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EX-31.1 - Zevotek, Incv162588_ex31-1.htm
EX-23.1 - Zevotek, Incv162588_ex23-1.htm
EX-32.1 - Zevotek, Incv162588_ex32-1.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________

FORM 10-K

(Mark One)

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Fiscal Year Ended June 30, 2009

o
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 issuer as specified in its charter)

DELAWARE
05-0630427
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
134 Cedar Street
Nutley, NJ 07110
________________________________________________________________________
(Address of principal executive offices, including zip code)


Registrant’s telephone number, including area code:
 
(973) 667-4026
Securities registered pursuant to Section 12(b) of the Act:
 
None
Securities registered pursuant to Section 12(g) of the Act:
 
None

___________________
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: o Yes No x
 
Indicate by check mark whether the registrant(1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. x Yes o No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy ir information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 if the Exchange Act.
 
Large accelerated filter o
Accelerated filter o
Non-accelerated filter o (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
 
As of October 8, 2009, 703,885,307 shares of our common stock were issued and outstanding.

Documents Incorporated by Reference:      None.
 

 
PART I

ITEM 1.   BUSINESS.

Our History

We were incorporated in the State of Delaware on December 19, 2005 and amended our Certificate of Incorporation on March 1, 2006. On March 1, 2006, we changed our name from The Diet Coffee Company, Inc. to Diet Coffee, Inc. and on June 26, 2008, we changed our name to Zevotek, Inc.   Our principal executive offices are located at 134 Cedar Street, Nutley, NJ 07110. Our telephone number is (973) 667-4026.

Overview of Business

We are engaged in the direct marketing and distribution of consumer products.  Our first offering was the Slim Coffee product line, which features coffee beverages. In May 2007, we entered into a license agreement to sell an energy saving compact fluorescent light bulb named the Ionic Bulb, which agreement was replaced by an Exclusive License and Sales Agreement dated February 24, 2009 under which we currently retain the exclusive worldwide rights to manufacture, market, use, sell, distribute and advertise the Ionic Bulb.   We plan to market the Ionic Bulb through TV infomercials, catalogs, magazines and major U.S. retail and specialty stores and our websites www.zevo-tek.com and www.ionicbulb.com.

Products
 
We currently have one product for marketing and sale: the Ionic Bulb, which we began selling in fiscal 2008.  During the fiscal year ended June 30, 2007, we offered and sold coffee products under the Slim Coffee product line.  Beginning in the quarter ended June 30 2007, we stopped marketing and selling of coffee products.  However, certain minimal residual sales occurred during the first quarter of fiscal 2008.  We have no current intention to market or sell coffee products in the future.

Ionic Bulb

On May 18, 2007, we entered into a license and supply agreement with an owner of the Ionic Bulb, which agreement was replaced by an Exclusive License and Sales Agreement dated February 24, 2009 under which we currently retain the exclusive worldwide rights to manufacture, market, use, sell, distribute and advertise the Ionic Bulb.  We intend to sell the Ionic Bulb through our wholly owned subsidiary Ionicbulb.com, Inc.   We seek to penetrate the $40 billion dollar global lighting industry through sales of the Ionic Bulb.  The Ionic Bulb combines the performance features of ionic air cleaning technology with those of a 10,000 hour reduced energy use compact fluorescent light bulb (CFL). The Ionic Bulb contains an air purifying microchip ion emitter that is powered by the bulb's own energy. The Ionic Bulb is designed for use in any U.S. home which we believe will not require any special modifications. When illuminated, the Ionic Bulb via silent emission of negative ions helps to eliminate smoke, dust, pollen, pet dander and odors from the air within a surrounding 100 square foot area. The Ionic Bulb is designed for consumer use.  We believe the Ionic Bulb product to be a less expensive and space saving alternative to air purifiers.
 
Industry testing shows CFL bulbs, such as the Ionic Bulb use approximately 1/3 less energy than ordinary incandescent light bulbs. CFL bulbs can be used nearly anywhere that ordinary incandescent lights are used, including recessed fixtures, table lamps, track lighting, ceiling fixtures and porch lights.
 
Sales and Marketing
 
We plan to market the Ionic Bulb through TV Infomercials, catalogs, magazines and major U.S. retail and specialty stores and our website www.ionicbulb.com. Our plans can be further described as follows:

Infomercials - We expect to develop and produce both long and short form (spot) direct response television campaigns (infomercials) to be placed in major national broadcast and cable networks. Spot infomercials run between 60 seconds and five minutes and long form infomercials run for 28 minutes. These campaigns will be conducted locally, nationally, or both, depending on the specific product and anticipated demand. As of the date of this annual report, we are in the final stages of production for a new Ionic Bulb infomercial.
 
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Retail - We have also approached several major national chains and expect to have a comprehensive network of major retailers selling our products. We plan to use independent distributors to assist us with establishing retail sales of our products.

Internet - Our Ionic Bulb products are being made available for sale on our web sites www.zevo-tek.com and www.ionicbulb.com, and are marketed using a streaming video presentation of the Ionic Bulb and its features.  We recently procured a merchant account enabling us to accept payment card transactions from all major credit card companies thereby facilitating the online purchase process through our corporate website.  We are currently working to establish a fulfillment center and an inbound call center.
 
We may create and distribute multimedia emails to selected individuals who purchase products or express an interest in our product line.
 
Manufacturing and Distribution
 
We contract with unaffiliated manufacturers outside the U.S. to manufacture our products. Our Ionic Bulb is manufactured in China and is subject to import duties, which have the effect of increasing the amount we pay to obtain such products. We are currently in negotiations for a formal manufacturing and distribution agreement.
 
On April 29, 2009 we entered into a Distribution Agreement with a German distributor pursuant to which we granted such distributor the exclusive right (subject to minimum sales in the first year) to advertise, market and sell our ionic bulb product in Germany, Austria, Switzerland, Liechtenstein, Czech Republic, Slovakia, Hungary, Romania and Poland (the “Territory”).  Upon satisfactory sales of an initial order (in dealer’s reasonable discretion) of 5,000 units of our ionic bulb product, the distributor agreed to purchase 5,000 units of our ionic bulb product per month during the first year of the contact to maintain exclusive status in the Territory.  We also granted distributor a license to use certain marketing material to advertise and sell the ionic bulb product.  Such distributor also agreed to maintain general and product liability insurance in an amount of at least $1,000,000 and agreed to name us as an additional insured under such policy.  The term of the agreement is for one year and will be automatically renewed for successive 1 year periods if the minimum quantities (5,000/month and 60,000/year) are met.

License Agreements, Trademarks and Patents
 
License and Supply Agreement

On May 18, 2007, we entered into that certain License and Supply Agreement (the “Original Agreement”) with Jason Ryu, the purported sole owner, pursuant to which Mr. Ryu granted us an exclusive, commercial license to market, distribute, sell and manufacture the Ionic Bulb Product and the patents underlying the Ionic Bulb Product set forth under the term “Ionic Bulb Patents” on Exhibit A to the Agreement (the “Ionic Bulb Patents”) which Original Agreement was terminated in July 2008 yet continued on an informal non-exclusive basis.  On February 24, 2009, we entered into an Exclusive License and Supply Agreement (the “Agreement”) with Jason Ryu to, amongst other things, reclaim the license for the Ionic Bulb Products on an exclusive basis.  Under the Agreement, Mr. Ryu granted us a worldwide exclusive license (the “License”) to manufacture, have manufactured, market, use, sell distribute and advertise the Licensed Products (as defined in the Agreement) which includes the Ionic Bulb products.  In consideration of the License, we agreed to issue Mr. Ryu fifty million (50,000,000) shares of our common stock (the “License Shares”).   If either (a) we fail to file our quarterly and annual reports by the due date for such report (including, if applicable, any extensions permitted under Rule 12b-25 of the Securities Exchange Act of 1934, as amended) or (b) our Common Stock  is not quoted on the OTCBB on or before February 14, 2010, then the License shall (unless Licensee exercises the Option set forth under Section 3.2 of the Agreement) continue on a non-exclusive basis; provided, however, that in such instance we can issue to Ryu an additional amount of shares of Common Stock equal to $90,000 to maintain the License on an exclusive basis.
 
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In addition, the Agreement also provides for the retention of Ryu as a non-exclusive independent contractor sales representative to obtain purchase orders for the Licensed Products on our behalf  In consideration for his consulting services, we agreed to issue Ryu 750,000 shares of Common Stock for each $100,000 in gross sales of the Licensed Product by Ryu (or any Sales Associate hired by him) on or before February 28, 2010 up to a maximum of 75,000,000 shares of Common Stock (collectively, the “Incentive Shares”).  The Incentive Shares shall not vest unless Ryu (or any Sales Associate hired by him) shall have collectively procured gross sales of $5,000,000 for the Licensed Products on or before February 28, 2010 (the “Target”).  If Ryu fails to achieve the Target, such Incentive Shares shall be null and void and of no further force and effect.  In addition to the Incentive Shares, we also agreed to pay Ryu a commission at the rate 50% of all Net Profits (as defined on the Agreement) recognized by us on sales of the Licensed Products made by Ryu (or Sales Associates hired by Ryu) on our behalf during the period of this Agreement.

Patents and Trademarks
 
On April 2, 2005, Mr. Ryu (and Mr. Chang Min Lee the co-inventor) filed US Patent Application No. 11/097,767 (Publication No. 20006/0078460) entitled “Anion General for Incorporation into Lighting Apparatuses and Other Appliances” with the US Patent and Trademark Office (“USPTO”).  The initial application was rejected on various grounds.  Mr. Ryu filed a response and amendment to the initial application with the USPTO on September 9, 2007.  Mr. Ryu filed a continuation-in-part (CIP) application on August 7, 2008, serial no. 12/221,908, which claims the benefit of no. 11/097,767, now abandoned. The CIP application adds some new enhancements to the bulb design that further distinguish the invention over the prior art.  As of the date of this Annual Report, the CIP is pending and has not yet been examined.  We cannot offer any assurance that the application will ultimately be approved by the USPTO. In addition, there is an international patent application on file under the Patent Cooperation Treaty (PCT), No PCT/KR2005/002997 (Publication No. WO/2006/031036) entitled Negative Ion Emission Lamp.  We intend to file additional applications, as appropriate to protect our rights in the Ionic Bulb.

A divisional application, serial no. 11/820,915, is pending.  It is directed to an ionic air purifying device in an appliance such as a fan (rather than in a CFL light bulb).  A response to an office action is due October 28, 2009 with one 3 month extension of time. No further extensions are available..

The initial application for trademark protection for the “Ionic Bulb” brand name was rejected.  There is no assurance that trademark protection will ultimately be procured.

Notwithstanding, Mr. Ryu’s and our efforts to protect proprietary rights in the Ionic Bulb, existing trade secret, copyright, and trademark laws afford only limited protection.  Further, the assignment of the US Patent Application by the co-inventor has not been perfected by filing with the USPTO.  Until such time as this filing is perfected, it is possible that the co-inventor could license the Ionic Bulb to another party.  Despite our efforts to protect our proprietary rights and other intellectual property, unauthorized parties may attempt to copy aspects of our products, obtain and use information that we regard as proprietary or misappropriate our copyrights, trademarks, trade dress, and similar proprietary rights. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate. In addition, our competitors might independently develop similar technology or duplicate our products or circumvent any patents or our other intellectual property rights.

Supply and Factoring Agreement—To be terminated at the end of the Initial Term on October 23, 2009

On October 23, 2007, Ionicbulb.com, Inc. (f/k/a Zevotek, Inc.), our wholly owned subsidiary, entered into a Supply Agreement with Star Funding, Inc. pursuant to which Star Funding will provide, on a discretionary basis, purchase order financing up to $2.5 million to facilitate Ionbulb.com Inc’s sale of its Ionic Bulb product. This purchase order financing may be made via direct payment to Ionbulb.com Inc’s suppliers, issue or cause the issuance of letters of credit, and/or advances to Ionicbulb.com. Ionicbulb.com will be required to pay Star Funding an amount equal to 2.5% of all “Expenses” (as defined) associated with the purchase of any Goods under the Agreement, including letter of credit fees, if any, which will equal 0.25% of the face amount of any letter of credit. As collateral security for all of Ionicbulb.com Inc.’s obligations under the Supply Agreement, Ionicbulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by either party with 60 days’ prior written notice before the end of the initial or any renewal period.
 
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On October 23, 2007, Ionicbulb.com also entered into a Factoring Agreement with Star Funding pursuant to which Star Funding has agreed to purchase certain accounts receivables of Ionicbulb.com under the Supply Agreement. Ionicbulb.com has agreed to pay Star Funding a factoring commission of 1.5% of the gross amount of each receivable under the Factoring Agreement provided, however, that Ionicbulb.com has agreed that Star Funding will receive $15,000 in fees under the Supply Agreement and the Factoring Agreement in the first 12 months and Ionicbulb.com has agreed to pay Star Funding the shortfall by which all fees and commissions are less than $15,000. As collateral security for all of Ioncibulb.com’s obligations under the Supply Agreement, Ioncibulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by Ionicbulb.com upon 60 days’ prior written notice before the end of the initial or any renewal period, or by Star Funding upon 30 days prior written notice.

To further secure Ionicbulb.com’s obligations under the Supply Agreement and the Factoring Agreement (as discussed below), we have executed (i) a guarantee and (ii) an assignment of that certain License and Supply Agreement under which is obtained its distribution rights for the Ionic Bulb. In addition, Adam Engel, President of Zevotek and Ionicbulb.com, executed an Anti Fraud and Performance Agreement under which Mr. Engel guaranteed Ionicbulb.com’s representations and warranties under the Supply and Factoring Agreements. Mr. Engel explicitly agrees that if any receivable purchased by Star Funding is not paid when due (subject to certain exceptions), such non-payment shall be presumed to be the result of a breach of Ionicbulb.com’s representations and warranties under the Supply Agreement and/or the Factoring Agreement at which time Star Funding may be able to execute on the (i) collateral pledged under the Supply and Factoring Agreements and (ii) license for distribution of the Ionic bulb product.

            In September 2009, Zevotek and Star Funding agreed to terminate these agreements, effective at the end of the initial term on October 23, 2009.  The parties agreed to exchange mutual releases in connection with the termination.

Competition
 
The CFL bulb market is subject to intense competition since new products and sellers are constantly entering the market and competing for consumer dollars. The ease of entry into the market also adds to the highly competitive nature of the industry.  We have not yet achieved a market share, nor do we have a long operating history, large customer base, or substantial financial, development and marketing resources. Our products will compete with many other CFL bulb products that are sold over the Internet and in mass market retail and specialty stores. Maintaining and gaining market share depends heavily on the differentiation of our product’s ionizing features, further product development and enhancement, pricing, quality, performance, packaging and availability, brand name recognition, patents, and marketing and distribution approaches.
 
Regulation
 
The formulation, manufacturing, packaging, labeling, advertising, distribution, and sale (hereafter, collectively “sale” or “sold”) of CFL bulbs, such as those we plan to sell, are subject to regulation by one or more federal agencies, principally the Federal Trade Commission, or FTC, and to a lesser extent the Consumer Product Safety Commission. Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States. Among other matters, regulation by the FTC covers product safety and claims made with respect to a product's ability to provide health-related benefits.
 
Federal agencies, primarily the FTC, have a variety of procedures and enforcement remedies available to them, including the following:
 
 
·
initiating investigations,
 
·
issuing warning letters and cease and desist orders,
 
·
requiring corrective labeling or advertising,
·
requiring consumer redress, such as requiring that a company offer to repurchase products
·
previously sold to consumers,
 
·
seeking injunctive relief or product seizures,
 
·
imposing civil penalties, or
 
·
commencing civil action and/or criminal prosecution.
 
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In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the industry, including the imposition by federal agencies of civil penalties. We cannot assure you that the regulatory environment in which we operate will not change or that such regulatory environment, or any specific action taken against us, will not result in a material adverse effect on our operations. In addition, increased sales of, and publicity about, CFL bulb may result in increased regulatory scrutiny of the CFL bulb industry, including consumer compliance with local regulations for properly disposing of used CFL bulbs which contain trace amounts of mercury.

The sale of our products in countries outside the United States is regulated by the governments of those countries. We are currently attempting to market our products outside of the United States. The Company plans to commence sales in those countries may be prevented or delayed by such regulation. While compliance with such regulation will generally be undertaken by international distributors, we may assist with such compliance and in certain cases may be liable if a distributor fails to comply.
 
We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect such additional regulation, when and if it occurs, would have on our business in the future. Such additional regulation could require, however, any or all of the actions listed below, which could have a material adverse effect on our operations:

 
·
the reformulation of certain products to meet new standards,
 
·
the recall or discontinuance of certain products,
 
·
additional record keeping,
 
·
expanded documentation of the properties of certain products,
 
·
revised, expanded or different labeling, or
 
·
additional scientific substantiation.
 
Coffee Products (Not currently being marketed or sold)

During the fiscal year ended June 30, 2007, we sold coffee products under the Slim Coffee brand. Beginning in the quarter ended June 30 2007, we stopped marketing and selling of coffee products.  However, certain minimal residual sales occurred during the first quarter of fiscal 2008.  We have no current intention to market or sell coffee products in the future.

Employees

As of October 8, 2009 we had one full-time employee, who is our president, chief executive officer and chief financial officer. We have not experienced any work stoppages and we consider relations with our employee to be good.

ITEM 1A.  RISK FACTORS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Risks Relating to Our Business:

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN BASE AN INVESTMENT DECISION.
 
Our company was formed on December 19, 2005, therefore we have a limited operating history upon which you can make an investment decision, or upon which we can accurately forecast future sales. You should, therefore, consider us subject to the business risks associated with a new business. The likelihood of our success must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the formation and initial operations of a new business.
 
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WE HAVE NO OPERATING HISTORY IN THE LIGHTING INDUSTRY, WHICH COULD RESULT IN ERRORS IN MANAGEMENT AND OPERATIONS.

We recently entered the lighting production and sale market and have no history of operations.  We may not be able to manage entry into this market effectively or properly staff operations, and failure to manage our entry into this market effectively could delay our ability to generate profitable operations.

OUR AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

In their report dated October 13, 2009, RBSM LLP stated that our consolidated financial statements for the year ended June 30, 2009, were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of our recurring losses from operations and our net capital deficiency. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit. Our continued net operating losses and stockholders' deficit increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

OUR FAILURE TO COMPLY WITH THE FINAL JUDGEMENT ISSUED BY THE FTC COULD ADVERSELY AFFECT OUR BUSINESS.

On March 26, 2007, we received a letter from the U.S. Federal Trade Commission (“FTC”) whereby we were informed that the FTC was conducting an investigation into advertising claims made for our weight loss product known as “Slim Coffee.”  The purpose of the investigation was to determine whether we, 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) we abide 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.  We expect to comply with terms of the stipulation and do not anticipate incurring a liability for the judgment, however there can be no assurance of compliance.  Should we fail to comply with the FTC’s final judgment, this could have a material adverse on our business, financial condition and results of operations.

WE COULD LOSE OUR EXCLUSIVE RIGHT TO MARKET AND SELL THE IONIC BULB

Under the terms of our exclusive license and sales agreement dated February 24, 2009 relating to the Ionic Bulb, if either (a) we fail to file our quarterly and annual reports by the due date for such report (including, if applicable, any extensions permitted under Rule 12b-25 of the Securities Exchange Act of 1934, as amended) or (b) our Common Stock  is not quoted on the OTCBB on or before February 14, 2010, then the License shall (unless Licensee exercises the Option set forth under Section 3.2 below) continue on a non-exclusive basis; provided, however, that in such instance we can issue to Mr. Ryu an additional amount of shares of Common Stock equal to $90,000 to maintain the License on an exclusive basis

WE LACK PROPER INTERNAL CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
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During the course of the preparation of our June 30, 2009 financial statements, we identified certain material weaknesses relating to our internal controls and procedures within the areas of revenue recognition and inventory accounting. Some of these internal control deficiencies may also constitute deficiencies in our disclosure and internal controls.

WE ARE SEEKING ADDITIONAL FINANCING TO FUND OUR WHOLESALE AND DIRECT RESPONSE SALES BUSINESS, AND IF WE ARE UNABLE TO OBTAIN FUNDING WHEN NEEDED, WE MAY NEED TO SCALE BACK OUR OPERATIONS.
 
We have been financing our operations since our inception in December 19, 2005 with $1,319,801 in funds invested by our founders raised through a private placement of our common stock and through the issuance of promissory notes to unaffiliated third party investors.  We have used the financing to start up our direct response sales business. We need additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares and revenues from operations.

Our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for our products. Accordingly, we expect to need to obtain additional private or public financing including debt or equity financing and there can be no assurance that such financing will be available as needed or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.

Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to generate adequate revenues or successfully obtain additional future funding may jeopardize our ability to continue our business and operations.

FAILURE TO PROTECT PROPRIETARY TECHNOLOGY COULD IMPAIR OUR COMPETITIVE POSITION.
 
The owners of the Ionic Bulb have filed U.S. and foreign patent applications for the Ionic Bulb.  Our success will depend in part on our ability to obtain United States and foreign patent protection for the Ionic Bulb and operate without infringing the proprietary rights of third parties.  We place considerable importance on obtaining patent protection for significant new technologies, products and processes.  Future enforcement of patents and proprietary rights in many other countries may be problematic or unpredictable.  Moreover, the issuance of a patent in one country does not assure the issuance of a similar patent in another country.  Claim interpretation and infringement laws vary by nation, so the extent of any patent protection is uncertain and may vary in different jurisdictions.  Our domestic patent position is also highly uncertain and involves complex legal and factual questions.  In addition, the assignment by the co-inventor has not yet been perfected in the US Patent and Trademark Office.  Until such time as this assignment is perfected, the co-inventor could license the Ionic Bulb technology to another party.  The applicant or inventors of subject matter covered by patent applications or patents owned by us may not have been the first to invent or the first to file patent applications for such inventions.  Due to uncertainties regarding patent law and the circumstances surrounding our patent applications, the pending or future patent applications we own may not result in the issuance of any patents.  Existing or future patents owned by to us may be challenged, infringed upon, invalidated, found to be unenforceable or circumvented by others.  Further, any rights we may have under any issued patents may not provide us with sufficient protection against competitive products or otherwise cover commercially valuable products or processes.
 
LITIGATION OR OTHER DISPUTES REGARDING PATENTS AND OTHER PROPRIETARY RIGHT MAY BE EXPENSIVE  AND HARM OUR ABILITY TO OPERATE.
 
The manufacture, use or sale of the Ionic Bulb may infringe on the patent rights of others.  If we are unable to avoid infringement of the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court.  Litigation is costly and time consuming.  We may not have sufficient resources to bring these actions to a successful conclusion.  In addition, if we do not obtain a license, develop or obtain non-infringing technology, or fail to successfully defend an infringement action or have the patents we are alleged to infringe declared invalid, we may:
 
•           incur substantial money damages;

•           not be able to obtain any required license on favorable terms, if at all.
 
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In addition, if another party claims the same subject matter or subject matter overlapping with the subject matter that we have claimed in a United States patent application or patent, we may decide or be required to participate in interference proceedings in the United States Patent and Trademark Office in order to determine the priority of invention.  Loss of such an interference proceeding would deprive us of patent protection sought or previously obtained and could prevent us from commercializing our products.  Participation in such proceedings could result in substantial costs, whether or not the eventual outcome is favorable.  These additional costs could adversely affect our financial results.

WE MAY BE UNABLE TO MANAGE BUSINESS GROWTH OR IMPLEMENT OUR EXPANSION STRATEGY.  
 
Our executive officer has limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. He may not successfully or efficiently manage our transition into a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. In particular, these new obligations will require substantial attention from our management and divert his attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.
 
Furthermore we may not be able to establish markets for our products, or implement the other features of our business strategy at the rate or to the extent presently planned because we are a small company. Our projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.

OUR FUTURE OPERATIONS ARE CONTINGENT ON OUR ABILITY TO RECRUIT EMPLOYEES TO EXPAND OUR DIRECT RESPONSE SALES BUSINESS.
 
In the event we are able to obtain necessary funding to establish our wholesale and direct response sales business, we expect to experience growth in the number of employees and the scope of our operations. In particular, we may hire additional sales, marketing and administrative personnel to advance our Ionic Bulb product sales. Additionally, acquisitions could result in an increase in employee headcount and business activity. Such activities could result in increased responsibilities for management. We believe that our ability to increase our customer support capability and to attract, train, and retain qualified technical, sales, marketing, and management personnel, will be a critical factor to our future success.
 
DUE TO THE HIGH LEVEL OF COMPETITION IN THE MARKETING AND SALE OF CONSUMER PRODUCTS, WE MIGHT FAIL TO COMPETE EFFECTIVELY, WHICH WOULD HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
 
The business of marketing consumer products is highly competitive and sensitive to the introduction of new products, which may rapidly capture a significant share of the market. These market segments include numerous manufacturers, distributors, marketers, retailers and physicians that actively compete for the business of consumers both in the United States and abroad. In addition, we anticipate that we will be subject to increasing competition in the future from sellers that utilize electronic commerce for their direct response sales business. Some of these competitors have longer operating histories, significantly greater financial, technical, product development, marketing and sales resources, greater name recognition, larger established customer bases and better-developed distribution channels than we do. Our present or future competitors in these industries may be able to develop new products that are comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends and standards or customer requirements, or devote greater resources to the development, promotion and sale of their products than we do. For example, if our competitors develop CFC light bulbs that prove to be more effective than our products, demand for our Ionic Bulb products could be reduced. Accordingly, we may not be able to compete effectively in our markets and competition may intensify.
 
 
We are also subject to significant competition for the recruitment of distributors from other network marketing organizations, including those that market other types of products. We compete for global customers and distributors with regard to consumer products. In addition, because the industry in which we operate is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge who will compete with us for our distributors and customers.
 
We expect that new competitors are likely to join existing competitors. Many of our current competitors are significantly larger and have substantially greater market presence as well as greater financial, technical, operational, marketing and other resources and experience than we have. In the event that such a competitor expends significant sales and marketing resources in one or several markets we may not be able to compete successfully in such markets. We believe that competition will continue to increase, placing downward pressure on prices. Such pressure could adversely affect our gross margins if we are not able to reduce costs commensurate with such price reductions. If our competitors were to provide better and more cost effective products, our business initiatives could be materially and adversely affected.

ADVERSE PUBLICITY ASSOCIATED WITH OUR PRODUCTS, OR THOSE OF SIMILAR COMPANIES, COULD HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
 
 
 
·
the safety and quality of our products and ingredients;
 
·
the safety and quality of similar products and ingredients distributed by other companies;
 
·
our distributors; and
 
·
the direct selling business generally.
 
Adverse publicity concerning any actual or purported failure of us or our distributors to comply with applicable laws and regulations regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing program, the licensing of our products for sale in our target markets or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could have an adverse effect on our goodwill and could negatively affect our ability to attract, motivate and retain distributors, which would negatively impact our ability to generate revenue. We cannot ensure that all distributors will comply with applicable legal requirements relating to the advertising, labeling, licensing or distribution of our products.    
 
In addition, our distributors' and consumers' perception of the safety and quality of our Ionic Bulb products as well as similar products distributed by other companies can be significantly influenced by national media attention, publicized scientific research or findings, widespread product liability claims and other publicity concerning our products or ingredients or similar products and ingredients distributed by other companies. Adverse publicity, whether or not accurate or resulting from consumers' use or misuse of our products or our direct response sales business, that associates consumption of our products or ingredients or any similar products or ingredients with illness or other adverse effects, questions the benefits of our or similar products or claims that any such products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could negatively impact our reputation or the market demand for our products.
 
Adverse publicity relating to us, our products, including our Ionic Bulb product line, our direct response sales business or our operations, or the attractiveness or viability of the financial opportunities provided thereby could have a negative effect on our ability to attract, motivate and retain distributors. Adverse publicity may cause a rapid, substantial loss of distributors, a decline in consumer interest in our direct marketing campaigns and a corresponding reduction in sales. We expect that negative publicity will, from time to time, negatively impact our business in particular markets.
 
9

 
ADDITIONAL FINANCING WILL BE NECESSARY FOR THE IMPLEMENTATION OF OUR MARKETING STRATEGY FOR OUR IONIC BULB PRODUCTS.

In developing and implementing our marketing strategy for our Ionic Bulb products, we will need to create additional infomercials and print ad campaigns. Once the marketing plans are implemented we will need to hire additional employees for the operation of our business. Accordingly we expect to need to obtain additional private or public financing including debt or equity financing and there can be no assurance that such financing will be available as needed, or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock. Furthermore, debt financing, if available, will require payment of interest, fees and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding will jeopardize our ability to continue our business and operations.

OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL SUFFER IF WE DO NOT ACCURATELY FORECAST CUSTOMERS' DEMANDS FOR OUR IONIC BULB PRODUCTS.
 
Because of our reliance on third-party manufacturers, the production lead times are relatively long. Therefore, we must commit to production well in advance of customer orders for our Ionic Bulb products. If we fail to forecast consumer demands accurately, we may encounter difficulties in filling customer orders or in liquidating excess inventories, or may find that customers are canceling orders or returning products. Our relatively long production lead time may increase the amount of inventory and the cost of storing inventory. Additionally, changes in retailer inventory management strategies could make inventory management more difficult. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

OUR DIRECT RESPONSE SALES OPERATION IS DEPENDENT ON HAVING ADEQUATE CREDIT CARD ACTIVITY PROCESSING CAPACITY WITH THE MAJOR CREDIT CARD COMPANIES AND A CREDIT CARD PROCESSOR.
 
A third party credit card processor regulates our daily credit card sales order volume and sets limits as to the maximum daily sales volume it will process. In addition, credit card companies, such as Visa and MasterCard, and credit card processors typically maintain a record of the level of customer requests to have charges for our products reversed (chargebacks). The credit card companies and processors may impose increased deposit requirements and fines for “high chargeback levels”, may modify our daily sales volume limit, make a demand for additional reserves or even discontinue doing business with us. The direct response business is known for relatively high chargeback levels and we may experience periods of higher than accepted levels of chargeback activity that could lead to fines and disruptions in credit card processing of customer orders. We endeavor to maintain reasonable business practices and customer satisfaction, which in part, can contribute to lower levels of chargeback activity. Nevertheless, excess chargeback activity could result in our being unable to have customers pay us using credit cards.

WE RELY ON OTHERS FOR PRODUCTION OF OUR IONIC BULB PRODUCTS, AND ANY INTERRUPTIONS OF THESE ARRANGEMENTS COULD DISRUPT OUR ABILITY TO FILL CUSTOMERS' ORDERS AND HAVE A MATERIAL IMPACT ON OUR ABILITY TO OPERATE.

We obtain our products for our Ionic Bulb product line from third party suppliers. Any increase in labor, equipment, or other production costs could adversely affect our cost of sales. Qualifying new manufacturers is time-consuming and might result in unforeseen manufacturing and operations problems. The loss of our relationships with our manufacturers or our inability to conduct our manufacturing services for us as anticipated in terms of cost, quality, and timeliness could adversely affect our ability to fill customer orders in accordance with required delivery, quality, and performance requirements. If this were to occur, the resulting decline in revenue would harm the business.
 
We depend on manufacturers to maintain high levels of productivity and satisfactory delivery schedules. Our manufacturers serve many other customers, a number of which have greater production requirements than we do. As a result, our manufacturers could determine to prioritize production capacity for other customers or reduce or eliminate deliveries to us on short notice. We may encounter manufacturing delays and longer delivery schedules in commencing volume production of new products. Any of these problems could result in our inability to deliver products in a timely manner and adversely affect our operating results. We depend to a great extent on our manufacturers for the safety, purity, and potency of our products.
 
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We currently outsource significant portions of our business functions, including, but not limited to, warehousing, customer service, inbound call center functions and payment processing for all direct response sales, customer order fulfillment, and product returns processing and shipping. From time to time we have experienced interruptions in these essential services for varying periods of time and future interruptions can and will occur. If such interruptions occur for extended periods of time, our operations may be materially adversely affected.

ANY MATERIAL INCREASE IN THE COST OF THE RAW MATERIALS USED TO MANUFACTURE OUR PRODUCTS WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR COST OF SALES.
 
As a cost efficiency measure and due to the relative size of our business, we do not manufacture our own product line but contract and depend on such supply and manufacture to third parties. We do not have contracts with our supplier of our Ionic Bulb product. We are subject to variations in the prices of the raw materials used in the manufacture of our products. We may not be able to pass along any cost increases to our customers and in the event that we are unable to raise prices, we would experience. As a result, any material increase in the cost of raw materials used in the manufacture of our Ionic Bulb product could have a material adverse effect on our cost of sales.

WE ARE DEPENDENT UPON KEY PERSONNEL AND CONSULTANTS.

Our success is heavily dependent on the continued active participation of our current executive officer listed under “Management.” Loss of the services of this officer could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depends on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on us. The inability of us to attract and retain the necessary managerial personnel and consultants and advisors could have a material adverse effect on our business, financial condition or results of operations.
 
WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDER.

Our series B stockholder holds approximately 81% of the outstanding votes entitled to vote on any matter presented to out stockholders.  Each share of series B preferred stock is entitled to 5,000 votes per share and as of the date hereof, all 1,000,000 shares of series B preferred stock issued are held by one person.  So long as this principal stockholder controls a majority of our fully diluted equity, they will continue to have the ability to elect our directors and determine the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially all of our assets, charter amendments and other matters requiring stockholder approval.   This controlling interest may have a negative impact on the market price of our common stock by discouraging third-party investors.
 
THERE IS PRESENTLY A LIMITED MARKET FOR OUR COMMON STOCK. ANY FAILURE TO DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR SHARES AND MAKE IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.

There is a limited market for our common stock.  Our common stock currently trades on the “pink sheets” and accordingly we have to seek market-makers to provide quotations for the common stock and it is possible that no market-maker will want to provide such quotations. The market price of our common stock may be highly volatile. In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.  Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.
 
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OUR COMMON STOCK IS SUBJECT TO THE “PENNY STOCK” RULES OF THE SEC.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
 
 
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
 
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
        
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

 
·
obtain financial information and investment experience objectives of the person; and
 
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
 
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

 
·
sets forth the basis on which the broker or dealer made the suitability determination; and
 
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

WE CURRENTLY TRADE ON THE PINK SHEETS WHICH LIMITS THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.

Our common stock currently trades on the Pink Sheets which limits the ability of broker deals to sell our common stock and the ability of stockholders to sell our securities in the secondary market.  This limits the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTC Bulletin Board, which may have an adverse material effect on our Company.
 
12

 
WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORSEEABLE FUTURE
 
We currently intend to retain earnings, if any, to support our growth strategy.

Cautionary Statement Concerning
Forward-Looking Information

This annual report and the documents to which we refer you and incorporate into this annual report by reference contain forward-looking statements.  In addition, from time to time, we, or our representatives, may make forward-looking statements orally or in writing.  These are statements that relate to future periods and include statements regarding our future strategic, operational and financial plans, potential acquisitions, anticipated or projected revenues, expenses and operational growth, markets and potential customers for our products and services, plans related to sales strategies and efforts, the anticipated benefits of our relationships with strategic partners, growth of our competition, our ability to compete, the adequacy of our current facilities and our ability to obtain additional space, use of future earnings, and the feature, benefits and performance of our current and future products and services.

You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” “seek” or “continue” or the negative of these or similar terms.  In evaluating these forward-looking statements, you should consider various factors, including those described in this annual report under the heading “Risk Factors.”  These and other factors may cause our actual results to differ materially from any forward-looking statement.  We caution you not to place undue reliance on these forward-looking statements.

We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us.  Such forward-looking statements relate to future events or our future performance.  Forward-looking statements are only predictions.  The forward-looking events discussed in this annual 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.  The forward-looking statements speak only as of the date hereof, and we expressly disclaim any obligation to publicly release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
None.

ITEM 2.   DESCRIPTION OF PROPERTY.

Our current executive office is located at 134 Cedar Street, Nutley, NJ.  This location is owned by our sole executive officer who does not require that we pay rent. We do not own any property.
 
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ITEM 3.   LEGAL PROCEEDINGS.

On March 26, 2007, we received a letter from the U.S. Federal Trade Commission (“FTC”) whereby we were informed that the FTC was conducting an investigation into advertising claims made for our weight loss product known as “Slim Coffee.”  The purpose of the investigation was to determine whether we, 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) we abide 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. 


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

No matters were submitted to a vote of our security holders during the quarter ended June 30, 2009.
 
14


PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock trades on the Other-OTC (Pink Sheets) under the symbol “ZVTK.PK.”  The following table shows the high and low bid prices for our common stock for each quarter since July 1, 2007 (the first day our stock began trading on the OTC Bulletin Board) as reported by the OTC Bulletin Board and the Other OTC (Pink Sheets).  All share prices have been adjusted to provide for the 1-50 reverse split effectuated on June 26, 2008.  We consider our stock to be “thinly traded” and any reported sale prices may not be a true market-based valuation of the stock.  Some of the bid quotations from set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
 
July 1, 2007 to June 30, 2008
 
High Bid
   
Low Bid
 
First quarter
  $ 62.50     $ 1.25  
Second quarter
    3.00       0.20  
Third quarter
    0.45       0.05  
Fourth quarter
    0.65       0.05  

July 1, 2008 to June 30, 2009
 
High Bid
   
Low Bid
 
First quarter
  $ 0.14     $ 0.02  
Second quarter
    0.07       0.001  
Third quarter
    0.03       0.001  
Fourth quarter
    0.023       0.002  
 
As of October 2, 2009 there were approximately 60 record holders of our common stock.

We have not paid any cash dividends since our inception and do not contemplate paying dividends in the foreseeable future.  It is anticipated that earnings, if any, will be retained to retire debt and for the operation of the business.

Shares eligible for future sale could depress the price of our common stock, thus lowering the value of a buyer’s investment.  Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for shares of our common stock.

Our revenues and operating results may fluctuate significantly from quarter to quarter, which can lead to significant volatility in the price and volume of our stock.  In addition, stock markets have experienced extreme price and volume volatility in recent years.  This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons unrelated or disproportionate to the operating performance of the specific companies.  These broad market fluctuations may adversely affect the market price of our common stock.
 
15



   
(a)
   
(b)
   
(c)
 
Plan Category
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
   
Weighted-average exercise price of outstanding options, warrants and rights
   
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
E Equity compensation plans approved by security holders
        $        
    Equity compensation plans not approved by security holders
                78,882,416
(1)(2)(3)(4)(5)
Total
        $       78,882,416
(1)(2)(3)(4)(5)

(1) 2007 Stock Incentive Plan. The purpose of our 2007 Stock Incentive Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 21,450,000 shares, subject to adjustment, and as of June 30, 2009, we had issued 429,000 shares.
 
Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.

The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.

In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.
 
(2) 2007 Stock Incentive Plan No. 2. The purpose of our 2007 Stock Incentive Plan No. 2 is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 17,994,000 shares, subject to adjustment, and as of June 30, 2009, we had issued 359,880 shares.
 
Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.
 
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The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.

In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.
 
(3) 2008 Stock Incentive Plan. The purpose of our 2008 Stock Incentive Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 33,000,000 shares, subject to adjustment, and as of June 30, 2009, we had issued 1,347,514 shares.
 
Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.

The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.

In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.
 
(4) 2008 California Stock Incentive Plan. The purpose of our 2008 California Stock Incentive Plan is to advance the best interests of the company by providing those persons who are residents of California and who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 33,000,000 shares, subject to adjustment, and as of June 30, 2009, we had issued 24,425,190 shares.
 
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Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.

The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.

In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.

(5)  Pursuant to each plan set forth above, the Company’s board of directors determined that, in connection with the June 2008 1 for 50 reverse stock split, the number of shares subject to previously outstanding stock awards should be adjusted in proportion to the respective reverse split.  As a result, after such reverse split, the number of shares subject to stock awards was reduced in proportion to the reverse split.  However, in accordance with each plan, the maximum number of shares of common stock that may be issued and sold under any awards granted under each plan was not reduced as a result of the reverse split and, accordingly, the total number of shares available under the plan after each reverse split remained the same as it was before such reverse split.  Pursuant the terms of each plan, the board of directors has full authority to interpret the plans, and that interpretation is binding upon all parties.

Equity Compensation Plans Adopted Subsequent to June 30, 2009

2009 Stock Incentive Plan. On September 15, 2009, our board of directors adopted the 2009 Stock Incentive Plan.  The purpose of our 2009 Stock Incentive Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 136,715,000 shares, subject to adjustment.
 
Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.

The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.
 
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In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.

2009 California Stock Incentive Plan. On September 15, 2009, our board of directors adopted the 2009 California Stock Incentive Plan.  The purpose of our 2009 California Stock Incentive Plan is to advance the best interests of the company by providing those persons who are residents of California and who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 136,715,000 shares, subject to adjustment.
 
Our compensation committee which is appointed by our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable an proper. Any decision made, or action taken, by the compensation committee or our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive.

The compensation committee or our board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.

In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.

Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest.

RECENT SALES OF UNREGISTERED SECURITIES

 
1.
During the quarter ended June 30, 2009, we issued an aggregate of 78,500,000 shares of common stock upon conversions of 10% convertible promissory notes. The aggregate principal and interest amount of these notes that were converted was $7,850. The issuances were exempt pursuant to Section 3(a)(9) of the Securities Act as well as Section 4(2) of the Securities Act.

2.
Since June 30, 2009, we issued an aggregate of 420,299,500 shares of common stock upon conversions of 10% convertible promissory notes. The aggregate principal and interest amount of these notes that were converted was $42,029.95. The issuances were exempt pursuant to Section 3(a)(9) of the Securities Act as well as Section 4(2) of the Securities Act.
 
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ITEM 6.  SELECTED FINANCIAL DATA
 
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
 
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion and analysis should be read in conjunction with our audited 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.  Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section “Risk Factors” set forth in this report.

The forward-looking events discussed in this annual 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 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 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
 
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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.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes appearing elsewhere in this report.

Company History

We were incorporated in the State of Delaware on December 19, 2005 and amended our Certificate of Incorporation on March 1, 2006. On March 1, 2006, we changed our name from The Diet Coffee Company, Inc. to Diet Coffee, Inc. and on June 26, 2008, we changed our name to Zevotek, Inc.   Our principal executive offices are located at 134 Cedar Street, Nutley, NJ 07110. Our telephone number is (973) 667-4026.
 
We are engaged in the direct marketing and distribution of consumer products.  Our first offering was the Slim Coffee product line, which featured coffee beverages. We no longer sell or market Slim Coffee products and do not anticipate selling Slim Coffee products in the fiscal year ended June 30, 2008.  In May 2007, we entered into a license agreement to sell an energy saving compact fluorescent light bulb named the Ionic Bulb, which agreement was replaced by an Exclusive License and Sales Agreement dated February 24, 2009 under which we currently retain the exclusive worldwide rights to manufacture, market, use, sell, distribute and advertise the Ionic Bulb..  We plan to market the Ionic Bulb through TV infomercials, catalogs, magazines and major U.S. retail and specialty stores and our websites www.zevo-tek.com and  www.ionicbulb.com.
 
Comparison of Fiscal Years Ended June 30, 2009 To June 30, 2008
 
Results of Operations
 
Revenue
 
Our sales were $0 for the year ended June 30, 2009 as compared to $272,926 for the year ended June 30, 2008, consisting of Ionic Bulb sales.  We recently signed a distribution agreement with a European distributor and expect our sales to increase in fiscal 2010 as a result.

Cost of Sales

Our cost of sales were $0 for the year ended June 30, 2009 as compared to $198,577 for the year ended June 30, 2008.  The decrease in cost of sales is attributable to the fact that we had no sales of products in the year ended June 30, 2009.

Gross Profit
 
Our gross profit was $0 for the year ended June 30, 2009.  Our gross profit was $74,349 for the year ended June 30, 2008 and our gross profit percentage was 27.2% for the year then ended.
 
Operating expenses
 
Operating expenses for the fiscal year ended June 30, 2009 were $320,050, consisting primarily of personnel costs and stock compensation costs.  Operating expenses for the fiscal year ended June 30, 2008 were $2,079,222.

Operating expenses decreased to $320,050 in the year ended June 30, 2009, or approximately 84.6%, from $2,079,222 for the comparable period in 2008. This decrease in primarily attributable to the closing of our New York office and decreased payments to consultants in the year as compared the same period in 2008. 
 
21


Net Income and Loss
 
Our net loss was $821,798 for the fiscal year ended June 30, 2009 and our net loss was $2,025,809  for the fiscal year ended June 30, 2008. We recently began operating our business, including efforts to market and sell our products, and revenues generated were not sufficient to cover our operating costs. We are continuing our efforts to market and sell our products in order to generate a higher sales volume and unless and until such time as we generate substantially higher sales volume, we will continue realize net losses.

Our net loss per common share was ($0.02) (basic and diluted) for fiscal year ended June 30, 2009 as compared to our ($0.91) (basic and diluted) net loss per common share for the fiscal year ended June 30, 2008.
 
The weighted average number of outstanding shares was 45,456,522 (basic and diluted) for fiscal year ended June 30, 2009 as compared to 2,235,822 (basic and diluted) for the fiscal year ended June 30, 2008.

Liquidity and Capital Resources
 
Overview
 
As of June 30, 2009, we had a working capital deficit of $1,417,761.  As of June 30, 2008, we had a working capital deficit of $1,310,795. Our cash position at June 30, 2009 was $0 as compared to $6,755 as of June 30, 2008.

For fiscal year ended June 30, 2009, net cash used in operating activities was $233,209, consisting primarily of a net loss of $821,798, adjusted primarily for common stock issued for services of $189,223 and an amortization of beneficial conversion feature related to our convertible promissory notes of $424,985.

Cash provided by financing activities totaled $226,454 consisting of $182,454 of proceeds from third party loans and $44,000 from advances payable.

We expect capital expenditures to be nominal for the year ending June 30, 2009. These anticipated expenditures are for continued investments in property and equipment used in our business and software for our accounting and information systems.
 
Financing
 
As of June 30, 2009, we have raised an aggregate of $1,319,801 in financing through the issuance debt and equity securities

Star Funding Financing Facility—To be terminated at the end of the Initial Term on October 23, 2009

On October 23, 2007, Ionicbulb.com, Inc. (f/k/a Zevotek, Inc.), our wholly owned subsidiary, entered into a Supply Agreement with Star Funding, Inc. pursuant to which Star Funding will provide, on a discretionary basis, purchase order financing up to $2.5 million to facilitate Ionbulb.com Inc’s sale of its Ionic Bulb product. This purchase order financing may be made via direct payment to Ionbulb.com Inc’s suppliers, issue or cause the issuance of letters of credit, and/or advances to Ionicbulb.com. Ionicbulb.com will be required to pay Star Funding an amount equal to 2.5% of all “Expenses” (as defined) associated with the purchase of any Goods under the Agreement, including letter of credit fees, if any, which will equal 0.25% of the face amount of any letter of credit. As collateral security for all of Ionicbulb.com Inc.’s obligations under the Supply Agreement, Ionicbulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by either party with 60 days’ prior written notice before the end of the initial or any renewal period.
 
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On October 23, 2007, Ionicbulb.com also entered into a Factoring Agreement with Star Funding pursuant to which Star Funding has agreed to purchase certain accounts receivables of Ionicbulb.com under the Supply Agreement. Ionicbulb.com has agreed to pay Star Funding a factoring commission of 1.5% of the gross amount of each receivable under the Factoring Agreement provided, however, that Ionicbulb.com has agreed that Star Funding will receive $15,000 in fees under the Supply Agreement and the Factoring Agreement in the first 12 months and Ionicbulb.com has agreed to pay Star Funding the shortfall by which all fees and commissions are less than $15,000. As collateral security for all of Ioncibulb.com’s obligations under the Supply Agreement, Ioncibulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by Ionicbulb.com upon 60 days’ prior written notice before the end of the initial or any renewal period, or by Star Funding upon 30 days prior written notice.

To further secure Ionicbulb.com’s obligations under the Supply Agreement and the Factoring Agreement (as discussed below), we have executed (i) a guarantee and (ii) an assignment of that certain License and Supply Agreement under which is obtained its distribution rights for the Ionic Bulb. In addition, Adam Engel, President of Zevotek and Ionicbulb.com, executed an Anti Fraud and Performance Agreement under which Mr. Engel guaranteed Ionicbulb.com’s representations and warranties under the Supply and Factoring Agreements. Mr. Engel explicitly agrees that if any receivable purchased by Star Funding is not paid when due (subject to certain exceptions), such non-payment shall be presumed to be the result of a breach of Ionicbulb.com’s representations and warranties under the Supply Agreement and/or the Factoring Agreement at which time Star Funding may be able to execute on the (i) collateral pledged under the Supply and Factoring Agreements and (ii) license for distribution of the Ionic bulb product.

            In September 2009, Zevotek and Star Funding agreed to terminate these agreements, effective at the end of the initial term on October 23, 2009.  The parties agreed to exchange mutual releases in connection with the termination.

Financing Needs
 
Since our inception on December 19, 2005 to June 30, 2009, we have generated revenues of $1,205,342 and have incurred a net loss of $4,146,023. It is hoped that we will begin to achieve sustainable revenues within the next 12 months, of which there can be no guarantee.  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, 2009 financial statements included in this Annual Report 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.
 
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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

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.

Revenue Recognition

The Company recognizes revenue from product sales in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 104 requires that four basic criteria 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) collectibility 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 collectibility 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.

Valuation of Accounts Receivable

Our allowance for doubtful accounts reflects our best estimate of probable losses, determined principally on the basis of historical experience and specific allowances for known troubled accounts.

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 good 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.
 
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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 follows SOP 93-7 whereby charging the costs of advertising to expenses as incurred.

Off Balance Sheet Arrangements

None

ITEM 8.   FINANCIAL STATEMENTS.

The financial statements and related notes are included as part of this report as indexed in the appendix on page F-1 through F-16.

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

None.

ITEM 9A.   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 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.
 
Evaluation of Disclosure Controls and Procedures

As of June 30, 2009, our President, Chief Financial Officer and Director carried out an evaluation, of the effectiveness of the design and operation of our system of disclosure controls and procedures pursuant to Rule 13a-15(d) and 15d-15(d) promulgated under the Exchange Act.  Based on this evaluation, our President, Chief Financial Officer and Director concluded that our controls and procedures were not effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Management’s Report on Internal Control Over Financial Reporting

Management is responsible for the preparation of the Company’s financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in all material aspects, the Company’s financial position and results in conformity with Generally Accepted Accounting Principles (“GAAP”).

Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, Certifying Officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Under the supervision of management, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission published in 1992.

As a result of this evaluation, we concluded that our internal control over financial reporting was not effective as of June 30, 2009 due to the identification of a material weakness. A material weakness is a control deficiency or combination of control deficiencies such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
 
25

 
During the course of the preparation of our June 30, 2009 financial statements, we identified certain material weaknesses relating to our internal controls and procedures within the areas of revenue recognition and inventory accounting. Some of these internal control deficiencies may also constitute deficiencies in our disclosure controls.
 
In addition, we have a limited number of employees and is not able to have proper segregation of duties based on the cost benefit of hiring additional employees solely to address the segregation of duties issue. We determined the risks associated with the lack of segregation of duties are insignificant based on the close involvement of management in day-to-day operations (i.e. tone at the top, corporate governance, officer oversight and involvement with daily activities, and other company level controls). We limited resources available and the limited amount of transactions and activities allow for compensating controls.
 
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
 
Our President, Chief Financial Officer and Director is in the process of implementing a more effective system of controls, procedures and other changes in the areas of revenue recognition and inventory accounting to insure that information required to be disclosed in this annual report on Form 10-K has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this problem, and intends to developed procedures to address them to the extent possible given limitations in financial and manpower resources.
 
Changes in Internal Controls over Financial Reporting

Other than the identification of the material weakness described above, there have not been any other changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected or are reasonably likely to affect our internal control over financial reporting.
 
ITEM 9B.  OTHER INFORMATION.
 
None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
Directors and Officers
 
The following table shows the names and ages of our directors and executive officers and the positions they hold as of the date of this Annual Report.
 
Name
Age
Position(s)
Adam J. Engel
37
President, Chief Executive Officer, Chief Financial
Officer, Treasurer, Secretary and Director
 
Mr. Adam J. Engel, has been our President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and our sole director since October 12, 2007. From April 2002 to July 31, 2007, Mr. Engel was employed by Washington Mutual Bank, most recently in the position of Account Executive.  Mr. Engel received a B.S. Degree in Political Science from SUNY, Oneonta.
 
During the Fiscal year ended June 30, 2007, David Stocknoff and David Attarian served as our sole executive officers and directors.  Messrs.  Stocknoff and Attarian resigned their positions as officers and directors of the Company effective October 12, 2007.
 
All of our directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Officers are appointed annually by our board of directors and serve at the discretion of the board.
 
26

 

Board of Directors, Board Meetings and Committees

Our board of directors held no formal meetings during the most recently completed fiscal year. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of New York and our bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.

Family Relationships
 
There are no family relationships between or among any of the current directors, executive officers or persons nominated or charged by the Company to become directors or executive officers.
 
Involvement in Certain Legal Proceedings

None of our directors or executive officers has, during the past five years:
 
 
·
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
 
 
·
had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
 
 
·
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or
 
 
·
been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
 
Director Independence
 
Our board of directors has determined that currently none of it members  qualify as “independent” as the term is used in Item 407 of Regulation S-B as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. - Marketplace Rule 4200.

Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the copies of such reports furnished to us for the period ended June 30, 2009, no Section 16(a) reports required to be filed by our executive officers, directors and greater-than-10% stockholders were filed on a timely basis.

Code of Ethics

We have adopted a code of ethics that applies to the principal executive officer and principal financial and accounting officer. We will provide to any person without charge, upon request, a copy of our code of ethics. Requests may be directed to our principal executive offices at 134 Cedar Street, Nutley, NJ 07110.
 
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ITEM 11. EXECUTIVE COMPENSATON

The following table sets forth the compensation paid to the Chief Executive Officer and our other executive officers for services rendered during the fiscal years ended June 30, 2009, 2008 and 2007.

Summary Compensation Table
 
                 
Stock
   
Option
   
All Other
       
Name and Position
Year
 
Salary
   
Bonus
   
Awards ($)
   
Awards ($)
   
Compensation
   
Total ($)
 
Adam Engel
2009
    120.000 (1)           11,123.97 (2)                 131,123.97  
Chairman, President,
2008
  $ 120,000 (3)               $ 36,000 (4)   $       $ 156,000  
Chief Executive Officer,
2007
  $ --     $ ---                 $ -     $ -  
CFO and Secretary
(since October 12, 2007)
                                                 
                                                   
David Stocknoff
2009
                                               
President, Chief Executive Officer
2008
  $ --     $ ---                 $ -     $ -  
CFO  and Director
(until October 12, 2007)
2007
  $ 105,000 (5)   $ ---                 $ -     $ -  
                                                   
David Attarian
2009
                                               
Secretary and Director
2008
  $ --     $ ---                 $ -     $ -  
(until October 12, 2007)
2007
  $ 113,362 (6)   $ ---                 $ -     $ -  
                                                   

(1) $99,517 of this amount was accrued as salary and not paid.
(2) On April 7, 2009, the board of directors granted Mr. Engel 674,180 shares of common stock as a stock award for accrued salary.
(3)  All cash compensation due Mr. Engel for the year ended June 30, 2008 was accrued and not paid.
(4) On December 13, 2007, the Company agreed to grant Mr. Engel an option award of 3,600,000 shares at an exercise price of $0.01 per share, which option vests at the rate of 100,000 shares per month. The amounts set forth in the table have been adjusted to reflect the 1 for 50 reverse stock split effected June 26, 2008.
(5) $48,190 of this amount was accrued as salary, but not paid.  Pursuant to the terms of Mr. Stocknoff’s separation agreement dated October 5, 2007, all obligations under his June 14, 2006 employment agreement were waived, including accrued salary.
(6)  $49,101 of this amount was accrued as salary, but not paid.  Pursuant to the terms of Mr. Attarian’s separation agreement dated October 5, 2007, all obligations under his June 14, 2006 employment agreement were waived, including accrued salary.

Grants of Plan-Based Awards

The following table sets forth information concerning the number of shares of common stock underlying restricted stock awards and stock options granted to the Named Executive Officers in Fiscal 2009.  
 
Name
 
Grant Date
 
Approval
Date
 
Estimated
Future
Payouts
Under Non-
Equity
Incentive
Plan Awards
 
Estimated
Future
Payouts
Under
Equity
Incentive
Plan Awards
 
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)(1)
 
All Other 
Option
Awards:
Number of
Securities
Underlying
Options
 (#)
 
Exercise or
Base Price
of Option
Awards
($/Sh)(2)
 
 
Grant Date Fair Value
of Stock and
Option
Awards(3)
Adam Engel
   
4/7/2009
 
4/7/2009
   
 
   
674,180
 
--
 
$
--
 
11,123.97
 

(1)
On April 7, 2009, the Company granted Mr. Engel a stock award of 674,180 shares of common stock.
(2)
Represents the grant date fair value of each equity award calculated in accordance with FAS 123R.
 
28

 
Outstanding Equity Awards at Fiscal Year-End
 
The following table sets forth all outstanding equity awards made to each of the Named Executive Officers that are outstanding at the end of Fiscal 2009.
 
   
Option Awards (1)
 
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   
Option Exercise
Price ($)
 
Option
Expiration Date
 
Number of
Shares
or Units
of Stock That
Have Not
Vested (#)
   
Market Value
of Shares or
Units of Stock
That Have Not
Vested
 
Adam Engel
    36,000       36,000     $ 0.01  
12/13/2017
           
 

(1)
On December 13, 2007, the Company agreed to grant Mr. Engel an option award of 3,600,000 shares of our common stock with exercise price $0.01, which options would vest at a rate of 100,000 shares per month. The amounts set forth in the table have been adjusted to reflect the 1 for 50 reverse stock split effected June 26, 2008.

Option Exercises and Stock Vested

Mr. Engel’s option award vested as set forth in the above table.  No stock options were exercised by any Named Executive Officers in Fiscal 2009

Employment Agreements

On December 13, 2007, we entered into employment agreements with Adam Engel. A description of the material terms of the agreement is set forth below and a copy of each agreement is attached as an exhibit hereto.

Adam Engel. We entered into an employment agreement with Adam Engel pursuant to which we employ Mr. Engel as our President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary. The agreement is for an initial term of three years and provides for an annual base salary during the term of the agreement of $120,000, payable either in cash of stock. Mr. Engel has also been granted options to purchase 72,000 shares of our common stock with an exercise price of $0.01 per share, which options will vest at a rate of 2,000 shares per month.

The agreement also contains the following material provisions: (i) reimbursement for all reasonable travel and other out-of-pocket expenses incurred in connection with his employment; (ii) four (4) weeks paid vacation leave; (iii) medical, dental and life insurance benefits; (iv) a severance payment of twelve (12) month’s salary at the then-applicable base salary rate in the event that we terminate Mr. Engel’s employment without cause or if Mr. Bennett’s employment is terminated due to death or disability; and (v) 24 month non-compete/non solicitation terms.

This description of the above referenced agreement does not purport to be complete and is qualified in its entirety by reference to such agreement attached hereto as an exhibit, which is incorporated herein by reference.
 
29


Potential Payments upon Termination
 
Mr. Engel gas entered into an employment agreement. Under the terms of his employment agreements, Mr. Engel is entitled to a severance payment of twelve (12) month’s salary at the then-applicable base salary rate in the event that we terminate their employment without cause or in the event that their employment is terminated due to death or disability.
 
The following table sets forth quantitative information with respect to potential payments to be made to Mr. Engel upon termination in various circumstances. The potential payments are based on the terms of Mr. Engel’s Employment Agreement discussed above. For a more detailed description of the Employment Agreement, see the “Employment Agreements” section above. 
 
Name
 
Potential Payment upon Termination (1)
 
Adam Engel
  $ 120,000 (2)

(1)
Employee entitled to twelve months severance at the then applicable base salary rate.

(2)
Based on Mr. Engel’s current annual base salary of $120,000.

Compensation of Directors

None of our directors received any compensation for their services in the period ended June 30, 2008. All directors are entitled to reimbursement for reasonable out-of-pocket expenses in attending board of directors meetings and for promoting our business.

Audit Committee

We do not have an audit committee at this time.
 
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of October 8, 2009 by the following persons:

 
·
each person who is known to be the beneficial owner of more than five percent (5%) of our issued and outstanding shares of common stock;
 
·
each of our directors and executive officers; and
 
·
all of our directors and executive officers as a group.
 
30

 
The following table assumes that there are 703,885,307 common shares issued and outstanding on October 8, 2009.  Except as set forth in the footnotes to the table, the persons names in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable.  A person is considered the beneficial owner of any securities as of a given date that can be acquired within 60 days of such date through the exercise of any option, warrant or right.  Shares of common stock subject to options, warrants or rights which are currently exercisable or exercisable within 60 days are considered outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not considered outstanding for computing the ownership percentage of any other person.

Amount and Nature of Beneficial Ownership
 
 
 
 
Name And
Address (1)
 
Number Of Common
Shares Beneficially Owned
   
 
 
 
Percentage Owned (2)
   
Number Of Series A Preferred
Shares Beneficially Owned
   
 
 
 
Percentage Owned (2)
   
Number Of Series B Preferred
Shares Beneficially Owned
   
 
 
 
Percentage Owned (2)
   
 
Percentage of Total Voting Power (3)
 
                                           
Adam Engel
    42,000 (4)     *       --       *       --       *       * %
                                                         
Sale-A-Vision, Inc.
14 Bond Street,
Suite 296
Great Neck, NY
    38,198       *       50,000       100 %     --       *       8.1 %
                                                         
Anthony Intrieri
60 Schofield Street
Bronx, NY 10464
    --       *       --       *       1,000,000       100 %     80.6 %
                                                         
Jason Ryu
547A Orchard Ave Palisades Park, NJ 07650
 
    50,000,000       7.1 %     --       *       --       *       *  
All directors and
officers as a group
(1 person)
    42,000       *       --       *       --       *       *  
 

*Less than 1%
 
(1)
Unless otherwise noted, the address is 134 Cedar Street, Nutley, NJ 07110.
 
(2)
Based on 703,885,307 common shares, 50,000 Series A Preferred Shares, and 1,000,000 Series B Preferred Shares issued and outstanding on October 8, 2009.
 
(3)
Holders of our common stock are entitled to one vote per share, for a total of 703,885,307 votes.  Holders of our Series A preferred stock are entitled to 10,000 votes per share, for a total of 500,000,000 votes.  Holders of our Series B preferred stock are entitled to 5,000 votes per share, for a total of 5,000,000,000 votes, or approximately 80.6% of the outstanding votes on October 7, 2009.
 
(4)
On December 13, 2007, the Company agreed to grant Mr. Engel an option award of 3,600,000 shares of our common stock with exercise price $0.01, which options would vest at a rate of 100,000 shares per month.  The amounts set forth in the table have been adjusted to reflect the 1 for 50 reverse stock split effected June 26, 2008.

There are no arrangements, known to us, including any pledge by any person of  our  securities, the operation of which may at a subsequent date result in a change  in  control  of  Zevotek, Inc.  There  are  no  arrangements  or  understandings  among members of both the former  and the new control groups and their associates with respect to election of  directors  or  other  matters.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

In December 2007, our President Mr. Engel loaned us $10,000 pursuant to a 0% promissory note.  This note has since been repaid in full.

On October 5, 2007, each of David Stocknoff and David Attarian resigned from all of their respective employment positions with us, which resignations were to be effective dated October 12, 2007.  In connection with their resignations, we entered into Separation and Consulting Agreements with each of them.

Separation Agreements

In connection, with Messrs. Stocknoff and Attarian’s resignation from their officer and director positions with us, we entered into a letter agreement dated October 5, 2007 with each of Messrs Stocknoff and Attarian setting forth the terms of our mutual separation.  Under the terms of these Agreements (which contained the same terms), Each of Mr. Stocknoff and Mr. Attarian and the Company agreed to waive any and all continuing rights and obligations under Mr. Stocknoff’s and Mr. Attarian’s respective employment agreements dated June 14, 2006.  In consideration thereof and to enter into the Letter Agreements, we agreed to pay Messrs. Stocknoff and Attarian each $90,000 as follows: $20,000 on the Effective Date (as defined) and thereafter in equal semi-monthly installments of $2,500 until January 2008 at which time the installment payments shall increase to $5,000.  Beginning January 2008, we may pay all or part of the installments in share of our common stock.  In addition, we agreed to issue 5,000,000 shares of our common stock on the Effective Date to each of Messrs. Stocknoff and Attarian.  Messrs. Stocknoff and Attarian also agreed to a 1 year non-compete/non solicitation provisions as well as confidentiality and non-disparagement clauses.  Each party to this agreement granted mutual releases.
 
31


Consulting Agreements

Effective October 12, 2007, we entered into Consulting Agreements with each of Messrs. Stocknoff and Attarian pursuant to which they will provide sales and product marketing services.  The term of the agreement is for 1 month and shall automatically renew on a month-to-month basis unless earlier terminated pursuant to the terms thereof.  As compensation for their services, we agreed to pay them $8,000 per month.  Beginning in January 2008,  the compensation will increase to $12,000 per month at which time we may pay all or part of such compensation in shares of our common stock (on the terms provided therein).
 
In connection with the founding and formation of the Company, our founders contributed to us $107,500 in cash plus paid advertising expenses in the amount of $10,250, for an aggregate amount of $117,750. In consideration for their contribution to us, we issued to the founders a total of 67,750,000 shares of our common stock and 50,000 shares of Series A Preferred Stock. The table below sets forth the name of the founders and the amount of capital stock they received for their investment.

Series A Preferred Stock
     
Name
 
Number of Shares
 
Sale-A-Vision, Inc. (3)
    50,000  
         
Common Stock
       
Name
 
Number of Shares
 
David Stocknoff
    2,500,000  
David Attarian
    2,500,000  
EPTA, LLC (1)
    3,500,000  
Juni, LLC (2)
    3,500,000  
Avraham Ovadia
    3,500,000  
Paul Greenfield
    1,500,000  
Kurt Streams
    1,500,000  
Moti Ben Melech
    500,000  
Sale-A-Vision, Inc. (3)
    43,500,000  
Todd Fritzhand
    10,000  
Shazad Mossanen
    20,000  
Nasser Mohkhatzadeh
    1,000,000  
Tamir Elimeleb
    10,000  
Sonia Makiling
    10,000  
Pablo Munoz de Cote
    100,000  
Jose Pintado
    100,000  
Neil Mizrahi
    2,000,000  
Emil Mizrahi
    2,000,000  

(2) Moshe Rahimi has voting and dispositive rights over the shares held by Juni, LLC.
(3) Motti Ben Melech has voting and dispositive rights over the shares held by Sale-A-Vision Inc.
 
32


Other than the above transactions, we have not entered into any material transactions with any director, executive officer, and nominee for director, beneficial owner of five percent or more of our common stock, or family members of such persons. We are not a subsidiary of any company.
 
Conflicts of Interest
 
Certain potential conflicts of interest are inherent in the relationships between our affiliates and us. From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with ours with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of our Company and other businesses with which our affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders will have any right to require participation in such other activities.
 
Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of our Company and these related persons or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.
 
With respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require that (1) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (2) the transaction be approved by a majority of our disinterested outside directors and (3) the transaction be fair and reasonable to our Company at the time it is authorized or approved by our directors.

Director Independence
 
For our description of director independence, see “Director Independence” under the section entitled “Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act” above.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

 
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

RBSM LLP, billed us $25,000 in fees for our annual audit for the year ended June 30, 2009, and $15,000 in fees for the review of our quarterly financial statements for that year.

RBSM LLP, billed us $25,000 in fees for our annual audit for the year ended June 30, 2008, and $8,500 in fees for the review of our quarterly financial statements for that year.

AUDIT-RELATED FEES

We did not pay any fees RBSM LLP for assurance and related services that are reasonably related to the performance of the audit or  review of our financial statements for fiscal years 2009 and 2008.

TAX FEES

We did not pay any fees to RBSM LLP for tax compliance, tax advice, tax planning or other  work during our fiscal years 2009 and 2008.

ALL OTHER FEES

           There  were  no  other  fees  billed by RBSM LLP for professional services rendered, other than as stated  under  the  captions  Audit  Fees,  Audit-Related  Fees,  and  Tax Fees.
 
33


With respect to the audit of our financial statements as of December 31, 2009 and 2008 and for the years then ended, none of the hours expended on RBSM LLP engagement to audit those financial statements were attributed to work by persons other than RBSM LLP’s full-time, permanent employees.

ITEM 15.  EXHIBITS.

Registrant’s Certificate of Incorporation.(1)
3.2
Certificate of Amendment to Registrant’s Certificate of Incorporation.(1)
3.3
Certificate of Designation, Powers, Preferences and Rights of Series A Preferred Stock.(1)
3.4
Registrant’s By-Laws.(1)
3.5
Certificate of Designations, Powers, Preferences and Rights of Series B Preferred Stock (11)
4.1
Form of Warrant.(1)
4.2
2007 Stock Incentive Plan (2)
4.3
2007 Stock Incentive Plan No. 2 (7)
4.4
2008 Stock Incentive Plan (8)
4.5
2008 California Stock Incentive Plan (9)
4.6
Form of Convertible Note (10)
4.7
2009 Stock Incentive Plan (14)
4.8
2009 California Stock Incentive Plan (15)
10.1
Employment Agreement by and between David Stocknoff and Diet Coffee, Inc., dated as of July 16, 2006.(1)
10.2
Employment Agreement by and between David Attarian and Diet Coffee, Inc., dated as of July 16, 2006.(1)
10.3
Form of Subscription Agreement.(1)
10.4
License and Supply Agreement dated as of May 18, 2007 by and among Diet Coffee, Inc. and Jason Ryu. (3)
10.5
Letter Agreement dated October 5, 2007 between Diet Coffee, Inc. and David Stocknoff (4)
10.6
Letter Agreement dated October 5, 2007 between Diet Coffee, Inc. and David Attarian (4)
10.7
Consulting Agreement dated October 12, 2007 between Diet Coffee, Inc. and David Stocknoff (4)
10.8
Consulting Agreement dated October 12, 2007 between Diet Coffee, Inc. and David Attarian (4)
10.9
Employment Agreement with Adam Engel (5)
10.10
Supply Agreement (6)
10.11
Factoring Agreement (6)
10.12
Assignment of License and Supply Agreement (6)
10.13
Guarantee (6)
10.14
Anti-Fraud Agreement (6)
10.15
Exclusive License and Sales Agreement (12)
10.16
Distribution Agreement (13)
23.1
Consent of Independent Public Accountants, RBSM, LLP (15)
31.1
Certification of Adam J. Engel, President and Chief Financial Officer of Zevotek, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002. (16)
32.1
Certification of Adam J. Engel, President and Chief Financial Officer of Zevotek, Inc., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002 (16)
 

(1)  
Filed as an exhibit to our Registration Statement on Form SB-2 (File No. 333-137210), as amended, originally filed with the SEC on September 8, 2006 and incorporated herein by reference.
(2)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-145985) filed with the SEC on September 11, 2007 and incorporated herein by reference.
(3)  
Filed as an exhibit to our Current Report on Form 8-K dated May 18, 2007and incorporated herein by reference.
(4)  
Filed as an exhibit to our Annual Report on Form 10KSB for the year ended June 30, 2007 and incorporated herein by reference.
(5)  
Filed as an exhibit to our Current Report on Form 8-K (filed with the SEC on December 14, 2007 and incorporated herein by reference.
(6)  
Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on December 21, 2007 and incorporated herein by reference.
(7)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-148050) filed with the SEC on December 13, 2007 and incorporated herein by reference.
 
34

 
(8)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-149334) filed with the SEC on February 21, 2008 and incorporated herein by reference
(9)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-149335) filed with the SEC on February 21, 2008 and incorporated herein by reference
(10)  
Filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2008 and incorporated herein by reference.
(11)  
Filed as an exhibit to our Annual Report on Form 10-KSB, as amended, for the year ended June 30, 2008 and incorporated herein by reference.
(12)  
 Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 27, 2009 and incorporated herein by reference
(13)  
Filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended March 31, 2009 and incorporated herein by reference
(14)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-162016) filed with the SEC on September 15, 2009 and incorporated herein by reference.
(15)  
Filed as an exhibit to our Registration Statement on Form S-8 (File No. 333-162014) filed with the SEC on September 15, 2009 and incorporated herein by reference.
(16)  
Filed herewith

35


SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report to be signed on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.
 
  ZEVOTEK, INC.  
     
     
       
Date: October 13, 2009
By:
/s/ Adam J. Engel         
    Adam J. Engel  
    President, Chief Financial Officer and Director  
       
 
Pursuant  to  the  requirements  of the Securities Exchange Act of 1934, as amended,  this  Amendment No. 1 to Annual Report has been signed by the following persons on behalf of  the  registrant  and  in  the  capacities  and  on  the  dates  indicated.
 
Signature
 
Title
 
Date
         
/s/ Adam J. Engel       
President Chief Executive Officer Chief         
 
October 13, 2009
Adam J. Engel         Financial Officer, Secretary, Treasurer and director    
 
36

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Zevotek, Inc.
Nutley, NJ 07110
 
We have audited the accompanying consolidated balance sheets of Zevotek, Inc. (the "Company") as of June 30, 2009 and 2008 and the related consolidated statements of operations, deficiency in stockholders' equity, and cash flows for each of the two years in the period ended June 30, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based upon our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Zevotek, Inc. as of June 30, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in the Note B to the accompanying consolidated financial statements, the Company has suffered recurring losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
/s/ RBSM LLP
 
 
Certified Public Accountants
 

New York, New York
October 13, 2009
 

 
PART 1:                 FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ZEVOTEK, INC.
 
CONSOLIDATED BALANCE SHEETS
 
             
   
June 30,
   
June 30,
 
   
2009
   
2008
 
ASSETS
           
Current assets:
           
Cash
  $ -     $ 6,755  
Prepayment
    17,000       -  
Other receivable
    -       30,345  
Total current assets
    17,000       37,100  
                 
Other assets:
               
Licensing agreement
    40,000       -  
Total assets
  $ 57,000     $ 37,100  
                 
                 
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
               
                 
Current liabilities:
               
Accounts payable and accrued expenses
  $ 1,232,271     $ 1,277,385  
Advances payable
    44,000       -  
Convertible notes payable and demand notes (net of debt discount of $166,595 and $300,964 as of June 30, 2009 and 2008, respectively)
    134,139       46,159  
Customer deposits
    24,351       24,351  
Total current liabilities
    1,434,761       1,347,895  
                 
Long term portion of convertible notes payable (net of debt discount of $167,232 and $0 as of June 30, 2009 and 2008, respectively)
    39,664       -  
                 
Deficiency in stockholders' equity:
               
Series A Preferred stock, $0.00001 par value; 10,000,000 shares authorized; 50,000 shares issued and outstanding as of June 30, 2009 and 2008
    1       1  
Series B Preferred stock, $0.00001 par value; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding as of June 30, 2009 and 2008
    10       10  
Common stock, $0.00001 par value, 1,000,000,000 shares authorized; 176,092,373 and 3,784,920 shares issued and outstanding as of June 30, 2009 and 2008, respectively
    1,761       38  
Common stock to be issued
    30       -  
Treasury stock, 40,000 and 0 shares as of June 30, 2009 and 2008, respectively
    -       -  
Additional paid in capital
    2,726,796       2,013,381  
Accumulated deficit
    (4,146,023 )     (3,324,225 )
Total deficiency in stockholders' equity
    (1,417,425 )     (1,310,795 )
                 
Total liabilities and deficiency in stockholders' equity
  $ 57,000     $ 37,100  
   
The accompanying notes are an integral part of the consolidated financial statements.
 

F-1

 
ZEVOTEK, INC
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
   
Years Ended June 30,
 
   
2009
   
2008
 
REVENUES:
           
Sales
  $ -     $ 272,926  
Cost of sales
    -       198,577  
Gross profit
    -       74,349  
                 
OPERATING EXPENSES:
               
Selling, general and administrative
    320,050       2,079,222  
                 
Loss from operations
    (320,050 )     (2,004,873 )
                 
OTHER INCOME (EXPENSE):
               
Interest, net
    (76,763 )     (20,936 )
Amortization
    (424,985 )     -  
                 
Net loss before provision for income taxes
    (821,798 )     (2,025,809 )
                 
Income taxes
    -       -  
                 
NET LOSS
  $ (821,798 )   $ (2,025,809 )
                 
Net loss per common share, basic and fully diluted
  $ (0.02 )   $ (0.91 )
                 
Weighted average number of common shares outstanding, basic and fully diluted
    45,456,522       2,235,822  
                 
The accompanying notes are an integral part of these consolidated financial statements.
 

F-2

 
ZEVOTEK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Two Years Ended June 30, 2009
 
 
   
Preferred stock 
               
 
               
 
             
   
Series A 
   
Series B 
   
Common stock 
   
Common
Stock To
   
Treasury stock 
   
Additional 
Paid in
   
Accumulated 
   
 
 
   
Shares 
   
Amount 
   
Shares 
   
Amount 
   
Shares 
   
Amount 
   
Be Issued 
   
Shares 
   
Amount 
   
Capital 
   
Deficit
   
Total
 
BALANCE, June 30, 2007
    50,000     $ 1       -     $ -       1,430,260     $ 14     $ -       -     $ -     $ 814,834     $ (1,298,416 )   $ (483,567 )
Common stock issued for services rendered
    -       -       -       -       1,994,780       20       -       -       -       845,540       -       845,560  
Fair value of Beneficial conversion feature
    -       -       -       -       -       -       -       -       -       314,049               314,049  
Conversion of debt for Series B Preferred stock
    -       -       1,000,000       10       -       -       -       -       -       21,018               21,028  
Conversion of debt for common stock
    -       -       -       -       359,880       4       -       -       -       17,940               17,944  
Net loss
    -       -       -       -       -       -       -       -       -       -       (2,025,809 )     (2,025,809 )
Balance, June 30, 2008
    50,000       1       1,000,000       10       3,784,920       38       -       -       -       2,013,381       (3,324,225 )     (1,310,795 )
Common stock issued for services rendered
    -       -       -       -       23,057,514       231       -       -       -       188,992       -       189,223  
Common stock issued for previously incurred debt
                                    1,553,939       15               -               6,135       -       6,150  
Common stock issued for licensing agreement
    -       -       -       -       50,000,000       500       -       -       -       39,500       -       40,000  
Conversion of debt and accrued interest for common stock
    -       -       -       -       97,696,000       977       30       -       -       20,939       -       21,946  
Common stock issued and held in treasury
    -       -       -       -       -       -       -       40,000       -       -       -       -  
Fair value of Beneficial conversion feature
    -       -       -       -       -       -       -       -       -       457,849       -       457,849  
Net loss
    -       -       -       -       -       -       -       -       -       -       (821,798 )     (821,798 )
BALANCE, June 30, 2009
    50,000     $ 1       1,000,000     $ 10       176,092,373     $ 1,761     $ 30       40,000     $ -     $ 2,726,796     $ (4,146,023 )   $ (1,417,425 )
 
The accompanying notes are an integral part of the consolidated financial statements.

F-3

 
ZEVOTEK, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Years Ended June 30, 2008 and 2009
 
       
   
2009
   
2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (821,798 )   $ (2,025,809 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Common stock issued for services rendered
    189,223       845,560  
Amortization of beneficial conversion feature
    424,985       13,085  
Bad debt allowance
    30,345       (27,761 )
Note issued to related party for services
    -       50,000  
(Increase) decrease in:
               
Prepayments
    (17,000 )     -  
Accounts receivable
    -       822  
Other assets
    -       10,789  
(Decrease) increase in:
               
Accounts payable and accrued expenses
    (38,964 )     807,024  
Customer deposits
    -       10,456  
Net cash used in operating activities:
    (233,209 )     (315,834 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from advances payable
    44,000       -  
Proceeds from loans
    182,454       322,500  
Net cash provided by financing activities
    226,454       322,500  
                 
Net (decrease) increase in cash and cash equivalents
    (6,755 )     6,666  
Cash and cash equivalents, beginning of year
    6,755       89  
                 
Cash and cash equivalents, end of year
  $ -     $ 6,755  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
               
Interest paid
  $ -     $ 7,851  
Taxes paid
  $ -     $ -  
Common stock issued for services rendered
  $ 189,223     $ 845,560  
Common stock issued in exchange for debt
  $ 28,096     $ 17,944  
Common stock issued for licensing agreement
  $ 40,000     $ -  
Debt converted for 1,000,000 Series B preferred shares
  $ -     $ 21,026  
                 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
F-4

 
ZEVOTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009

 
NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying 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 March 1, 2006, the Company changed its name Diet Coffee Inc, and on June 25, 2008 to the current existing name.
 
The Company’s wholly-owned subsidiary is Ionic Bulb.com, Inc (Ionic Bulb) which was formerly named Zevotek, Inc. Through its subsidiary, it markets and sells a range of home care and household products. In May 2007, the Company entered into a license agreement to sell an energy saving compact fluorescent light bulb named the Ionic Bulb. The Company plans to market the Ionic Bulb through TV infomercials, catalogs, magazines and major U.S. retail and specialty stores and our websites www.ionic-bulb.com and www.zevo-tek.com.
 
General
 
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
 
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated financial statements include the accounts of the Registrant and its wholly-owned subsidiary, Ionic Bulb.com, Inc. The Registrant formed its Ionic Bulb.com, Inc. subsidiary on August 21, 2007 and started its operations during the fiscal year ending June 30, 2008. All significant inter-company transactions and balances have been eliminated in consolidation.
 
The company has adopted the fiscal year end of June 30.
 
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.
 
Revenue Recognition
 
The Company recognizes revenue from product sales in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB 104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 104 requires that four basic criteria 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) collectibility 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 collectibility 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.
 
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. We account for these incentives in accordance with Emerging Issues Task Force Issue No. 0 1-9, Accounting for Consideration Given by a Vendor to a Customer, ("EITF 0 1-9"). 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 years ended June 30, 2009 and 2008.
 
F-5

 
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 financial statements in accordance with the requirements of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." Assets and liabilities are translated 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 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 good 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 June 30, 2009 and 2008 Finished Goods inventory was $0.
 
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 June 30, 2009 and 2008 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 Statement of Financial Accounting Standards No. 144 (SFAS 144). 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 discounted 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. SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less disposal costs.
 
Advertising
 
The Company follows SOP 93-7 whereby charging the costs of advertising to expenses as incurred. The Company charged $0 and $22,238 to operations for the years ended June 30, 2009 and 2008, respectively.
 
Comprehensive Income
 
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," establishes standards for reporting and displaying of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as financial statements. The Company does not have any items of comprehensive income in the period presented.
 
F-6


Income Taxes
 
The Company has adopted Financial Accounting Standards No. 109 ("SFAS 109") 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.
 
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 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. FIN 48 also provides guidance on derecognition, classification, treatment of interest and penalties, and disclosure of such positions. Effective August 1, 2007, the Company adopted the provisions of FIN 48, as required. As a result of implementing FIN 48, there has been no adjustment to the Company’s financial statements and the adoption of FIN 48 did not have a material effect on the Company’s consolidated financial statements for the year ended June 30, 2009.
 
Research and Development
 
The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs." Under SFAS 2, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development 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 years ended June 30, 2009 and 2008, respectively.
 
Segment Information
 
The Company has adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131") in the years ended December 31, 2001 and subsequent years. SFAS 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance.

Stock Based Compensation
 
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123.” This statement amended SFAS 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary charge to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amended the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Effective for the period ended June 30, 2006 the Company has adopted SFAS 123 (R) which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and eliminates the intrinsic value method that was provided in SFAS 123 for accounting of stock- based compensation to employees. The Company made no employee stock-based compensation grants before June 30, 2007 and during the years ended June 30, 2009 and 2008; therefore has no unrecognized stock compensation related liabilities or expense unvested or vested.

Loss per Share
 
The Company follows Statement of Financial Accounting Standards No. 128 (“SFAS No. 128”) “Earnings per Share”. Basic and diluted earnings (loss) per share amounts are computed based on net income (loss) divided by the weighted average number of common shares outstanding. Potentially dilutive shares of common stock realizable from the conversion of our convertible debentures of 4,876,529,035 and 347,494,370, respectively at June 30, 2009 and 2008, are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.  
 
F-7


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.
 
Liquidity

As shown in the accompanying financial statements, the Company’s current liabilities exceed its current assets by $1,417,761 as of June 30, 2009. The Company has incurred a net loss of $821,798 and used $233,209 in cash flows for operations during the year ended June 30, 2009.

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

Recent accounting pronouncements

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141(R)"), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141R is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited and the Company is currently evaluating the effect, if any that the adoption will have on its consolidated financial position results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets. SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited and the Company is currently evaluating the effect, if any that the adoption will have on its consolidated financial position results of operations or cash flows.

In December 2007, the FASB ratified the consensus in Emerging Issues Task Force (EITF) Issue No. 07-1, “Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1 defines collaborative arrangements and requires collaborators to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) the other collaborators based on other applicable authoritative accounting literature, and in the absence of other applicable authoritative literature, on a reasonable, rational and consistent accounting policy is to be elected. EITF 07-1 also provides for disclosures regarding the nature and purpose of the arrangement, the entity’s rights and obligations, the accounting policy for the arrangement and the income statement classification and amounts arising from the agreement.

EITF 07-1 will be effective for fiscal years beginning after December 15, 2008, which will be the Company’s fiscal year 2009, and will be applied as a change in accounting principle retrospectively for all collaborative arrangements existing as of the effective date. The Company is currently evaluating the impact, if any on the adoption of EITF 07-1 on its consolidated financial position, results of operations or cash flows.

In March 2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133” (“SFAS No. 161”).  SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows.  Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.  It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged.  The Company is currently evaluating the impact of SFAS No. 161, if any, will have on its consolidated financial position, results of operations or cash flows.

In April 2008, the FASB issued FSP No. FAS 142-3,“Determination of the Useful Life of Intangible Assets”. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”.  The Company is required to adopt FSP 142-3 on September 1, 2009, earlier adoption is prohibited.  The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption.  The Company is currently evaluating the impact of FSP 142-3 on its consolidated financial position, results of operations or cash flows.
 
F-8


In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162").  SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy).  SFAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."  The Company does not expect the adoption of SFAS No. 162 to have a material effect on its consolidated financial position, results of operations or cash flows.

In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) " ("FSP APB 14-1").  FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate.  FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.  The Company is currently evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on its consolidated financial position, results of operations or cash flows.
 
In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under the FSP, unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. The Company does not expect the adoption of FSP EITF No. 03-6-1 to have a material effect on its consolidated financial position, results of operations or cash flows.

In June 2008, the FASB ratified the consensus on Emerging Issues Task Force (EITF) Issue 07-5, “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock.” This issue addresses whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which is the first part of the scope exception in paragraph 11(a) of SFAS No. 133, for purposes of determining whether the instrument should be classified as an equity instrument or accounted for as a derivative instrument. The provisions of EITF Issue No. 07-5 are effective for financial statements issued for fiscal years beginning after December 15, 2008 and will be applied retrospectively through a cumulative effect adjustment to retained earnings for outstanding instruments as of that date. The Company is currently evaluating the impact, if any, adopting EITF Issue No. 07-5 will have on its consolidated financial condition or results of operations.

In June 2008, the FASB ratified the consensus on EITF Issue No. 08-4, “Transition Guidance for Conforming Changes to Issue No. 98-5.” The objective of EITF Issue No.08-4 is to provide transition guidance for conforming changes made to EITF Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” that result from EITF Issue No. 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments,” and SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The guidance provided by EITF Issue No. 08-4 is effective for financial statements issued for fiscal years ending after December 15, 2008. The Company’s adoption of EITF Issue No. 08-4 is not anticipated to have a material effect on its consolidated financial condition or results of operations.

In January 2009, the FASB issued Financial Statement of Position (“FSP”) Issue No. EITF No. 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF No. 99-20-1”). FSP EITF No. 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transferor in Securitized Financial Assets” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The Company adopted FSP EITF No. 99-20-1 and it did not have a material impact on the consolidated financial statements.
 
FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157 (“SFAS 157”), Fair Value Measurements. FSP FAS 157-4 reaffirms what SFAS 157 states is the objective of fair value measurement, to reflect how much an asset would be sold for in an orderly transaction at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The Company does not expect this pronouncement to have a material impact on its consolidated results of operations, financial position, or cash flows
 
F-9

 
FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures. This relates to fair value disclosures for any financial instruments that are not currently reflected on the consolidated balance sheet at fair value. FSP FAS 107-1 and APB 28-1 now require that fair value disclosures be made on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The Company does not expect this pronouncement to have a material impact on its consolidated results of operations, financial position, or cash flows.
 
FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. This FSP is intended to bring greater consistency to the timing of impairment recognition and to provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. This FSP also requires increased and timelier disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The Company does not expect this pronouncement to have a material impact on its consolidated results of operations, financial position, or cash flows.
 
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company is required to adopt SFAS 165 prospectively to both interim and annual financial periods ending after June 15, 2009. Adoption of SFAS 165 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
 
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification, (“Codification”) as the single source of authoritative GAAP to be applied by nongovernmental entities, except for the rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. Adoption of SFAS 168 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.
 
NOTE B - GOING CONCERN MATTERS
 
The accompanying 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 consolidated financial statements, for the years ended June 30, 2009 and 2008, the Company had incurred losses of $821,798 and $2,025,809, respectively. At June 30, 2009, the Company had a working capital deficit of $1,417,761 and accumulated losses of $4,146,023. 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 is actively pursuing additional equity financing through discussions with private investors. There can be no assurance the Company will be successful in its effort to secure additional equity financing. If operations and cash flows improve through these efforts, management believes that the Company can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.
 
The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued developing, marketing and selling of its services and additional equity investment in the Company. The accompanying consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE C- OTHER RECEIVABLES AND FINANCING AGREEMENT
 
On October 23, 2007, Ionicbulb.com (f/k/a Zevotek, Inc.) our wholly-owned subsidiary entered into a Supply Agreement with Star Funding, Inc. pursuant to which Star Funding will provide, on a discretionary basis, purchase order financing up to $2.5 million to facilitate Ionicbulb.com Inc.’s sale of its Ionic Bulb product. This purchase order financing may be made via direct payment to Ionicbulb.com’s suppliers, issue or cause the issuance of letters of credit, and/or advances to Ionicbulb.com. Ionicbulb.com will be required to pay Star Funding an amount equal to 2.5% of all “Expenses” (as defined) associated with the purchase of any Goods under the Agreement, including letter of credit fees, if any, which will equal 0.25% of the face amount of any letter of credit. As collateral security for all of Ionicbulb.com’s obligations under the Supply Agreement, Ionicbulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by either party with 60 days’ prior written notice before the end of the initial or any renewal period.
 
On October 23, 2007, Ionicbulb.com also entered into a Factoring Agreement with Star Funding pursuant to which Star Funding has agreed to purchase certain accounts receivables of Ionicbulb.com under the Supply Agreement. Ionicbulb.com has agreed to pay Star Funding a factoring commission of 1.5% of the gross amount of each receivable under the Factoring Agreement provided, however, that Ionicbulb.com has agreed that Star Funding will receive $15,000 in fees under the Supply Agreement and the Factoring Agreement in the first 12 months and Ionicbulb.com has agreed to pay Star Funding the shortfall by which all fees and commissions are less than $15,000. As collateral security for all of Ionicbulb.com’s obligations under the Supply Agreement, Ionicbulb.com granted Star Funding a security interest in all of Ionicbulb.com’s personal property and fixtures. The Supply Agreement is for an initial term of two years, and will be automatically extended for additional 1 year terms unless terminated by Ionicbulb.com upon 60 days’ prior written notice before the end of the initial or any renewal period or by Star Funding upon 30 days prior written notice.
 
F-10

 
To further secure Ionicbulb.com’s obligations under the Supply Agreement and the Factoring Agreement (as discussed below), Diet Coffee has executed (i) a guarantee and (ii) an assignment of that certain License and Supply Agreement under which is obtained its distribution rights for the Ionic Bulb. In addition, Mr. Engel, President of Ionicbulb.com and Zevotek, Inc., executed an Anti Fraud and Performance Agreement under which Mr. Engel guaranteed Ionicbulb.com’s representations and warranties under the Supply and Factoring Agreements. Mr. Engel explicitly agrees that if any receivable purchased by Star Funding is not paid when due (subject to certain exceptions), such non-payment shall be presumed to be the result of a breach of Ionicbulb.com’s representations and warranties under the Supply Agreement and/or the Factoring Agreement at which time Star Funding may be able to execute on the (i) collateral pledged under the Supply and Factoring Agreements and (ii) license for distribution of the Ionic bulb product.

Other receivables of $0 and $30,345 at June 30, 2009 and 2008 consisted of Star Funding’s holdbacks on product sales. The holdback is designed to allow the Company to receive the holdback cash after customer refunds and charge-backs are cleared.
 
NOTE D – 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 certain licensed products.  The license is on a year to year basis with automatic renewal subject to the Company re-acquire listing on the OTC BB exchange by February 14, 2010 and files all quarterly and annual reports by due dates, inclusive of allowable extensions.

In exchange for the exclusive license, the Company issued 50,000,000 shares of its common stock.  The license was valued at the market price of the underlying security.

In addition, the Agreement also provides for the retention of Ryu as a non-exclusive independent contractor sales representative to obtain purchase orders for the Licensed Products on our behalf  In consideration for his consulting services, we agreed to issue Ryu 750,000 shares of Common Stock for each $100,000 in gross sales of the Licensed Product by Ryu (or any Sales Associate hired by him) on or before February 28, 2010 up to a maximum of 75,000,000 shares of Common Stock (collectively, the “Incentive Shares”).  The Incentive Shares shall not vest unless Ryu (or any Sales Associate hired by him) shall have collectively procured gross sales of $5,000,000 for the Licensed Products on or before February 28, 2010 (the “Target”).  If Ryu fails to achieve the Target, such Incentive Shares shall be null and void and of no further force and effect.  In addition to the Incentive Shares, we also agreed to pay Ryu a commission at the rate 50% of all Net Profits (as defined on the Agreement) recognized by us on sales of the Licensed Products made by Ryu (or Sales Associates hired by Ryu) on our behalf during the period of this Agreement.

On April 29, 2009 the Company entered into a Distribution Agreement with a German distributor pursuant to which the Company granted such distributor the exclusive right (subject to minimum sales in the first year) to advertise, market and sell our ionic bulb product in Germany, Austria, Switzerland, Liechtenstein, Czech Republic, Slovakia, Hungary, Romania and Poland (the “Territory”).  Upon satisfactory sales of an initial order (in dealer’s reasonable discretion) of 5,000 units of the Company’s ionic bulb product, the distributor agreed to purchase 5,000 units of the Company’s ionic bulb product per month during the first year of the contact to maintain exclusive status in the Territory.  The Company also granted distributor a license to use certain marketing material to advertise and sell the ionic bulb product.  Such distributor also agreed to maintain general and product liability insurance in an amount of at least $1,000,000 and agreed to name us as an additional insured under such policy.  The term of the agreement is for one year and will be automatically renewed for successive 1 year periods if the minimum quantities (5,000/month and 60,000/year) are met.

NOTE E- ACCOUNTS PAYABLE AND LIABILITIES
 
Accounts payable and accrued liabilities are as follows:
 
   
June 30,
2009
   
June 30,
2008
 
Accounts payable 
 
$
195,181
   
$
168,926
 
Accrued professional fees
   
100,000
     
373,186
 
Accrued payroll and payroll taxes
   
799,280
     
630,340
 
Other accrued liabilities
   
137,810
     
104,933
 
                 
Total
 
$
1,232,271
   
$
1,277,385
 
 
F-11


NOTE F - CONVERTIBLE NOTES PAYABLE AND DEMAND NOTES
 
  
 
June 30,
 2009
   
June 30, 
2008
 
Notes Payable to Interstellar Holdings, LLC.
           
Demand promissory note (a)
 
$
-
   
$
24,569
 
Convertible term note (b)
   
87,013
     
116,765
 
Convertible term note ( c )
   
155,789
     
155,789
 
    Convertible term note (d)
   
50,000
     
50,000
 
    Convertible term note (e)
   
92,924
     
-
 
    Convertible term note (f)
   
113,972
     
-
 
    Convertible term note (g)
   
7,932
     
-
 
Subtotal
   
507,630
     
347,123
 
Less: Discount on Debt
   
( 333,827
)
   
(300,964
)
     
173,803
     
46,159
 
Less: current portion
   
(134,139
)
 
 
(46,159
)
Long term debt
 
$
39,664
   
$
-
 

 
a)
On November 10, 2008, the Company entered into a demand promissory note for the principal amount of $24,569 bearing interest at 10% per annum.
 
b)
On May 14, 2008, the Company entered into a convertible term note 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).
 
c)
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).
 
d)
On January 1, 2008, 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 370,000 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.
 
e)
On January 8, 2009, the Company entered into a convertible term note 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).
 
f)
On March 9, 2009, the Company entered into a convertible term note 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).
g) Of the convertible term notes entered into on May 14, 2008, certain notes having a principal amount of $7,932 as of June 30, 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).
     
In accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), 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 Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios ("EITF 98-5"), 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.  During the year ended June 30, 2009, amortization related to the beneficial conversion feature was $424,985.

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 $.00001 within the limitations and restrictions stated in the Certificate of Incorporation of the Company.
 
F-12


The Company issued of 50,000 shares of Series A - Preferred stock; non convertible. 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 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.

At June 30, 2009 and 2008, common shares issued and outstanding were 176,092,373 and 3,784,920, respectively.

On September 11, 2007, the Company adopted its 2007 Stock Incentive Plan (the “2007 Plan”). The Company is permitted to issue up to 21,450,000 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 June 30, 2009, 429,000 shares have been 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 17,994,000 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 June 30, 2009, 359,880 shares have been 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 33,000,000 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 June 30, 2009, 1,347,251 shares have been issued under this Plan.

On February 21, 2008 the Company adopted its 2008 California Stock Incentive Plan. The Company is permitted to issue up to 33,000,000 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 June 30, 2009, 24,425,190 shares have been issued under this Plan.

During the year ending June 30, 2008, the Company issued 1,994,780 shares of common stock, valued at $845,560 for services and expenses. The Company converted debt and accrued interest of $17,944 into 359,880 shares of common stock in May and June 2008.

During the year ended June 30, 2009, the Company issued 23,057,514 shares of common stock for services valued at $189,223, converted $21,946 of debt and accrued interest into 97,696,000 issued shares of common stock and 3,000,000 shares of common stock to be issued as of June 30, 2009.

During the year ended June 30, 2009, the Company issued 1,553,939 shares of common stock for $6,150 in accounts payable and 50,000,000 shares for an exclusive licensing agreement (see note D above).
 
Treasury Stock
 
As of June 30, 2009 and 2008, the Company had 40,000 and 0 shares of common stock held in treasury, respectively, that are carried at $0 based on a $0.00001 par value.
 
NOTE H - INCOME TAXES
 
The Company has adopted Financial Accounting Standards No. 109, 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 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. A management estimate that at June 30, 2009, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $2.5 million expiring by the year 2028, that may be used to offset future taxable income. Due to significant changes in the Company's ownership, the future use of its existing net operating losses may be limited.
 
The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Components of deferred tax assets as of June 30, 2009 are as follows:
 
Net operating loss carry forward
 
$
1,600,000
 
Valuation allowance
   
(1,600,000
)
Net
 
$
 0
 
 
F-13

 
The Company has not filed their federal or state income tax returns for fiscal years ended June 30, 2006, 2007, 2008 and 2009.

NOTE I - STOCK OPTIONS AND WARRANTS

During the years ended June 30, 2009 and 2008, the Company did not issue any stock warrants.

In July 2006, the Company sold 5,700 shares of its Common stock at a net average of $0.925 per share. As part of the sale of Common stock the Company issued 5,700 warrants to purchase its Common stock at a price of $25.00 per share expiring 2 years from the date of issuance being July 2008.

On December 13, 2007, the Company agreed to grant Mr. Engel options to purchase 72,000 shares of common stock, which options would vest at a rate of 2,000 shares per month. These options have not yet been deemed granted.
 
NOTE J - COMMITMENTS AND CONTINGENCIES

Employment Agreement
 
On December 13, 2007, the Company entered into an employment agreement with Adam Engel pursuant to which the Company employs Mr. Engel as President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary. The agreement is for an initial term of three years and provides for an annual base salary during the term of the agreement of $120,000, payable either in cash or stock. The Company also agreed to grant Mr. Engel options to purchase 72,000 shares of Company common stock with an exercise price of $0.25 per share (which price shall not be less than 85% of the “fair market value” of the Company’s common stock on the date of grant), which options would vest at a rate of 2,000 shares per month. These options have not yet been granted. In addition to salary and benefit provisions, the agreements include defined commitments should we terminate his employment without cause and 24 month non-compete/non solicitation terms.  As of June 30, 2009, the Company owes $155,393 in unpaid salary.

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. Company to comply with terms of the stipulation and do not anticipate incurring a liability for the judgment, however there can be no assurance of compliance.  Should Company fail to comply with the FTC’s final judgment, this could have a material adverse on Companies business, financial condition and results of operations.

Royalty commitment and Agreement Termination
 
On May 18, 2007, the Company entered into a Consulting, License and Supply Agreement with Jason Ryu, pursuant to which the Company licensed the right to market and sell a fluorescent light bulb that contains an air purifying microchip ion emitter from Mr. Ryu. In exchange for this license the Company agreed to pay Mr. Ryu a royalty of $0.20 per unit for the first 1.5 million units sold by the Company and the lesser of $0.15 per unit or 5% of manufacturing costs for all additional units. The initial term of this agreement was for two years and was to be automatically be renewed for subsequent two year periods if at least 5 million units are old by the Company during each period. Within ninety days from the date of this Agreement, the Company was required to place an order not less than 100,000 units and at least 600,000 units each quarter thereafter.  Mr. Ryu sent notice to the Company that license agreement shall continue on a non-exclusive basis.

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 certain licensed products.  The license is on a year to year basis with automatic renewal subject to the Company re-acquire listing on the OTC BB exchange by February 14, 2010 and files all quarterly and annual reports by due dates, inclusive of allowable extensions.  In exchange for the exclusive license, the Company issued 50,000,000 shares of its common stock.
 
F-14


In addition, the Agreement also provides for the retention of Ryu as a non-exclusive independent contractor sales representative to obtain purchase orders for the Licensed Products on companies behalf  In consideration for his consulting services, Company agreed to issue Ryu 750,000 shares of Common Stock for each $100,000 in gross sales of the Licensed Product by Ryu (or any Sales Associate hired by him) on or before February 28, 2010 up to a maximum of 75,000,000 shares of Common Stock (collectively, the “Incentive Shares”).  The Incentive Shares shall not vest unless Ryu (or any Sales Associate hired by him) shall have collectively procured gross sales of $5,000,000 for the Licensed Products on or before February 28, 2010 (the “Target”).  If Ryu fails to achieve the Target, such Incentive Shares shall be null and void and of no further force and effect.  In addition to the Incentive Shares, Company also agreed to pay Ryu a commission at the rate 50% of all Net Profits (as defined on the Agreement) recognized by Company on sales of the Licensed Products made by Ryu (or Sales Associates hired by Ryu) on Companies behalf during the period of this Agreement.
 
Distribution Agreement

On April 29, 2009 the Company entered into a Distribution Agreement with a German distributor pursuant to which the Company granted such distributor the exclusive right (subject to minimum sales in the first year) to advertise, market and sell our ionic bulb product in Germany, Austria, Switzerland, Liechtenstein, Czech Republic, Slovakia, Hungary, Romania and Poland (the “Territory”).  Upon satisfactory sales of an initial order (in dealer’s reasonable discretion) of 5,000 units of the Company’s ionic bulb product, the distributor agreed to purchase 5,000 units of the Company’s ionic bulb product per month during the first year of the contact to maintain exclusive status in the Territory.  The Company also granted distributor a license to use certain marketing material to advertise and sell the ionic bulb product.  Such distributor also agreed to maintain general and product liability insurance in an amount of at least $1,000,000 and agreed to name us as an additional insured under such policy.  The term of the agreement is for one year and will be automatically renewed for successive 1 year periods if the minimum quantities (5,000/month and 60,000/year) are met.

Payroll Taxes
 
At June 30, 2009, the Company is delinquent with filing and remitting payroll taxes of approximately $81,000 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 June 30, 2009, the Company is delinquent with remitting sales taxes of approximately $16,413, 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.

NOTE K - FAIR VALUE MEASUREMENT
   
The Company adopted the provisions of SFAS No. 157, “Fair Value Measurements” on July 1, 2008.  SFAS No. 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.  SFAS No. 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  SFAS No. 157 establishes three levels of inputs that may be used to measure fair value:
     
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.
 
F-15


Upon adoption of SFAS No. 157, there was no cumulative effect adjustment to the beginning retained earnings and no impact on the consolidated financial statements.
    
The carrying value of the Company’s cash and cash equivalents, accounts receivable, prepayments, accounts payable, short-term borrowings (including 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 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.
   
The following table sets forth the Company’s short investments as of June 30, 2009, which are measured at fair value on a recurring basis by level within the fair value hierarchy.  As required by SFAS No. 157, these are classified based on the lowest level of input that is significant to the fair value measurement:
   
  
 
Quoted
Prices in
Active
Markets for
Identical
Instruments
Level 1
   
Significant
Other
Observable
Inputs
Level 2
   
Significant
Unobservable
Inputs
Level 3
   
Assets at
Fair Value
 
Assets:
                               
License agreement
 
$
 -
   
$
-
   
$
40,000
   
40,000
 
Liabilities:
                               
Advances payable
 
$
 -
   
$
(44,000)
   
$
   
(44,000
Convertible notes payable
 
$
 -
   
$
(173,803)
   
$
   
(173,803

NOTE L – SUBSEQUENT EVENTS

In accordance with SFAS No. 165, the Company has evaluated Subsequent Events through the date of this filing (October 13, 2009).
 
Since June 30, 2009, the Company issued an aggregate of 74,493,434 shares of common stock to consultants for services rendered.

Since June 30, 2009, the Company issued an aggregate of 453,299,500 shares of common stock upon conversion of convertible promissory notes, including the 3,000,000 shares to be issued as of June 30, 2009.

In September 2009, the Company and Star Funding agreed to terminate their Supply Agreement and Factoring Agreement, effective at the end of the initial term on October 23, 2009.  The parties agreed to exchange mutual releases in connection with the termination.

On September 15, 2009, Company board of directors adopted the 2009 Stock Incentive Plan.  The total number of shares available for the grant of either stock options or compensation stock under the plan is 136,715,000 shares, subject to adjustment.

On September 15, 2009, Company board of directors adopted the 2009 California Stock Incentive Plan.  The total number of shares available for the grant of either stock options or compensation stock under the plan is 136,715,000 shares, subject to adjustment.
F-16