2010, the Company converted $192,430 of advances payable into a
      convertible term note bearing interest at 10% per annum with a maturity
      date of August 6, 2012.   At any time at the option of the
      note holder, principal and interest payments may be paid in common stock
      at a conversion price of $0.0001 per share (see
  below).


i)
            On
      January 8, 2009, the Company entered into convertible term notes bearing
      interest at 10% per annum with a maturity date of January 8,
      2011.   The notes were subsequently amended on January 8,
      2011 to extend the maturity date to January 8, 2012. At any time at the
      option of the note holder, principal and interest payments may be paid in
      common stock at a conversion price of $0.0001 per share (see
      below).


j)
            On
      March 9, 2009, the Company entered into convertible term notes bearing
      interest at 10% per annum with a maturity date of March 9,
      2011.   At any time at the option of the note holder,
      principal and interest payments may be paid in common stock at a
      conversion price of $0.0001 per share (see
  below).


11





In
accordance with Accounting Standards Codification 470-20-65, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios (“ASC 470-20-65”), the Company recognized an
imbedded beneficial conversion feature present in the notes. The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional paid in capital. The Company recognized and measured an aggregate
of $314,049 of the proceeds, which was equal to the intrinsic value of the
imbedded beneficial conversion feature at the time, to additional paid in
capital and a discount against the Notes issued during the year ended June 30,
2008. The debt discount attributed to the beneficial conversion feature was
originally amortized over the Notes maturity period (two years) as interest
expense, adjusted for conversion of debt to common stock. In January 2009
through March 2009, the Company restructured certain Notes to a conversion rate
of $0.0001 per share with a two year term and accordingly fully amortized the
remaining debt discount of $206,160. In accordance with ASC 470-20-65,
Accounting for Convertible Securities with Beneficial Conversion Features, the
Company recognized an imbedded beneficial conversion feature present in the
notes. The Company recognized and measured an aggregate of $457,849 of the
proceeds, which is equal to the intrinsic value of the imbedded amended
beneficial conversion feature, to additional paid in capital and a discount
against the Notes issued during the year ended June 30, 2009. The remaining debt
discount attributed to the original beneficial conversion feature was expensed
at the time the Notes were amended and the $457,849 assigned to the amended
beneficial conversion feature is being amortized over the Notes maturity
period.





On July
28, 2009, the Company issued a $44,000 convertible note having the same terms as
the amended outstanding convertible notes.  The Company recognized and
measured an aggregate of $44,000 of the proceeds, which is equal to the
intrinsic value of the imbedded amended beneficial conversion feature, to
additional paid in capital and a discount against the note issued, with the
discount being amortized over the note’s two-year term.





On August
6, 2010, the Company converted $192,430 of advances payable into a convertible
note.  The Company recognized and measured an aggregate of $192,430 of
the advances payable, which is equal to the intrinsic value of the imbedded
amended beneficial conversion feature, to additional paid in capital and a
discount against the note issued, with the discount being amortized over the
note’s two-year term.





During
the three and six months ended December 31, 2010, amortization related to the
beneficial conversion feature on the convertible notes was $46,486 and $95,236,
respectively.





During
the three and six months ended December 31, 2009, amortization related to the
beneficial conversion feature on the convertible notes was $110,548 and
$189,279, respectively.





In or
about May 2010, an alleged assignee (the “Assignee”) of certain convertible
promissory notes, commenced an action by the filing of a summons and complaint
against the Company alleging a failure to comply with its demands to convert
principal and interest under the Company’s promissory notes in Company common
stock.  The Company served and filed its Answer on July 21, 2010, in
which it denied the material allegations of the complaint and asserted numerous
affirmative defenses.  The parties have entered into a stipulation of
settlement resolving this action on November 4, 2010 and a final judgment and
injunction were entered on November 12, 2010, pursuant to which the Company
agreed to issue stock once a month to the Assignee until it has issued at total
182,000,000 shares of common stock. As of December 31, 2010, the Company has
issued 29,834,902 shares of its common stock to the Assignee. See Note K for
subsequent issuance.





NOTE
G – STOCKHOLDERS EQUITY





Preferred
Stock





The
Company has authorized 10,000,000 shares of Preferred Stock of which 50,000
shares have been designated as Series A Preferred Stock, par value $0.00001, and
1,000,000 shares have been designated as Series B Preferred Stock, par value
$0.00001 within the limitations and restrictions stated in the Certificate of
Incorporation of the Company.





The
Company issued 50,000 shares of Series A Preferred Stock; Each share of the
Series A Preferred Stock is entitled to 10,000 votes on all matters submitted to
the stockholders of the Company. The holders of the Series A Preferred Stock are
not granted any preference upon the liquidation, dissolution or winding up of
the business of the Company. The Series A Preferred Stock is not Convertible
into Common Stock.





The
Company designated and issued 1,000,000 shares of Series B Preferred
Stock.  On May 14, 2008, the Company and an unrelated third party
entered into an exchange agreement under which the third party note holder
exchanged a $21,026 promissory note for 1,000,000 shares of Series B Preferred
Stock.   Each share of Series B Preferred Stock is entitled to
5,000 votes on all matters submitted to the stockholders of the
Company.





Common
Stock





The
Company effectuated a 1 for 50 reverse stock split on June 26, 2008. All common
stock and related information has been retroactively restated. In addition,
contemporaneously with the stock split the Company increased its authorized
Common stock, par value $0.00001 to 1,000,000,000 shares. Prior to this date,
the authorized shares were 200,000,000 shares. On October 14, 2009, the Company
authorized capital was increased to 5,000,000,000.


On
September 24, 2010, the Company filed a certificate of amendment to its
Certificate of Incorporation with the Secretary of State of the State of
Delaware in order to effectuate a reverse split on a 1 to 20 basis (the “Reverse
Split”).  On October 6, 2010, Financial Industry Regulatory Authority
(“FINRA”) approved the Reverse Split and each holder of common stock received 1
share of the Company’s common stock for each 20 shares of the Company’s common
stock they owned. The Company did not issue fractional shares in connection with
the foregoing stock split.  Fractional shares were rounded up to the
nearest whole share.  All per share numbers reflected in this
quarterly report on Form 10-Q are reflective of the Reverse Split. At December
31, 2010 and June 30, 2010, common shares issued were 391,984,575 and
173,596,998 and outstanding were 391,982,575 and 173,594,998,
respectively.




12




On
September 11, 2007, the Company adopted its 2007 Stock Incentive Plan (the “2007
Plan”). The Company is permitted to issue up to 1,072,500 shares of common stock
under the Plan in the form of stock options, restricted stock awards, and stock
awards to employees, non-employee directors, and outside
consultants.  As of December 31, 2010, there were 1,072,500 shares
issued under this 2007 Plan.





On
December 13, 2007, the Company adopted its 2007 Stock Incentive Plan No. 2. (the
“2007 Plan #2”). The Company is permitted to issue up to 1,099,700 shares of
common stock under the Plan in the form of stock options, restricted stock
awards, and stock awards to employees, non-employee directors, and outside
consultants.  As of December 31, 2010, there were 1,099,700 shares
issued under this 2007 Plan #2.





On
February 21, 2008 the Company adopted its 2008 Stock Incentive Plan. The Company
is permitted to issue up to 1,650,000 shares of common stock under the Plan in
the form of stock options, restricted stock awards, and stock awards to
employees, non-employee directors, and outside consultants.  As of
December 31, 2010, there were 1,617,047 shares issued under this 2008
Plan.





On
February 21, 2008 the Company adopted its 2008 California Stock Incentive Plan.
The Company is permitted to issue up to 1,650,000 shares of common stock under
the Plan in the form of stock options, restricted stock awards, and stock awards
to employees, non-employee directors, and outside consultants.  As of
December 31, 2010, there were 1,646,260 shares issued under this 2008
Plan.





On
September 15, 2009 the Company adopted its 2009 Stock Incentive Plan. The
Company is permitted to issue up to 6,835,750 shares of common stock under the
Plan in the form of stock options, restricted stock awards, and stock awards to
employees, non-employee directors, and outside consultants.  As of
December 31, 2010, there were 4,470,000 shares issued under this 2009
Plan.





On
September 15, 2009 the Company adopted its 2009 California Stock Incentive Plan.
The Company is permitted to issue up to 6,835,750 shares of common stock under
the Plan in the form of stock options, restricted stock awards, and stock awards
to employees, non-employee directors, and outside consultants.  As of
December 31, 2010, there were 5,260,552 shares issued under this 2009
Plan.





On August
17, 2010, the Company adopted its 2010 Equity Incentive Plan (“2010 Plan”). The
Company is permitted to issue up to 17,500,000 shares of common stock under the
Plan in the form of stock options, restricted stock awards, and stock awards to
directors, officers, consultants, advisors and employees of the
Company.  As of December 31, 2010, there were 17,500,000 shares issued
under this 2010 Plan.





On
November 17, 2010, the Company adopted its 2011 Equity Incentive Plan (“2011
Plan”). The Company is permitted to issue up to 60,000,000 shares of common
stock under the Plan in the form of stock options, restricted stock awards, and
stock awards to directors, officers, consultants, advisors and employees of the
Company.  As of December 31, 2010, there were 47,961,540 shares issued
under this 2010 Plan.




During
the six months ended December 31, 2010, the Company issued 60,918,782 shares of
common stock, valued at $242,443 for services, accrued expenses and
prepayments.





During
the six months ended December 31, 2010, the Company converted debt and accrued
interest of $53,946 into 149,962,702 shares of common stock.





During
the six months ended December 31, 2010, the Company issued 2,250,000 shares of
its common stock, valued at $31,500, to its Chief Executive Officer and two of
its directors as compensation.





During
the six months ended December 31, 2010, the Company issued 5,255,952 shares
valued at $33,927 to a former officer to satisfy a claim included in common
stock to be issued.





Treasury
Stock





As of
December 31, 2010 and June 30, 2010, the Company had 2,000 shares of common
stock held in treasury, which carried at $0 based on a $0.00001 par
value.





NOTE
H - STOCK OPTIONS AND WARRANTS





During
the six months ended December 31, 2010 and 2009, the Company did not issue any
stock warrants or options.  As of December 31, 2010, no warrants or
options are outstanding.




NOTE
I - COMMITMENTS AND CONTINGENCIES





Employment
Agreement


On
February 25, 2010, Adam Engel resigned from his positions as President, Chief
Executive Officer, Chief Financial Officer, Secretary and Treasurer. In
connection with Mr. Engel’s resignation, the Company entered into a letter
agreement dated February 24, 2010 setting forth the terms of the mutual
separation. Under the terms, Mr. Engel and the Company agreed to waive any and
all continuing rights, including payroll totaling $170,576 and obligations under
Mr. Engel’s employment agreement dated December 13, 2007.  Mr. Engel
agreed to a one-year non-compete/non solicitation provision as well as
confidentiality and non-disparagement clauses.




13




On May
21, 2010, the Company entered into a consulting agreement with Mr. Engel for a
period of five months at $10,000 per month, payable in Company common stock and
Mr. Engel agreed that there were no claims arising from the earlier agreement as
mentioned above. In June 2010, the Company issued common stock to Mr. Engel
valued at $20,000 and recognized the remaining balance as common stock to be
issued. The Company paid the consulting fees by issuing the remaining balance of
common stock to Mr. Engel during the six months ended December 31, 2010, along
with a final issuance in January 2011, and charged additional paid in capital
for the value of the issuances in
settlement of remaining balance of $50,000 as per above agreement.





U.S. Federal Trade
Commission Settlement





On March
26, 2007, the Company received a letter from the U.S. Federal Trade Commission
(“FTC”) whereby the Company was informed that the FTC was conducting an
investigation into advertising claims made for the Company’s weight loss product
known as “Slim Coffee.”  The purpose of the investigation was to
determine whether the Company, in connection with its sales of Slim Coffee,
engaged in unfair or deceptive acts or practices and false advertising. The FTC
threatened to file a complaint in the United States District Court, Southern
District of New York, alleging false advertising, unless the Company and the FTC
could reach a satisfactory resolution to the matter.  A negotiated
settlement has been reached with the FTC under which the Company, its officers
and directors did not admit any wrongdoing.  On January 10, 2008,
pursuant to a stipulated final judgment and order, the United States District
Court, Southern District of New York, entered a final judgment and order against
the Company in the amount of $923,910.  The full amount of the
judgment, and payment of any portion of it is suspended and cannot be reinstated
so long as (a) the Company abides by the reporting and monitoring requirements
of the judgment, (b) does not make false advertising claims in connection with
any of its products in the future, and (c) its past financial disclosures to the
FTC were materially accurate. The Company plans to comply with the terms of the
stipulation and do not anticipate incurring a liability for the judgment,
however there can be no assurance of compliance.  Should the Company
fail to comply with the FTC’s final judgment, this could have a material
adverse effect on the Company’s business, financial condition and
results of operations.





Ionic Bulb
License





On
February 24, 2009, the Company entered into an Exclusive License and Sales
Agreement whereby the Company obtained worldwide exclusive rights to
manufacture, market use, sell, distribute and advertise certain licensed
products.  The license is on a year to year basis with automatic
renewal and is subject to becoming non-exclusive should the Company fail to
files all quarterly and annual reports by due dates, inclusive of allowable
extensions.  In exchange for the exclusive license, the Company issued
2,500,000 shares of its common stock.





Payroll
Taxes





At
December 31, 2010, the Company is delinquent with filing and remitting payroll
taxes of approximately $83,000 including estimated penalties and interest
related to payroll taxes withheld since April 2007. The Company has recorded the
delinquent payroll taxes, which are included in accrued expenses on the balance
sheet. Although the Company has not entered into any formal repayment agreements
with the respective tax authorities, management plans to make payment as funds
become available. Penalties and interest amounts are subject to increase based
on a number of factors that can cause the estimated liability to increase
further. Interest and penalties were accrued in an amount estimated to cover the
ultimate liability.





Sales
Taxes





At
December 31, 2010, the Company is delinquent with remitting sales taxes of
approximately $16,000, including related estimated penalties and interest
related to sales taxes withheld since 2006 in the state of New York. The Company
has recorded the delinquent sales taxes, which are included in accrued expenses
on the balance sheet. Although the Company has not entered into any formal
repayment agreements with the respective tax authorities, management plans to
make payment as funds become available. Penalties and interest amounts are
subject to increase based on a number of factors that can cause the estimated
liability to increase further. Interest and penalties were accrued in an amount
estimated to cover the ultimate liability.




Legal





In or
about May 2010, an alleged assignee (the “Assignee”) of certain convertible
promissory notes, commenced an action by the filing of a summons and complaint
against the Company alleging a failure to comply with its demands to convert
principal and interest under the Company’s promissory notes in Company common
stock.  The Company served and filed its Answer on July 21, 2010, in
which it denied the material allegations of the complaint and asserted numerous
affirmative defenses.  The parties have entered into a stipulation of
settlement resolving this action on November 4, 2010 and a final judgment and
injunction were entered on November 12, 2010, pursuant to which the Company
agreed to issue stock once a month to the Assignee until it has issued at total
182,000,000 shares of common stock.  As of December 31, 2010, the
Company had issued 29,834,902 shares to the Assignee. See Note K for subsequent
issuance.





Leases





The
Company leases office space on a month to month basis in Stuart, Florida and
Frisco, Texas.  Rent expense for the three and six months ended
December 31, 2010 and 2009 was $2,545 and $0, respectively.


14





NOTE
J - FAIR VALUE MEASUREMENT





Fair Value Measurements under
GAAP clarifies the principle that fair value should be based on the assumptions
market participants would use when pricing an asset or liability and establishes
a fair value hierarchy that prioritizes the information used to develop those
assumptions. Under the standard, fair value measurements are separately
disclosed by level within the fair value hierarchy.  It only applies
to accounting pronouncements that already require or permit fair value measures,
except for standards that relate to share-based payments





Level 1 -
Quoted prices in active markets for identical assets or
liabilities.





Level 2 -
Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which all significant inputs are observable or can be derived principally from
or corroborated by observable market data for substantially the full term of the
assets or liabilities.





Level 3 -
Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.





To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment.  In certain cases, the inputs used to measure fair value may
fall into different levels of the fair value hierarchy.  In such
cases, for disclosure purposes, the level in the fair value hierarchy within
which the fair value measurement is disclosed and is determined based on the
lowest level input that is significant to the fair value
measurement.





The
carrying value of the Company’s cash, accounts receivable, prepayments, accounts
payable, advances payable, convertible notes payable, and other current assets
and liabilities approximate fair value because of their short-term
maturity.  All other significant financial assets, financial
liabilities and equity instruments of the Company are either recognized or
disclosed in the unaudited condensed consolidated financial statements together
with other information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable the fair
values of financial assets and financial liabilities have been determined and
disclosed; otherwise only available information pertinent to fair value has been
disclosed.





As of
December 31, 2010, there were no financial assets or liabilities that were
measured at fair value on a recurring basis.





NOTE
K – SUBSEQUENT EVENTS





Since
December 31, 2010, the Company issued an aggregate of 110,684,407 shares of
common stock upon conversion of convertible promissory notes and interest,
including 20,820,507 shares issued to the Assignee.





Since
December 31, 2010, the Company issued an aggregate of 7,000,000 shares of common
stock in exchange for consulting services.





On
January 8, 2011, the Company entered into amendment agreements with certain note
holders to extend the maturity dates on certain convertible term notes to
January 8, 2012 as discussed in Note F.


15




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





The
following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements and related notes included
in this report.  This report contains “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of
1995.  The statements contained in this report that are not historic
in nature, particularly those that utilize terminology such as “may,” “will,”
“should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or
comparable terminology are forward-looking statements based on current
expectations and assumptions.  Various risks and uncertainties could
cause actual results to differ materially from those expressed in
forward-looking statements.





The
forward-looking events discussed in this quarterly report, the documents to
which we refer you and other statements made from time to time by us or our
representatives, may not occur, and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about
us.  For these statements, we claim the protection of the “bespeaks
caution” doctrine.  All forward-looking statements in this document
are based on information currently available to us as of the date of this
report, and we assume no obligation to update any forward-looking
statements.  Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements.





General





The
following discussion and analysis is provided to increase the understanding of,
and should be read in conjunction with, our unaudited condensed consolidated
financial statements and related notes included elsewhere in this
Report.  Historical results and percentage relationships among any
amounts in these financial statements are not necessarily indicative of trends
in operating results for any future period. This report contains
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995.  The statements, which are not
historical facts contained in this Report, including this Management’s
discussion and analysis of financial condition and results of operation, and
notes to our unaudited condensed consolidated financial statements, particularly
those that utilize terminology such as “may” “will,” “should,” “expects,”
“anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are
forward-looking statements. Such statements are based on currently available
operating, financial and competitive information, and are subject to various
risks and uncertainties. Future events and our actual results may differ
materially from the results reflected in these forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
dependence on existing and future key strategic and strategic end-user
customers, limited ability to establish new strategic relationships, ability to
sustain and manage growth, variability of operating results, our expansion and
development of new service lines, marketing and other business development
initiatives, the commencement of new engagements, competition in the industry,
general economic conditions, dependence on key personnel, the ability to
attract, hire and retain personnel who possess the technical skills and
experience necessary to meet the service requirements of our clients, the
potential liability with respect to actions taken by our existing and past
employees, risks associated with international sales, and other risks described
herein and in our other filings with the Securities and Exchange
Commission.





The
safe harbor for forward-looking statements provided by Section 21E of the
Securities Exchange Act of 1934 excludes issuers of “penny stock” (as defined
under Rule 3a51-1 of the Securities Exchange Act of 1934). Our common stock
currently falls within that definition.





All
forward-looking statements in this document are based on information currently
available to us as of the date of this report, and we assume no obligation to
update any forward-looking statements.  Forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking
statements.




Company History





We were organized on December 19, 2005
under the state laws of Delaware with an original name of “The Diet Coffee
Company.” On June 25, 2008, we changed our name to Zevotek, Inc. We market and sell innovative personal
and home care items. We have a license to sell the Ionic Bulb, a patented air
purifier that silently emits negative ions using a microchip placed inside a
10,000-hour energy saving compact fluorescent light bulb (CFL). The Ionic Bulb
is an eco-easy maintenance-free inexpensive alternative that is designed to
clean the air in a 100 square foot area of unpleasant odors and indoor air
pollutants that you breathe. We sell the Ionic Bulb through specialty retail
shops, TV commercials, Amazon.com and newionicbulb.com, and we market the Ionic
Bulb to major U.S. retail stores. We acquired exclusive worldwide sales and
manufacturing rights to a U.S. patented new product named Gung H2O that reduces
water use in the home. We plan to sell Gung H20 to major U.S. retail stores and
directly to American consumers using TV ads and Internet
marketing.





On September 24, 2010, we filed a
certificate of amendment to our Certificate of Incorporation with the Secretary
of State of the State of Delaware in order to effectuate a reverse split on a
one for twenty basis (the “Reverse Split”).  On October 6, 2010, FINRA
approved the Reverse Split and each holder of common stock received 1 share of
our common stock for each 20 shares of our common stock they owned. We did not
issue fractional shares in connection with the foregoing stock
split.  Fractional shares were rounded up to the nearest whole
share.  All per share numbers reflected in this quarterly report on
Form 10-Q are reflective of the Reverse Split.


16





Comparison
of Three Months Ended December 31, 2010 To December 31, 2009





Results
of Operations





Revenue





Our sales
were $2,544 for the three months ended December 31, 2010 and $5,077 for the
three months ended December 31, 2009, a decrease of $2,533 or 49.9
%.   We started test marketing the Ionic Bulb in December 2009 by
airing a two-minute Ionic Bulb infomercial on a variety of U.S. cable television
channels at different times of the day and days of the
week.  Television test marketing helps us find viewing audiences more
inclined to buy the Ionic Bulb, educate viewers on the Ionic Bulb's performance
and money saving features and test different prices. To gain publicity and
reviews of the Ionic Bulb in 2010, we introduced the Ionic Bulb to
environmentally conscious celebrities in Hollywood, to TV journalists and to
editors and writers at magazines, newspapers, electronic journals and blogs. In
February 2011, we hired a new sales agency to solicit Ionic Bulb orders from
their customer base that is comprised of major national retailers, specialty and
regional retailers, a home shopping channel, catalog merchants, and ecommerce
companies which we expect will result in increased sales of the Ionic Bulb in
future periods resulting from orders they place with us. We also expect the next
generation Ionic Bulb we plan to introduce in 2011, with its new more compact
design for consumers’ smaller light fixtures and recessed ceiling lights and
Energy Star qualification, to increase demand for the Ionic Bulb.





During
the three months ended December 31, 2010, our television advertising consisted
of airings of one-minute versions of the ad, which is designed to create
consumer awareness of the Ionic Bulb rather than to generate direct
response sales. We are using airings of our Ionic Bulb one-minute ad and a new
thirty-second ad that began airing in January 2011 to result in successful sales
of the Ionic Bulb at retail outlets that we expect to carry our products. Sales
for the three months ended December 31, 2010 are comprised of Ionic Bulb sold
directly to individual consumers who called toll-free telephone numbers that
appeared in our TV ads or who bought the Ionic Bulb on the Internet either
through our newionicbulb.com website or Amazon.com. We are treating as a
consignment sale the shipments of the Ionic Bulb to retail stores of a new
customer in the three months ended December 31, 2010, and therefore excluding
the shipments from our sales until revenue recognition criteria are satisfied.
Sales for the three months ended December 31, 2009 are comprised of Ionic Bulb
sales to individual consumers who called toll-free telephone numbers that
appeared in our TV ads that began airing in December 2009. Our revenues exclude
shipping and handling fees, which we include as an offset to our shipping and
handling costs.





Gross
Profit





Our gross
profit was $873 for the three months ended December 31, 2010 and $3,556 for the
three months ended December 31, 2009. The decrease of $2,683 or 75.4% was due
primarily to the decrease in revenue. We anticipate improving our gross profit
margin through the introduction of a next generation Ionic Bulb manufactured by
a factory in China at a lower cost than the cost of our current model of the
Ionic Bulb.





Operating
Expenses





Operating
expenses were $250,861 for the three months ended December 31, 2010, as compared
to $207,817 for the three months ended December 31, 2009.  The
increase of $43,044 or 20.7% was primarily due to the increase in selling
expenses related to our advertising, promoting and marketing the Ionic Bulb for
the placement of the Ionic Bulb on U.S. retail store shelves, which began during
the quarter and to generate orders from major U.S. retailers, specialty stores,
catalog companies and Internet sellers such as Amazon.com.  We
incurred $107,479 and $86,571 in selling expenses during the three months ended
December 31, 2010 and 2009, respectively.  Selling expenses for the
three months ended December 31, 2010 were comprised of advertising and marketing
costs in connection with a sales and marketing campaign to generate Ionic Bulb
retail orders in our fiscal year ending June 30, 2011.  Selling
expenses for the three months ended December 31, 2009 were comprised of the
Ionic Bulb test marketing that began in December 2009. We anticipate increased
selling expenses in the future as we increase the frequency of Ionic Bulb TV ad
airings, other Ionic Bulb promotional activities and plans to support sales
growth. We incurred $143,382 and $121,246 in general and administrative expenses
for the three months ended December 31, 2010 and 2009,
respectively.





Net Loss





Our net
loss decreased by $633 or 0.2% to $325,003 for the three months ended December
31, 2010 as compared to our net loss of $325,636 for the three months ended
December 31, 2009.





Our net
loss per common share was $0.00 (basic and diluted) for three months ended
December 31, 2010 as compared to our net loss per common share of $0.01 for the
three months ended December 31, 2009.





The
weighted average number of outstanding shares was 278,224,009 (basic and
diluted) for three months ended December 31, 2010 as compared to 63,826,203
(basic and diluted) for the three months ended December 31,
2009.


17





Comparison
of Six Months Ended December 31, 2010 To December 31, 2009




Results
of Operations





Revenue





Our sales
were $7,884 for the six months ended December 31, 2010 and $5,077 for the six
months ended December 31, 2009, an increase of $2,807 or
55.3%.   We started test marketing the Ionic Bulb in December
2009 by airing a two-minute Ionic Bulb infomercial on a variety of U.S. cable
television channels at different times of the day and days of the
week.  Television test marketing helps us find viewing audiences more
inclined to buy the Ionic Bulb, educate viewers on the Ionic Bulb's performance
and money saving features and test different prices. To gain publicity and
reviews of the Ionic Bulb in 2010, we introduced the Ionic Bulb to
environmentally conscious celebrities in Hollywood, to TV journalists and to
editors and writers at magazines, newspapers, electronic journals and blogs. In
February 2011, we hired a new sales agency to solicit Ionic Bulb orders from
their customer base that is comprised of major national retailers, specialty and
regional retailers, a home shopping channel, catalog merchants, and ecommerce
companies which we expect will result in increased sales of the Ionic Bulb in
future periods resulting from orders they place with us. We also expect the next
generation Ionic Bulb we plan to introduce in 2011, with its new more compact
design for consumers’ smaller light fixtures and recessed ceiling lights and
Energy Star qualification, to increase demand for the Ionic Bulb.





During
the six months ended December 31, 2010, our television advertising consisted of
airings of one-minute versions of the ad, which is designed to create consumer
awareness of the Ionic Bulb more than to generate direct response
sales.  We are using airings of our Ionic Bulb one-minute ad and a new
thirty-second ad that began airing in January 2011 to result in successful sales
of the Ionic Bulb at retail outlets that we expect to carry our
products.  Sales for the six months ended December 31, 2010 are
comprised of Ionic Bulb sold directly to individual consumers who called
toll-free telephone numbers that appeared in our TV ads or who bought the Ionic
Bulb on the Internet either through our newionicbulb.com website or
Amazon.com. We are treating as a consignment sale the shipments of the Ionic
Bulb to retail stores of a new customer in the six months ended December 31,
2010, and therefore excluding the shipments from our sales until revenue
recognition criteria are satisfied. Sales for the six months ended December 31,
2009 are comprised of Ionic Bulb sales to individual consumers who called
toll-free telephone numbers that appeared in our TV ads that began airing in
December 2009. Our revenues exclude shipping and handling fees, which we include
as an offset to our shipping and handling costs.





Gross
Profit





Our gross
profit was $3,072 for the six months ended December 31, 2010 and $3,556 for the
six months ended December 31, 2009. The decrease of $484 or 13.6% was due to
increased sales order fulfillment costs. We anticipate improving our gross
profit margin through the introduction of a next generation Ionic Bulb
manufactured by a factory in China at a lower cost than the cost of our current
model of the Ionic Bulb.





Operating
Expenses





Operating
expenses were $577,538 for the six months ended December 31, 2010, as compared
to $409,602 for the six months ended December 31, 2009.  The increase
of $167,936 or 41.0% was primarily due to the increase in selling expenses
related to our advertising, promoting and marketing the Ionic Bulb for the
placement of the Ionic Bulb on U.S. retail store shelves, which began during the
quarter and to generate orders from major U.S. retailers, specialty stores,
catalog companies and Internet sellers such as Amazon.com.  We
incurred $245,183 and $86,571 in selling expenses during the six months ended
December 31, 2010 and 2009, respectively.  Selling expenses were
comprised of advertising and marketing costs in connection with a sales and
marketing campaign to generate Ionic Bulb retail orders in our fiscal year
ending June 30, 2011.  We anticipate increased selling expenses in the
future as we increase the frequency of Ionic Bulb TV ad airings, other Ionic
Bulb promotional activities and plans to support sales growth. We incurred
$332,355 and $323,031 in general and administrative expenses for the six months
ended December 31, 2010 and 2009, respectively.





Net
Loss





Our net
loss was $725,036 for the six months ended December 31, 2010 and our net loss
was $619,897 for the six months ended December 31, 2009.  The increase
of $105,139 or 16.9% was primarily due to increased selling expenses related to
our advertising, promoting and marketing the Ionic Bulb for the placement of the
Ionic Bulb on U.S. retail store shelves and to generate Ionic Bulb retail orders
in our fiscal year ending June 30, 2011.





Our net
loss per common share was $0.00 (basic and diluted) for six months ended
December 31, 2010 as compared to our net loss per common share of $0.02 for the
six months ended December 31, 2009.





The
weighted average number of outstanding shares was 235,045,382 (basic and
diluted) for six months ended December 31, 2010 as compared to 40,167,624 (basic
and diluted) for the six months ended December 31, 2009.





Liquidity
and Capital Resources





Overview





As of
December 31, 2010, we had a working capital deficit of $1,586,575.  As
of June 30, 2010, we had a working capital deficit of $1,478,126.  Our
cash position at December 31, 2010 was $21,173 as compared to $132,517 at June
30, 2010.  Our working capital deficit did not significantly change
during the three months ended December 31, 2010.


18





Cash
provided by financing activities totaled $234,903 for the six months ended
December 31, 2010 consisting of advances from a note holder.





We expect
capital expenditures to be nominal for the year ending June 30, 2011. These
anticipated expenditures are for investments in property and equipment used in
our business.





Financing
Needs





Since our
inception on December 19, 2005 to December 31, 2010, we have generated revenues
of $1,398,145 and have incurred an accumulated deficit of
$6,210,061.  We hope to begin achieving sustainable revenues in 2011
from sales of the Ionic Bulb and the introduction of our new Gung H20
product.  We are seeking additional products to market and sell, which
we believe will allow us to make use of our existing operational structure to
generate more sales and gross profits.  Our ability to achieve
profitability is dependent on several factors, including but not limited to, our
ability to: generate liquidity from operations and satisfy our ongoing operating
costs on a timely basis. We still need additional investments in order to
continue operations to cash flow break even. Additional investments are being
sought, but we cannot guarantee that we will be able to obtain such investments.
Financing transactions may include the issuance of equity or debt securities,
obtaining credit facilities, or other financing mechanisms. However, the trading
price of our common stock and conditions in the U.S. stock and debt markets make
it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our operations
again, attempt to further restructure financial obligations and/or seek a
strategic merger, acquisition or a sale of assets.





The
independent auditor's report on our June 30, 2010 financial statements states
that our recurring losses raise substantial doubts about our ability to continue
as a going concern.





The
effect of inflation on our revenue and operating results was not significant.
Our operations are located in North America and there are no seasonal aspects
that would have a material effect on our financial condition or results of
operations.





We do not
maintain off-balance sheet arrangements nor do we participate in non-exchange
traded contracts requiring fair value accounting treatment.




CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES





Financial
Reporting Release No. 60, recently released by the Securities and Exchange
Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
The notes to the consolidated financial statements include a summary of
significant accounting policies and methods used in the preparation of our
Consolidated Financial Statements. In addition, Financial Reporting Release No.
61 was recently released by the SEC requires all companies to include a
discussion which addresses, among other things, liquidity, off-balance sheet
arrangements, contractual obligations and commercial commitments. The following
is a brief discussion of the more significant accounting policies and methods
used by us.





The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of financial statements in accordance with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
including the recoverability of tangible and intangible assets, disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reported
period.





On an
on-going basis, we evaluate our estimates. The most significant estimates relate
to our recognition of revenue, the allowance for doubtful accounts receivable
and inventory valuation reserves.





We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.





Reverse
Stock Split





The
Company effectuated a 1 for 20 reverse stock split on September 24,
2010.   All common stock and related information have been
retroactively restated.


19





Revenue
Recognition





The
Company recognizes revenue from product sales based on four basic criteria that
must be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgment regarding the fixed
nature of the selling prices of the products delivered and the collectability of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product was not delivered or is subject to refund until such time that the
Company and the customer jointly determine that the product has been delivered
or no refund will be required.




Inventories
/ Cost of Goods Sold





The
Company has adopted a policy to record inventory at the lower of cost or market
determined by the first-in-first-out method. The elements of cost that comprise
inventory and cost of goods sold are FOB shipping point costs, freight and
destination charges, customs and importation fees and taxes, customer broker
fees (if any) and other related costs. Warehousing costs are charged to cost of
goods in the period the costs are incurred. The Company provides inventory
allowances based on estimates of obsolete inventories.





Allowance
for doubtful accounts





The
Company maintains an allowance for doubtful accounts to reduce amounts to their
estimated realizable value, including reserves for customer and other receivable
allowances and incentives. In estimating the provision for doubtful accounts,
the company considers a number of factors including age of the accounts
receivable, trends and ratios involving the age of the accounts receivable and
the customer mix of each aging categories.





Advertising





The
Company charges the costs of advertising to expenses as incurred.





Off Balance Sheet
Arrangements





None





ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information required by this item.





ITEM
4 – CONTROLS AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including our principal executive and financial officers, as
appropriate to allow timely decisions regarding required
disclosure.





The
Company’s management, under the supervision and with the participation of our
Chief Executive Officer/Chief Financial Officer, carried out an evaluation of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the
Exchange Act) as of December 31, 2010.  Based upon that evaluation and
the identification of the material weakness in the Company’s internal control
over financial reporting, the Chief Executive Officer/Chief Financial Officer
concluded that the Company’s disclosure controls and procedures were ineffective
as of the end of the period covered by this report.





The
reason for the ineffectiveness of our disclosure controls and procedures was the
result of having a limited number of employees and not having proper segregation
of duties based on the cost benefit of hiring additional employees solely to
address the segregation of duties issue. We compensate for the lack of
segregation of duties by employing close involvement of management in day-to-day
operations.





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 paragraph (d) of Rule 13a-15 or
15d-15 under the Exchange Act that occurred during the quarter ended December
31, 2010 that have materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.


20





PART
II:  OTHER INFORMATION





ITEM
1 – LEGAL PROCEEDINGS




Metacomet Company, LLC v.
Zevotek, Inc





Case No. 3:10CV1754
(MRK)





United States District
Court, District of Connecticut





In or
about May 2010, an alleged assignee (the “Assignee”) of certain convertible
promissory notes commenced an action by the filing of a summons and complaint
against us alleging a failure to comply with its demands to convert principal
and interest under the promissory notes in our common stock.  We
served and filed our Answer on July 21, 2010, in which we denied the material
allegations of the complaint and asserted numerous affirmative
defenses.  The parties have entered into a stipulation of settlement
resolving this action on November 4, 2010 and a final judgment and injunction
were entered on November 12, 2010, pursuant to which we agreed to issue stock
once a month to the Assignee until we have issued at total 182,000,000 shares of
our common stock.





ITEM
1A – RISK FACTORS





As a
“small reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide information required by this item.





ITEM
2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





During
the six months ended December 31, 2010, the Company issued 149,962,702 shares of
common stock in payment of principal and interest due on unregistered
convertible promissory notes. The notes
and the shares were issued in a transaction that was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act, which exempts transactions of an issuer not involving a public
offering.





ITEM
3 – DEFAULT UPON SENIOR SECURITIES





None.





ITEM 4 – REMOVED AND
RESERVED.





ITEM
5 – OTHER INFORMATION




On August
6, 2010, the Company issued a convertible promissory note to a certain investor
in the principal amount of $192,430.62. The Note matures on the two-year
anniversary of the date of issuance (the “Maturity Date”) and accrues interest
at an annual rate of ten percent (10%).  The Note is payable in full
on the Maturity Date unless previously converted into shares of the Company’s
common stock at an initial conversion price of $0.0001 per share, as may be
adjusted.  A form of the note is attached to this Quarterly Report as
Exhibit 4.1.




On
January 8, 2011, the Company and certain holders of its convertible promissory
notes originally dated as of January 9, 2010 and March 9, 2009, entered into an
amendment agreement (the “Amendment Agreement”) in order to extend the maturity
date of an aggregate of $140,424.72 worth of the Company’s convertible
promissory notes to January 8, 2012.  A form of the Amendment Agreement is
attached to this Quarterly Report as Exhibit 4.2.





ITEM
6 – EXHIBITS





Item
                No.
              
              Description4.1
              
              Form
      of Convertible Promissory Note4.2
              
              Form
      of Amendment to Convertible Promissory Notes31.1
              
              Certification
      of  Robert Babkie, Chief Executive Officer and Chief Financial
      Officer of Zevotek, Inc. pursuant to Rule 13a-14(a)32.1
              
              Certification
      of Robert Babkie, Chief Executive Officer and Chief Financial Officer of
      Zevotek, Inc. pursuant to 18 U.S.C. § 1350 adopted pursuant to Section 906
      of the Sarbanes Oxley Act of
2002


21




SIGNATURES





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





ZEVOTEK,
      INC.February
      18, 2011
            /s/ Robert BabkieRobert
      BabkiePresident,
      Chief Executive Officer and Chief Financial Officer(Principal
      Executive and Principal Financial and Accounting
  Officer)


22