Zevotek, Inc - FORM 10-Q

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EX-32.1 - Zevotek, Inc	ex32-1.htm
EX-10.1 - Zevotek, Inc	ex10-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

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

For the transition period from _________________ to _________________

Commission File No.: 333-137210

ZEVOTEK, INC.

(Exact name of registrant as specified in its charter)

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

19 Sylvan Avenue

Second Floor

Englewood Cliffs, NJ 07632

(Address of principal executive offices)

Issuer’s telephone number: (201) 820-0357

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

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

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨	(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 ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 21, 2012, there were 318,794 shares of our common stock outstanding.

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Quarterly Report on Form 10-Q

Quarterly Period Ended March 31, 2012

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		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited) and June 30, 2011	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2012 and 2011 (unaudited)	4
	Condensed Consolidated Statement of Stockholders’ Deficit for Period from June 30, 2010 to March 31, 2012 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2012 and 2011 (unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2012	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
Signatures		24
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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PART 1: FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ZEVOTEK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			June 30,
	2012			2011
	(unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	17		$	4,737
Accounts receivable		-			4,043
Inventory		86,113			88,323
Prepayments and other current assets		14,000			-
Total current assets		100,130			97,103

Other asset:
Licensing agreement		40,000			40,000
Total assets	$	140,130		$	137,103

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued expenses	$	1,010,867		$	774,346
Advances payable		214,173			43,823
Convertible notes payable and demand notes (net of debt discount of $0 and $814,962 as of March 31, 2012 and June 30, 2011, respectively)		1,287,569			309,806
Total current liabilities		2,512,609			1,127,975

Long term portion of convertible notes payable (net of debt discount of $0 and $106,350 as of March 31, 2012 and June 30, 2011, respectively)		-			86,080

Stockholders' deficit:
Preferred Stock, $0.00001 par value; 10,000,000 shares authorized Series A Preferred stock, $0.00001 par value; 50,000 shares designated, issued and outstanding as of March 31, 2012 and June 30, 2011		1			1
Series B Preferred stock, $0.00001 par value; 1,000,000 shares designated, issued and outstanding as of March 31, 2012 and June 30, 2011		10			10
Common stock, $0.00001 par value, 5,000,000,000 shares authorized; 318,794 and 220,810 shares issued and outstanding as of March 31, 2012 and June 30, 2011, respectively		3			2
Treasury stock, 1 share as of March 31, 2012 and June 30, 2011		—			—
Additional paid in capital		5,704,355			5,652,172
Accumulated deficit		(8,076,848	)		(6,729,137	)
Total stockholders' deficit		(2,372,479	)		(1,076,952	)
Total liabilities and stockholders' deficit	$	140,130		$	137,103

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

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ZEVOTEK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2012			2011			2012			2011
REVENUES:
Sales	$	1,488		$	5,068		$	6,135		$	12,952

Cost of sales		536			2,514			2,210			7,326

Gross profit		952			2,554			3,925			5,626

OPERATING EXPENSES:
Selling		645			46,287			31,544			291,471
General and administrative		102,855			124,319			284,351			456,674
Total operating expense		103,500			170,606			315,895			748,145

Loss from operations		(102,548	)		(168,052	)		(311,970	)		(742,519	)

OTHER (EXPENSE):
Interest, net		(38,067	)		(29,875	)		(114,429	)		(85,208	)
Amortization of beneficial conversion feature		—			(37,544	)		(921,312	)		(132,780	)
Total other expense		(38,067	)		(67,419	)		(1,035,741	)		(217,988	)

Net loss before provision for income taxes		(140,615	)		(235,471	)		(1,347,711	)		(960,507	)

Income taxes		—			—			—			—

NET LOSS	$	(140,615	)	$	(235,471	)	$	(1,347,711	)	$	(960,507	)

Net loss per common share, basic and fully diluted	$	(0.44	)	$	(2.26	)	$	(4.52	)	$	(14.60	)
Weighted average number of common shares outstanding, basic and fully diluted		318,419			104,117			298,090			65,767

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

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ZEVOTEK, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

For the Period from June 30, 2010 to March 31, 2012

	Preferred stock												Common							Additional
	Series A				Series B				Common stock				Stock To			Treasury stock				Paid in		Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Be Issued			Shares		Amount		Capital		Deficit			Total
BALANCE, June 30, 2010		50,000	$	1		1,000,000	$	10		34,719	$	—	$	30,000			1	$	—	$	4,000,804	$	(5,485,025	)	$	(1,454,210	)
Common stock issued for services rendered		—		—		—		—		29,273		—		—			—		—		235,413		—			235,413
Common stock issued for accounts payable		—		—		—		—		2,219		—		—			—		—		90,000		—			90,000
Conversion of debt and accrued interest for common stock		—		—		—		—		148,098		2		—			—		—		112,998		—			113,000
Fair value of beneficial conversion feature		—		—		—		—		—		—		—			—		—		1,137,957		—			1,137,957
Common stock issued to officers and board members		—		—		—		—		4,950		—		—			—		—		45,000		—			45,000
Common stock issued to former officers for accrued compensation		—		—		—		—		1,551		—		(30,000	)		—		—		30,000		—			—
Net loss		—		—		—		—		—		—		—			—		—		—		(1,244,112	)		(1,244,112	)
BALANCE, June 30, 2011		50,000	$	1		1,000,000	$	10		220,810	$	2	$	—			1	$	—	$	5,652,172	$	(6,729,137	)	$	(1,076,952	)
Common stock issued for services rendered		—		—		—		—		2,500		—		—			—		—		5,000		—			5,000
Common stock issued for settlement of accrued liabilities		—		—		—		—		8,000		—		—			—		—		7,373		—			7,373
Common stock issued for purchasing representative agreement		—		—		—		—		22,045		—		—			—		—		9,250		—			9,250
Conversion of debt and interest for common stock		—		—		—		—		61,121		1		—			—		—		30,560		—			30,561
Shares issued in satisfaction of fraction shares resulting from 1 for 5,000 reverse stock split		—		—		—		—		4,318		—		—			—		—		—		—			—
Net loss		—		—		—		—		—		—		—			—		—		—		(1,347,711	)		(1,347,711	)
BALANCE, March 31, 2012 (unaudited)		50,000	$	1		1,000,000	$	10		318,794	$	3	$	—			1	$	—	$	5,704,355	$	(8,076,848	)	$	(2,372,479	)

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

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ZEVOTEK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended March 31, 2012 and 2011

(UNAUDITED)

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,347,711	)	$	(960,507	)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for services rendered		8,750			189,186
Common stock issued for interest		39			4,050
Common stock issued to board members as remuneration		—			31,500
Amortization of beneficial conversion feature		921,312			132,780
Changes in operating assets and liabilities:
Decrease in accounts receivable		4,043			3,353
Decrease in inventory		2,210			8,130
(Increase) decrease in prepayments and other current assets		(8,500	)		17,600
Increase in accounts payable and accrued expenses		244,787			153,292
Net cash used in operating activities		(175,070	)		(420,616	)

CASH FLOWS FROM INVESTING ACTIVITIES:		—			—

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances payable		170,350			289,903
Net cash provided by financing activities		170,350			289,903

Net decrease in cash and cash equivalents		(4,720	)		(130,713	)
Cash and cash equivalents, beginning of period		4,737			132,517
Cash and cash equivalents, end of period	$	17		$	1,804

SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
Interest paid	$	—		$	—
Income taxes paid	$	—		$	—

NON CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for prior year interest	$	—		$	4,119
Common stock issued for settlement of accrued liabilities	$	7,373		$	110,000
Common stock issued as a prepayment for purchasing representative agreement	$	5,500		$	—
Interest transfer to convertible note	$	—		$	2,821
Exchange of convertible debenture for advances payable	$	—		$	192,430
Debt and accrued interest converted for shares of common stock	$	30,522		$	79,077

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

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ZEVOTEK, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

NOTE A - SUMMARY OF ACCOUNTING POLICIES

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

Business and Basis of Presentation

ZEVOTEK, INC. (the “Company” or the “Registrant”) was organized on March 19, 2005 under the state laws of Delaware with an original name of “The Diet Coffee Company.” On March 1, 2006, the Company amended its Certificate of Incorporation and changed its name from “The Diet Coffee Company, Inc.” to “Diet Coffee, Inc.” On June 25, 2008, the Company changed its name to “Zevotek, Inc.”

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

General

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and instructions to Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet of the Company, as of June 30, 2011, was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of normal recurring nature. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2011.

Reverse Stock Split

On September 26, 2011, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of Delaware to effectuate a reverse split of its outstanding shares of common stock on a 1 to 5,000 basis. The Financial Industry Regulatory Authority (“FINRA”) effected the reverse stock split on October 27, 2011. Each holder of common stock received 1 share of the Company’s common stock in exchange for each 5,000 shares of the Company’s common stock they owned. The Company did not issue fractional shares in connection with the foregoing split. Fractional shares were rounded up to the nearest whole share. All references in the accompanying unaudited condensed consolidated financial statements and notes thereto have been retroactively restated to reflect the stock split.

Revenue Recognition

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

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ASC 605 incorporates Accounting Standards Codification 605-25, “Revenue Recognition Multiple Element Arrangements”. ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The Company does not have any multiple element arrangements.

Consideration Paid to Customers

The Company offers its customers certain incentives in the form of cooperative advertising arrangements, product markdown allowances, trade discounts, cash discounts, and slotting fees. Markdown allowances, trade discounts, cooperative advertising program participation and cash discounts are all recorded as reductions of net sales. No customer incentives are included in sales for the three and nine months ended March 31, 2012 and 2011.

Use of Estimates

The preparation of the unaudited condensed consolidated 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.

Cash and Cash Equivalents

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

Inventories / Cost of Goods Sold

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

Inventories consist of finished products available for sale to distributors and customers. At March 31, 2012 and June 30, 2011, finished goods inventory was $86,113 and $88,323, respectively.

Allowance for doubtful accounts

The Company maintains an allowance for doubtful accounts to reduce amounts to their estimated realizable value, including reserves for customer and other receivable allowances and incentives. In estimating the provision for doubtful accounts, the Company considers a number of factors including age of the accounts receivable, trends and ratios involving the age of the accounts receivable and the customer mix of each aging categories. As of March 31, 2012 and June 30, 2011, the allowance for doubtful accounts was $0.

Impairment of long lived assets

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

Advertising

The Company charges the costs of advertising to expenses as incurred. The Company charged $0 and $10,842 to operations for the three months ended March 31, 2012 and 2011, respectively. The Company charged $1,393 and $141,895 to operations for the nine months ended March 31, 2012 and 2011, respectively.

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Income Taxes

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

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

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

As a result of implementing ASC 740, there has been no adjustment to the Company’s financial statements and the adoption of ASC 740 did not have a material effect on the Company’s unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2012 and 2011.

Research and Development

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Accounting Standards Codification 730 "Research and Development" (“ASC 730”). Under ASC 730, all research and development costs must be charged to expense as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company had no expenditures on research and product development for three and nine months ended March 31, 2012 and 2011, respectively.

Stock Based Compensation

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

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

Loss per Share

The Company has adopted Accounting Standards Codification subtopic 260-10, Earnings per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares outstanding. Stock options and warrants would have been excluded as common stock equivalents in the diluted loss per share because their effect is anti-dilutive on the computation. Potentially dilutive shares of common stock realizable from the conversion of the Company’s convertible debentures of 146,437,488 and 3,898,973,401 shares, respectively at March 31, 2012 and 2011, are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive.

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Concentration of Credit Risk

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

Reclassifications

Certain reclassifications have been made in prior period's unaudited condensed consolidated financial statements to conform to classifications used in the current period.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will have a material impact on its consolidated financial condition or the results of its operations.

NOTE B - GOING CONCERN MATTERS

The accompanying unaudited condensed consolidated statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2012, the Company incurred net losses of $140,615 and $1,347,711, respectively. At March 31, 2012, the Company had a working capital deficit of $2,412,479 (current liabilities exceeded current assets) and accumulated deficit of $8,076,848. The Company is in default of principal and accrued interest on certain convertible notes payable.

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

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

NOTE C – LICENSING, DISTRIBUTION AND PURCHASING AGREEMENT

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

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

On March 2, 2011, the Company and the Ionic Bulb patent holder entered into a non-exclusive Purchasing Representative Agreement whereby the patent holder agreed to introduce the Company to a new third party manufacturer that will produce a next generation version of the Ionic Bulb with new features and improved manufacturing cost. Additionally, the patent holder affirmed his obligation to defend against patent infringement. The Company agreed to pay patent holder a fixed amount per Ionic Bulb ordered from the new manufacturer. As agreed by both parties, the Company made an advance fee payment by issuance of 5,000 shares of the Company’s restricted stock which was valued at $5,500 and is included in prepayments as of March 31, 2012 and an additional 17,045 shares of common stock valued at $3,750 as a result of a decline in market price and charged to operations. The value of the restricted shares applied to payment of the fees was based upon the average closing price of the Company's common stock for the ten trading days preceding the date on which the restrictive stock legend was to be removed. The term of the agreement is three years with one-year automatic renewals that are subject to minimum fee payments to the patent holder for the first and second renewal term, respectively.

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NOTE D- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are as follows:

	March 31, 2012 (unaudited)		June 30, 2011
Accounts payable	$	28,701	$	10,867
Accrued professional fees		349,245		225,163
Accrued payroll and payroll taxes		122,789		161,649
Old disputed accounts payable		160,756		160,756
Accrued interest		295,319		183,507
Other accrued liabilities		54,057		32,404
Total	$	1,010,867	$	774,346

NOTE E – ADVANCES PAYABLE

As of March 31, 2012 and June 30, 2011, the Company owed $214,173 and $43,823 to a note holder and a lender, respectively, for cash advanced to the Company for operating purposes. The advances accrue interest at 10% per annum and are repayable on demand.

NOTE F - CONVERTIBLE NOTES PAYABLE AND DEMAND NOTES

	March 31, 2012 (unaudited)			June 30, 2011
Notes Payable:
Convertible term note (a)	$	923		$	923
Convertible term note (b)		1,923			1,923
Convertible term note (c)		50,000			50,000
Convertible term note (d)		2,497			2,497
Convertible term note (e)		226			25,174
Convertible term note (f)		11,132			11,132
Convertible term note (g)		26,420			30,920
Convertible term note (h)		192,430			192,430
Convertible term note (i)		34,141			34,141
Convertible term note (j)		22,350			22,530
Convertible term note (k)		945,527			945,527
		1,287,569			1,317,197
Less: unamortized discount on debt		—			(921,311	)
		1,287,569			395,886
Less: current portion		(1,287,569	)		(309,806	)
Long term debt	$	—		$	86,080

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	a)	On May 14, 2008, the Company entered into convertible term notes bearing interest at 10% per annum with a maturity date of May 14, 2010. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.0001 per share. The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holders about amending the conversion terms to cure the default.
	b)	On May 27, 2008, the Company entered into a convertible term note bearing interest at 10% per annum with a maturity date of May 27, 2010. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.0001 per share. The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default.
	c)	On January 1, 2008, the Company entered into a convertible term note for the principal amount of $50,000 bearing interest at 7% per annum with a maturity date of June 30, 2008. This note is convertible into common stock at 90% of the common stock closing price at June 30, 2008, or approximately 4 shares of common stock. The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default.
	d)	On January 8, 2009, the Company entered into convertible term notes bearing interest at 10% per annum with a maturity date of January 8, 2011. 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. 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.
	e)	On March 9, 2009, the Company entered into convertible term notes bearing interest at 10% per annum with a maturity date of March 9, 2011. The notes were amended on January 8, 2011 to extend the maturity date to January 8, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.10 per share (see below). The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default
	f)	Of the convertible term notes entered into on May 14, 2008, certain notes having a principal amount of $11,132 as of March 31, 2012 and 2011 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. The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default.
	g)	On July 28, 2009, the Company entered into a convertible term note bearing interest at 10% per annum with a maturity date of July 28, 2011. 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. 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 $0.10 per share (see below).
	h)	On August 6, 2010, the Company converted $192,430 of advances payable into a convertible term note bearing interest at 10% per annum with a maturity date of August 6, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.10 per share (see below).
	i)	On January 8, 2009, the Company entered into convertible term notes bearing interest at 10% per annum with a maturity date of January 8, 2011. The notes were amended on January 8, 2011 to extend the maturity date to January 8, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.10 per share (see below). The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default.
	j)	On March 9, 2009, the Company entered into convertible term notes bearing interest at 10% per annum with a maturity date of March 9, 2011. 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. 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 $0.10 per share (see below).
	k)	On May 10, 2011, the Company converted $945,527 of advances payable into a convertible term note bearing interest at 10% per annum with a maturity date of May 10, 2012. At any time at the option of the note holder, principal and interest payments may be paid in common stock at a conversion price of $0.10 per share (see below). The Company is in default of payment of principal and interest on the note and the Company is in discussions with the note holder about amending the conversion terms to cure the default.

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

On May 10, 2011, the Company converted $945,527 of advances payable into a convertible note. The Company recognized and measured an aggregate of $945,527 of the advances payable, which is equal to the intrinsic value of the imbedded amended beneficial conversion feature, to additional paid in capital and a debt discount against the note issued, with the discount being amortized over the note’s one-year term.

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On October 12, 2011, the Company entered into amendment agreements with certain holders of its outstanding convertible promissory notes, ((e) and (g) through (k) above), in order to amend certain terms contained therein. The Company amended its (i) 10% convertible promissory note in the original principal amount of $192,430 dated as of August 6, 2010 and (ii) its 10% convertible promissory note in the original principal amount of $945,527 dated as of May 10, 2011, in order to (a) amend the conversion price to $0.10, (b) add a “Most Favored Nations Provision” to allow for adjustment of such conversion price in the event of certain lower priced issuances of the Company’s securities and (c) include a provision prohibiting the conversion of such note in the event conversion would require the Company to issue shares of common stock in excess of its then authorized but unissued shares. The Company amended its (i) 10% convertible promissory note in the original principal amount of $26,225 dated as of January 8, 2009, (ii) its 10% convertible promissory note in the original principal amount of $41,728 dated as of January 8, 2009; (iii) its 10% convertible promissory note in the original principal amount of $72,471 dated as of March 9, 2009, (iv) its 10% convertible promissory note in the original principal amount of $41,500 dated as of March 9, 2009 and (v) its 10% convertible promissory note in the original principal amount of $44,000 dated as of July 28, 2009 in order to (a) amend the conversion price to $0.10 and (b) add a “Most Favored Nations Provision” to allow for adjustment of such conversion price in the event of certain lower priced issuances of the Company’s securities. Because the changes in fair values of the conversion options were greater than 10% of the carrying value of the original debts, the transactions qualified under ASC 470-50 “Debtor’s Accounting for a Modification or Exchange of Debt Instruments” and determined to be substantial. As a result, the Company wrote off the remaining unamortized debt discount totaling $624,004 at December 31, 2011.

During the three and nine months ended March 31, 2012, amortization related to the beneficial conversion feature on the convertible notes was $0 and $921,312, respectively.

During the three and nine months ended March 31, 2011, amortization related to the beneficial conversion feature on the convertible notes was $37,544 and $132,780, respectively.

NOTE G – STOCKHOLDERS EQUITY

Preferred Stock

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

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

The Company has designated and issued 1,000,000 shares of Series B Preferred Stock. On May 14, 2008, the Company and a third party note holder 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. Subsequently, the third party note holder, Anthony Intrieri, became Chairman of the Board of Directors. On September 12, 2011, the Estate of Anthony Intrieri ("Estate") sold 1,000,000 shares of the Company's Series B Preferred Stock to an unrelated third party. The Estate obtained the shares following the passing of Mr. Intrieri.

Common Stock

On September 26, 2011, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of Delaware to effectuate a reverse split of its outstanding shares of common stock on a 1 to 5,000 basis. FINRA effected the reverse stock split on October 27, 2011. Each holder of common stock received 1 share of the Company’s common stock in exchange for each 5,000 shares of the Company’s common stock they own. The Company did not issue fractional shares in connection with the foregoing split. Fractional shares were rounded up to the nearest whole share. All references in the accompanying unaudited condensed consolidated financial statements and notes thereto have been retroactively restated to reflect the stock split.

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During the nine months ended March 31, 2012, the Company issued 10,500 shares of common stock, valued at $12,373 for services and accrued expenses.

During the nine months ended March 31, 2012, the Company issued 22,045 shares of common stock, valued at $9,250 for a non-exclusive Purchasing Representative Agreement (Note C).

During the nine months ended March 31, 2012, the Company converted debt and accrued interest of $30,561 into 61,121 shares of common stock based upon the Notes’ conversion prices.

During the nine months ended March 31, 2012, the Company issued 4,318 shares of common stock in satisfaction of fraction shares resulting from the 1 for 5,000 reverse stock split.

As of March 31, 2012 and June 30, 2011, there were 318,794 and 220,810 shares of common stock issued and outstanding, respectively.

Treasury Stock

As of March 31, 2012 and June 30, 2011, the Company had 1 share of common stock held in treasury, which was carried at $0 based on a $0.00001 par value.

NOTE H - STOCK OPTIONS AND WARRANTS

During the nine months ended March 31, 2012 and 2011, the Company did not issue any stock warrants or options. As of March 31, 2012, there are no outstanding stock warrants or options.

NOTE I - COMMITMENTS AND CONTINGENCIES

U.S. Federal Trade Commission Settlement

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

Licenses

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

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Gung H2O License

On December 10, 2010, the Company entered into an Exclusive License and Sales Agreement whereby the Company has worldwide exclusive rights to develop, manufacture, market, use, sell, distribute and advertise a U.S. patented new product named Gung H2O that reduces water use in the home. The license has a five-year initial term with automatic annual renewals and is not subject to minimum payments to the licensor.

Payroll Taxes

At March 31, 2012, the Company is delinquent with filing and remitting payroll taxes of approximately $49,000 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 sheets. Although the Company has not entered into any formal repayment agreements with the applicable 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 March 31, 2012, the Company is delinquent with remitting sales taxes of approximately $16,000, including related estimated penalties and interest related to sales taxes withheld since 2006 in the state of New York. The Company has recorded the delinquent sales taxes, which are included in accrued expenses on the balance sheet. Although the Company has not entered into any formal repayment agreements with the applicable 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.

Leases

The Company leased office space on a month to month basis in Stuart, Florida. Rent expense for the three and nine months ended March 31, 2012 was $636 and $1914, respectively. Rent expense for the three and nine months ended March 31, 2011 was $1,072 and $3,617, respectively.

NOTE J - FAIR VALUE MEASUREMENT

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

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

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

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

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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 is determined based on the lowest level input that is significant to the fair value measurement.

The carrying value of the Company’s cash, accounts receivable, prepayments, accounts payable, advances payable, convertible notes payable, and other current assets and liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the unaudited condensed consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. As of March 31, 2012, there were no financial assets or liabilities that were measured at fair value on a recurring basis.

NOTE K – SUBSEQUENT EVENTS

Since March 31, 2012, the Company has borrowed $30,000 as an advance from a certain lender.

On May 17, 2012, the Company issued a convertible promissory note to an investor as repayment for $10,000 advanced to the Company on March 19, 2012. The note matures on March 19, 2014 and accrues interest at an annual rate of ten percent (10%). The note is payable in full on the maturity date unless previously converted into shares of the Company’s common stock at a conversion price of $0.10 per share, as may be adjusted.

On May 7, 2012, Mr. Jason Ryu was appointed as Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director due to the resignation of Mr. Robert Babkie on March 19, 2012. Prior to his appointment, the Company entered into a certain Exclusive License and Sales Agreement and a Purchasing Representative Agreement with Mr. Ryu as fully discussed in Note I.

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

General

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

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

Company History

We were organized on March 19, 2005 under the state laws of Delaware with an original name of “The Diet Coffee Company.” On March 1, 2006, we amended our Certificate of Incorporation and changed our name from “The Diet Coffee Company, Inc.” to “Diet Coffee, Inc.” On June 25, 2008, we changed our name to “Zevotek, Inc.” Our principal executive offices are located at 19 Sylvan Avenue, Second Floor, Englewood Cliffs, NJ 07632. Our telephone number is (201) 820-0357

Company Overview

We market and sell innovative personal and home care items. We are engaged in the direct marketing and distribution of consumer products. On February 24, 2009, we entered into an Exclusive License and Sales Agreement giving us the worldwide rights to manufacture, market, use, sell, distribute and advertise an air purifier that is contained in an energy saving compact fluorescent light bulb named the Ionic Bulb. We market the Ionic Bulb through TV infomercials, our website newionicbulb.com and Amazon.com. We plan to sell through catalogs and major U.S. retail and specialty stores.

On December 10, 2010, we entered into an Exclusive License and Sales Agreement giving us the worldwide rights to develop, manufacture, market, use, sell, distribute and advertise a U.S. patented new product named “Gung H2O” that reduces water use in the home. Gung H2O is a patented plumbing valve that is installed in the traditional gravity toilet tank of a non-low flow toilet. The Gung H2O valve regulates the amount of water used to fill and flush a toilet. The valve is adjustable to enable the toilet to use more or less water as desired. The Gung H2O valve enables a traditional non-low flow toilet to use less water to achieve the equivalent level of flushing power of a non-low flow toilet. We plan to sell Gung H20 to major U.S. retail stores and directly to American consumers using TV ads and Internet marketing.

We are currently seeking new products to sell.

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Recent Updates

On March 19, 2012, Robert Babkie resigned as our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director and on May 7, 2012, Jason Ryu was appointed as our Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director. Mr. Ryu and the Company are a party to that certain Exclusive License and Sales Agreement dated as of February 24, 2009 pursuant to which Mr. Ryu granted the Company a worldwide exclusive license to manufacture, market, use, sell, distribute and advertise the Ionic Bulb. In consideration for the license, the Company issued Mr. Ryu 500 shares of common stock. Under the February 2009 Agreement, the Company also retained Mr. Ryu as a non-exclusive independent contractor sales representative to obtain purchase orders of the licensed products on behalf of the Company. Mr. Ryu and the Company are also parties to that certain non exclusive Purchasing Representative Agreement dated as of March 2, 2011 pursuant to which Mr. Ryu would identify certain manufacturers of the Ionic Bulb in consideration for 5,000 shares of the Company’s common stock, valued at $5,500, which represents a prepayment of Mr. Ryu’s fee based on his right to receive payments based on the Company’s purchase cost of the Ionic Bulb from the identified manufacturers. As a result of a decline in market price, Mr Ryu received an additional 17,045 shares of the Company’s common stock, valued at $3,750, which was charged to operations.

Comparison of Three Months Ended March 31, 2012 to March 31, 2011

Results of Operations

Revenue

Our sales were $1,488 for the three months ended March 31, 2012 and $5,068 for the three months ended March 31, 2011, a decrease of $3,580 or 70.6% which was primarily due to our sales for the three months ended March 31, 2012 being generated through orders placed by customers at Amazon.com as compared to our sales for the three months ended March 31, 2011 being primarily generated through orders placed by customers in response to our TV airings of the one-minute versions of our Ionic Bulb ads.

Gross Profit

Our gross profit was $952 for the three months ended March 31, 2012 and $2,554 for the three months ended March 31, 2011, a decrease of $1,602 or 62.7% which was primarily due to our decrease in sales.

Operating Expenses

Operating expenses were $315,895 for the three months ended March 31, 2012 and $748,145 for the three months ended March 31, 2011, a decrease of $432,250 or 57.8% which was primarily due to reductions in fulfillment and warehousing costs, salaries, advertising, professional fees and consulting fees. We incurred $31,544 and $291,471 in selling expenses during the three months ended March 31, 2012 and 2011, respectively. Selling expenses for the three months ended March 31, 2012 were comprised of advertising, marketing, salaries and fulfillment costs. Selling expenses for the three months ended March 31, 2011 were comprised of advertising and marketing costs in connection with a sales and marketing campaign to generate Ionic Bulb retail orders. We incurred $284,351 and $456,674 in general and administrative expenses for the three months ended March 31, 2012 and 2011, respectively.

Net Loss

Our net loss decreased by $94,856 or 40.3% to $140,615 for the three months ended March 31, 2012 as compared to our net loss of $235,471 for the three months ended March 31, 2011. The decrease was primarily due to the $67,106 reduction in operating expenses and the $37,544 a reduction in the amortization of beneficial conversion feature expense associated with our convertible notes payable.

Our net loss per common share was $0.44 (basic and diluted) for the three months ended March 31, 2012 as compared to our net loss per common share of $2.26 for the three months ended March 31, 2011.

The weighted average number of outstanding shares was 318,419 (basic and diluted) for the three months ended March 31, 2012 as compared to 104,117 (basic and diluted) for the three months ended March 31, 2011.

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Comparison of Nine Months Ended March 31, 2012 to March 31, 2011

Results of Operations

Revenue

Our sales were $6,135 for the nine months ended March 31, 2012 and $12,952 for the nine months ended March 31, 2011, a decrease of $6,817 or 52.6% which was primarily due to our sales for the nine months ended March 31, 2012 being generated through orders placed by customers at Amazon.com as compared to our sales for the nine months ended March 31, 2011 being primarily generated through orders placed by customers in response to our TV airings of our Ionic Bulb ads.

Gross Profit

Our gross profit was $3,925 for the nine months ended March 31, 2012 and $5,626 for the nine months ended March 31, 2011, a decrease of $1,701 or 30.2%, which was primarily due to our decrease in sales.

Operating Expenses

Operating expenses were $315,896 for the nine months ended March 31, 2012 and $748,145 for the nine months ended March 31, 2011, a decrease of $432,249 or 57.8% which was primarily due to reductions in fulfillment and warehousing costs, salaries, advertising, professional fees and consulting fees. We incurred $31,544 and $291,471 in selling expenses during the nine months ended March 31, 2012 and 2011, respectively. Selling expenses for the nine months ended March 31, 2012 were comprised of advertising, marketing, salaries and fulfillment costs. Selling expenses for the nine months ended March 31, 2011 were comprised of advertising and marketing costs in connection with a sales and marketing campaign to generate Ionic Bulb retail orders. We incurred $284,352 and $456,674 in general and administrative expenses for the nine months ended March 31, 2012 and 2011, respectively.

Net Loss

Our net loss increased by $387,204 or 40.3% to $1,347,711 for the nine months ended March 31, 2012 as compared to our net loss of $960,507 for the nine months ended March 31, 2011. The increase was primarily due to the write off of our unamortized debt discount resulting from the amendment of our convertible notes payable’s original fixed conversion price of $0.0001 to the new fixed conversion price of $0.10 effective on October 12, 2011, which was partially offset by our $432,249 reduction in operating expense in the nine months ended March 31, 2012 and as compared to the nine months ended March 31, 2011.

Our net loss per common share was $4.52 (basic and diluted) for the nine months ended March 31, 2012 as compared to our net loss per common share of $14.60 for the nine months ended March 31, 2011.

The weighted average number of outstanding shares was 298,090 (basic and diluted) for the nine months ended March 31, 2012 as compared to 65,767 (basic and diluted) for the nine months ended March 31, 2011.

Liquidity and Capital Resources

Overview

As of March 31, 2012, we had a working capital deficit of $2,412,479. As of June 30, 2011, we had a working capital deficit of $1,030,872. Our cash position at March 31, 2011 was $17 as compared to $4,737 at June 30, 2011. Our working capital deficit changed significantly during the nine months ended March 31, 2012 due to the $236,521 increase in accounts payable and accrued expenses, the $170,350 of additional funds advanced to us for operating purposes and the $624,004 write off of the remaining unamortized debt discount resulting from debt modifications during the second quarter ended December 31, 2011.

Cash provided by financing activities for the nine months ended March 31, 2012 and 2011 totaled $170,350 and $289,903, respectively, consisting of advances of funds for our operating purposes.

We expect capital expenditures to be nominal for the year ending June 30, 2012. These anticipated expenditures are for investments in property and equipment used in our business.

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Financing Needs

Since our inception on December 19, 2005 to March 31, 2012, we have generated revenues of $1,411,936 and have incurred a net loss of $8,076,848. We hope to begin achieving 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 may still need additional investments in order to continue operations to cash flow break even, but we cannot guarantee that we will be able to obtain such investments. From time to time, we may receive additional funding from existing investors. 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 registered public accounting firm’s report on our June 30, 2011 consolidated financial statements included in our Form 10-K states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about the our ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

Inflation

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.

Off Balance Sheet Arrangements

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

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Financial Reporting Release No. 60, recently released by the Securities and Exchange Commission (the “SEC”), requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The notes to the unaudited condensed consolidated financial statements include a summary of significant accounting policies and methods used in the preparation of our unaudited condensed 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 unaudited condensed 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 unaudited condensed consolidated financial statements.

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Reverse Stock Split

On September 26, 2011, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect a reverse split on the outstanding shares of the Company’s common stock on a 1 for 5,000 basis (the “Reverse Split”). All per share numbers in this quarterly report are reflective of the Reverse Split. The Financial Industry Regulatory Authority (“FINRA”) effected the Reverse Split on October 27, 2011.

Revenue Recognition

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

Inventories / Cost of Goods Sold

Allowance for doubtful accounts

Advertising

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

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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The Company’s management, under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2012. Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting, the Chief Executive Officer/Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report.

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

Changes in Internal Control over Financial Reporting

The primary change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended March 31, 2012 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting is that on March 19, 2012, Robert Babkie resigned as our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director and on May 7, 2012, Jason Ryu was appointed as our Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director.

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PART II: OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

None.

ITEM 1A – RISK FACTORS

Not applicable.

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

None.

ITEM 3 – DEFAULT UPON SENIOR SECURITIES

The Company is in default under the terms of all, except one of its outstanding promissory notes, which have an aggregate principal amount of $1,095,138 as of their respective issuance dates. As of May 21, 2012, the Company owes $1,244,541 in principal and interest under the terms of the notes. The Company and the note holders are in discussions.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

ITEM 6 – EXHIBITS

Exhibit No.	Description
31.1	Certification of Chief Executive Officer and Chief Financial Officer of Zevotek, Inc. pursuant to Rule 13a-14(a)
32.1	Certification of Chief Executive Officer and Chief Financial Officer of Zevotek, Inc. pursuant to 18 U.S.C. § 1350 adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
10.1	Form of Convertible Promissory Note
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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

	ZEVOTEK, INC.

May 21, 2012	/s/ Jason Ryu
	Jason Ryu
	Chief Executive Officer and Chief Financial Officer
	(Principal Executive and Principal Financial and Accounting Officer)

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Zevotek, Inc - FORM 10-Q - May 21, 2012

Attached files

Zevotek, Inc Reports