George Foreman Enterprises Inc - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - George Foreman Enterprises Inc	v233451_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - George Foreman Enterprises Inc	v233451_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - George Foreman Enterprises Inc	v233451_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - George Foreman Enterprises Inc	v233451_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009 or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ___________ to _________________.

COMMISSION FILE NUMBER: 000-26585

GEORGE FOREMAN ENTERPRISES, INC.

(Name of Small Business Issuer as Specified in Its Charter)

DELAWARE (State or Other Jurisdiction of Incorporation)	54-1811721 (I.R.S. Employer Identification No.)

100 N. WILKES-BARRE BLVD, 4TH FLOOR, WILKES-BARRE, PA (Address of Principal Executive Offices)	18702 (Zip Code)

Registrant's telephone number, including area code (570) 822-6277

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

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 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

As of August 23, 2011, 5,088,759 shares of the registrant's common stock, par value $0.01, were outstanding.

GEORGE FOREMAN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2009

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheets (unaudited) as of September 30, 2009 and December 31, 2008	4

		Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2009 and 2008	5

		Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2009 and 2008	6

		Notes to Unaudited Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

	Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION

	Item 1.	Legal Proceedings	20

	Item 1A.	Risk Factors	20

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

	Item 3.	Defaults upon Senior Securities	20

	Item 4.	Submission of Matters to a Vote of Securities Holders	20

	Item 5.	Other Information	20

	Item 6.	Exhibits	20

		Signatures	21

George Foreman Enterprises, Inc. (referred to in this report as "we" or the "Company") is filing this Quarterly Report on Form 10-Q for the period ended September 30, 2009 (this "Report"). The Company is delinquent in compliance with its reporting obligations with the Securities and Exchange Commission (the "SEC"). The filing of this Report is part of the ongoing process to bring the Company in compliance with its reporting obligations under the rules and regulations of the SEC.

This Report reflects the Company's financial position, results of operations, business and prospects only as of the end of the period covered by this Report. The readers are cautioned not to place undue reliance on such information, because the Company's financial position has deteriorated further since the end of the period covered by this Report due to additional expenses incurred by the Company as a result of continued operation expenses and the challenges being faced by the Company to generate meaningful revenues from its business. Additionally, as disclosed in this Report and the Company's other filings with the SEC, the Company has had a history of operating losses, and there is substantial doubt about the Company's ability to continue as a going concern. Any forward-looking statements included in this Report represent management's view as of the filing date of this Report.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules a and regulations of the Securities and Exchange Commission. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report of Form 10-K for the year ended December 31, 2008. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2009 and 2008 are not necessarily indicative of the results for the entire fiscal year or for any other period.

GEORGE FOREMAN ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	39,818		$	102,944
Time deposit		-			98,000
Accrued interest receivable		-			1,984
Accounts receivable, less allowance for doubtful accounts of $1,100 at September 30, 2009 and December 31, 2008		73,012			137,027
Prepaid expenses and other current assets		37,600			31,512
Marketable securities, cost of $1,131,545 and $1,511,075 at September 30, 2009 & December 31, 2008, respectively		204,689			297,959
Total current assets		355,119			669,426
Time deposit, net of current portion		-			54,000
Total assets	$	355,119		$	723,426
LIABILITIES AND DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses	$	666,271		$	414,805
Deferred royalties, current portion		339,510			466,587
Accrued interest payable		4,208			4,208
Lease obligation, current portion		-			87,036
Convertible notes payable		833,000			-
Related party payables		69,586			76,357
		1,912,575			1,048,993
Long-term liabilities,
Contingent liability		1,000,000			1,000,000
Convertible notes payable, net of current portion		-			533,000
Deferred royalties, net of current portion		238,420			470,200
Lease obligation, net of current portion		-			15,530
Total liabilities		3,150,995			3,067,723
Deficiency:
Series A Preferred Stock, $0.01 par value, 2 shares authorized, issued and outstanding at September 30, 2009 and December 31, 2008		30,000			30,000
Common stock, $0.01 par value, 25,000,000 shares authorized; 3,358,444 shares issued and 3,289,006 shares outstanding at September 30, 2009 & December 31, 2008		33,585			33,585
Additional paid-in capital		186,393,716			186,393,716
Accumulated deficit		(190,421,476	)		(189,920,678	)
Treasury stock, 69,438 shares at cost		(91,533	)		(91,533	)
Total George Foreman Enterprises, Inc. and Subsidiaries		(4,055,708	)		(3,554,910	)
Non-controlling interest		1,259,832			1,210,613
Total deficiency		(2,795,876	)		(2,344,297	)
Total liabilities and deficiency	$	355,119		$	723,426

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

GEORGE FOREMAN ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008

Sales	$	160,833		$	334,220		$	477,112		$	1,208,445

Costs and expenses,
Cost of goods sold		3,564			55,642			24,639			179,725
Selling, general and administrative		120,536			339,442			417,981			2,038,215
Impairment loss		-			-			-			909,629
Amortization		-			-			-			206,972
Total costs and expenses		124,100			395,084			442,620			3,334,541

Income (loss) from operations		36,733			(60,864	)		34,492			(2,126,096	)

Other income (expense),
Unrealized gain(loss) on marketable securities		(162,411	)		(320,960	)		(123,740	)		(256,212	)
Interest income		4			1,860			332			11,450
Interest expense on amortization on discount of notes		(100,000	)		(100,000	)		(300,000	)		(233,000	)
Interest expense		( 20,333	)		(21,926	)		(62,663	)		(50,874	)
Total other income (expense)		(282,740	)		(441,026	)		(486,071	)		(528,636	)

Net loss		(246,007	)		(501,890	)		(451,579	)		(2,654,732	)

Less: Net (earnings) loss attributable to non-controlling interest		(11,063	)		76,607			(49,219	)		356,134

Net loss available to common stockholders	$	(257,070	)	$	(425,283	)	$	(500,798	)	$	(2,298,598	)

Net loss per common share – basic and diluted	$	(0.08	)	$	(0.13	)	$	(0.15	)	$	(0.70	)

Weighted average shares outstanding – basic and diluted		3,289,006			3,289,006			3,289,006			3,289,006

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

GEORGE FOREMAN ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended
	September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(451,579	)	$	(2,654,732	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment loss		-			909,629
Amortization expense		-			206,972
Amortization of deferred royalties		(389,327	)		(223,713	)
Amortization of discounted notes		300,000			233,000
Other than temporary impairment and realized (gains)losses on marketable securities		123,740			1,006,212
Marketable securities received in settlement		-			(450,000	)
Changes in operating assets and liabilities:
Accrued interest receivable		1,984			4,305
Accounts receivable		64,015			(248,664	)
Inventory		-			(164,730	)
Prepaid expenses and other current assets		(6,088	)		(27,666	)
Accounts payable and accrued expenses		251,466			(141,637	)
Deferred royalties		-			3,478
Accrued interest payable		-			4,208
Lease obligation		(102,566	)		(61,328	)
Net cash used in operating activities		(208,355	)		(1,604,666	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of time deposit		-			(152,000	)
Proceeds of matured time deposit		152,000			250,000
Net cash provided by investing activities		152,000			98,000

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes		-			1,000,000
Proceeds from related party payable		37,500			318,436
Payment of related party payable		(44,271	)		(23,162	)
Net cash provided by (used in) financing activities		(6,771	)		1,295,274

Net decrease in cash and cash equivalents		(63,126	)		(211,392	)
Cash and cash equivalents at beginning of period		102,944			344,631
Cash and cash equivalents at end of period	$	39,818		$	133,239

Supplemental disclosure of non-cash investing and financing activities,
Investment in common stock received in settlement	$	-		$	450,000
Investment in common stock in exchange for deferred royalties	$	30,470		$	588,075

Supplemental disclosure:
Interest paid	$	62,663		$	24,830

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

GEORGE FOREMAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of George Foreman Enterprises, Inc, its wholly-owned subsidiary, George Foreman Management, Inc., and its majority-owned subsidiary, George Foreman Ventures, LLC ("Ventures"). G-Nutritional, Inc. is a wholly-owned subsidiary of Ventures through which a majority ownership position in Vita Ventures, LLC was acquired. Ventures also acquired a majority ownership position in InStride Ventures, LLC. The Company was formed in Delaware in April 1996. The Company’s operations are derived from licensing agreements and royalties received from the right to use the George Foreman name.

On August 15, 2005, the Company and Ventures entered into a series of agreements with George Foreman and George Foreman Productions, Inc. ("GFPI") pursuant to which, among other things, Mr. Foreman assigned certain trademarks and rights to the name, image, signature, voice, likenesses, caricatures, sobriquets, and all other identifying features and indicia of Mr. Foreman to Ventures, and GFPI agreed to furnish the personal services of Mr. Foreman to Ventures. In exchange, Mr. Foreman and GFPI were issued membership interests in Ventures. These membership interests can be, at GFPI and Mr. Foreman's option, exchanged into approximately thirty-five percent (35%), or 1,799,753 shares, of the fully-diluted shares of common stock of the Company. In addition, a trust of which George Foreman, Jr. and George Foreman III are the trustees was issued two shares of the Company's Series A Preferred Stock, which shares entitle the holders thereof, voting separately as a class, to elect two (2) members of the Company's Board of Directors (the "Board"). The trust, as holder of such Series A Preferred Stock, elected George Foreman and George Foreman, Jr. to serve as its designated directors on the Board.

2.	RECENT DEVELOPMENTS

On May 28, 2010, the Company and Ventures entered into an agreement with George Foreman (“Foreman”) and GFPI, which restructured the contractual rights and obligations of the parties. In addition, Foreman and GFPI exchanged all of their membership interests in Ventures for the Company’s common stock under the Investor Rights Agreement entered into as of August 15, 2005. The parties agreed to terminate the Services and Assignment Agreements and all of the rights and obligations of the parties thereunder. Ventures agreed to sell, grant, assign and otherwise set over to Foreman and GFPI, solely and exclusively and forever, irrevocably and unconditionally, all of their right, title and interest, of every nature and description, whether or not such rights are now known, recognize or contemplated, including the right to enforce the same for all past, present and future infringements, in and to: the Foreman Indicia and the Indicia Rights, marks any and all registrations of, and applications to register, the Marks filed in the United States Patent and Trademark Office, in any states within the United States and anywhere else in the world; and all materials created or produced using the Marks, the Foreman Indicia and/or Indicia Rights including, without limitation, all copyrights therein.

The Company, Ventures, and each of the respective Affiliates agreed to cease and desist from any and all uses of, and shall not use, the Foreman Indicia, the Indicia Rights and/or the Marks, subject only to the licenses previously provided to Ventures for the use of the Foreman Indicia, the Indicia Rights, the Materials and/or the Marks solely in connection with and for the purpose of complying with and/or exercising its contractual rights, representations, commitments and obligations under the Ventures’ License Agreements.

Foreman and GFPI Parties agreed to waive any right to receive shares of preferred stock pursuant to the Registration Rights Agreement (see Note 15 below) and any amounts due to them. Foreman and George Foreman Jr. resigned from the Company’s board of directors immediately upon the execution of this agreement. George Foreman Jr. and George Foreman III, former employees of the Company, agreed to waive any right to receive any amounts due to them under their employment contracts.

Ventures entered into another Agreement with Foreman and United States Pharmaceutical Group, LLC (d/b/a NationsHealth) (“NationsHealth”) on May 28, 2010 pursuant to which Foreman was appointed as NationsHealth’s exclusive spokesman for core diabetic supplies and Foreman granted NationsHealth, through the Agreement with Ventures, an exclusive worldwide license to use the Foreman name, likeness, image and signature in connection with advertising to promote the core diabetic supplies. As part of the Agreement, both Ventures and Foreman will share qualified lead income received from NationsHealth in addition to 10% of the net profits derived from the value of diabetic supplies.

On December 13, 2010, Ventures received a demand letter from the minority members of InStride Ventures claiming that Ventures breached its fiduciary duty to InStride Ventures by entering into this Agreement with NationsHealth on May 28, 2010. InStride Ventures had previously entered into a product distribution agreement with NationsHealth on September 4, 2008 and the minority members contend that the May 28, 2010 agreement bypassed the rights of InStride Ventures LLC. No further action has been taken by the minority members of InStride Ventures. The Company believes that the claims set forth in the demand letter are without merit and will vigorously defend these claims.

3. GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $451,579 for the nine months ended September 30, 2009. In addition, the Company is currently in default with its debt holders, has a history of net losses and negative cash flows from operations, mainly due to its inability to generate significant revenues to date, and the remaining cash available at September 30, 2009 is $39,818. These factors create substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On March 7, 2008, the Company sold 8% Convertible Promissory Notes (the “Notes”) in the aggregate principal amount of $800,000 (see Note 16 below). The Notes are convertible into units of the Company at a conversion price of $2.50 per unit, subject to adjustment. Each unit consists of one share of the Company’s common stock, par value $0.01 and one common stock purchase warrant, exercisable at a price of $3.00 per share, subject to adjustment. The proceeds from these transactions have been used to fund working capital. The buyers of the Notes included two entities that are controlled by Seymour Holtzman. Mr. Holtzman was a director, chief executive officer and co-chairman of the board of directors of the Company until November 8, 2010. The buyers also included Jeremy Anderson, the chief financial officer of the Company.

The Company sold 8% Convertible Notes on March 31, 2008 in the aggregate principal amount of $200,000. The Notes are also convertible into units of the Company at a conversion price of $2.50 per unit, subject to adjustment. Each unit consists of one share of the Company’s common stock, par value $0.01 and one common stock purchase warrant, exercisable at a price of $3.00 per share, subject to adjustment. The proceeds from these transactions have been used to fund working capital. The amounts raised in these two transactions were not sufficient to ensure the Company's ability to continue as a going concern.

The Company's success will depend primarily upon its ability to exploit and protect the intellectual property rights that Mr. Foreman has assigned to Ventures. Furthermore, Ventures is limited in the use of Mr. Foreman’s name and likeness to the products and categories it has already developed. Ventures may not explore the further development of the Foreman brand into new products and categories and may only promote and develop those agreements it has under the InStride, Vita Ventures, UFood, and NationsHealth. These limitations may significantly impede our ability to grow, which would adversely affect our financial conditions, results of operations and business prospects. Mr. Foreman has entered into numerous licensing, endorsement and other agreements over the last decade, and there can be no assurances that a third party will not assert a claim to some or all of the intellectual property rights that the Company believes have been assigned to Ventures. In addition, the United States Patent and Trademark Office ("the "PTO") may cite preexisting trademark applications and registrations by third parties against, and prior trademark owners may oppose, future trademark applications by the Company or Ventures incorporating the George Foreman name. Further, even if the Company or Ventures were able to obtain acceptance of its trademark applications by the PTO, a significant number of similar marks registered by, and licensed to, third parties could diminish the value and protectability of the intellectual property held by the Company or Ventures.

The Company can give no assurance that the Company's existing cash and cash equivalents are sufficient to satisfy its current obligations. The Company believes its current obligations will primarily relate to costs associated with the development of the Foreman brand and the repayment of its debt under the Notes. Ventures is limited in the use of Mr. Foreman’s name and likeness to the products and categories it has already developed. Ventures may not explore the further development of the Foreman brand into new products and categories and may only promote and develop those agreements it has under the InStride, Vita Ventures, UFood, and NationsHealth. These limitations may significantly impede our ability to grow, which would adversely affect our financial conditions, results of operations and business prospects.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's significant accounting policies are summarized in Note 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2008. There were no significant changes to these policies during the nine months ended September 30, 2009 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

5. FAIR VALUE MEASUREMENTS

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Level 1 - Observable inputs such as quoted market prices in active markets

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2009:

			Fair Value Measurements at September 30, 2009 Using
	Total Carrying value as of September 30, 2009		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Marketable Securities	$	204,689	$	204,689	$	—	$	—

Total	$	204,689	$	204,689	$	—	$	—

Marketable securities are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy. The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of September 30, 2009.

6. TIME DEPOSIT

On July 15, 2007, in connection with the Assignment and Termination Agreement (see Note 12 below) the Company opened a certificate of deposit for $250,000 with Wachovia Bank. Provided no event of default has occurred, the Company may reduce the letter of credit by $90,792 on each anniversary beginning on June 30, 2007. Accordingly, the letter of credit was reduced to $152,000 in May 2008, collateralized by a time deposit of $152,000, to secure the Company's payment to the landlord. This obligation was settled with the Landlord in June 2009.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets at September 30, 2009 and December 31, 2008 were $37,600 and $31,512, respectively. Balances of $37,500 and $31,512 at September 30, 2009 and December 31, 2008, respectively represent prepaid insurance for the Directors and Officers Liability Policy. The amounts are being expensed monthly over the life of the policy.

8. INTANGIBLE ASSETS - TRADE NAME

On August 15, 2005, the Company and Ventures, entered into a series of agreements with George Foreman and GFPI pursuant to which, among other things, Mr. Foreman assigned certain trademarks and rights to the name, image, signature, voice, likenesses, caricatures, sobriquets, and all other identifying features and indicia of Mr. Foreman to Ventures, and GFPI agreed to furnish the personal services of Mr. Foreman to Ventures. The initial capital contribution of intellectual property by Mr. Foreman and George Foreman Productions, Inc. was valued for consolidated financial statement purposes at $2,099,716. The intangible asset was being amortized over its five year estimated useful life. The Company recorded amortization expense of $206,972 for the year ended December 31, 2008.

Intangible assets that are subject to amortization are evaluated for impairment. The Company uses a un-discounted cash flow analysis method of assessing impairment of these assets. Significant management judgment is required in the forecasting of future operating results, which are used in the preparation of the projected non-discounted cash flows. Due to recurring losses and negative cash flows from operations, in 2008 the Company evaluated its intangible assets for impairment. To date, the Company has not been successful in achieving its financial projections and cash flow estimates. Fair value was estimated using an undiscounted cash flow method. As a result and based on our performance to date and the lack of history of meeting our financial projections, the Company determined that the trade name was impaired and recorded an impairment charge of $909,629, the unamortized balance, during the quarter ended June 30, 2008 reducing the amount to $-0-.

9. INVESTMENT IN COMMON STOCK – MARKETABLE SECURITIES

On June 12, 2007, Ventures and KnowFat Franchise Company, Inc. (“KnowFat”) consummated a transaction pursuant to which Ventures granted KnowFat a non-exclusive limited license to use the name and likeness of George Foreman in connection with the promotion of restaurants operated by KnowFat and its franchisees. In exchange, Ventures was granted a total of 900,000 shares of common stock of KnowFat, of which 450,000 shares vested at date of closing and the remaining shares will vest over the four-year term of the licensing agreement. On December 18, 2007, KnowFat entered into a merger agreement and commenced business operations as a publicly traded company under the name UFood Restaurant Group, Inc ("UFood"). Due to the conversion of shares upon the merger, the number of shares of UFood common stock that Ventures was granted increased to 1,371,157.

This nonmonetary exchange was accounted for under Emerging Issues Task Force 00-08, "Accounting by a Grantee for an Equity Investment to be Received in Conjunction with Providing Goods or Services" ("EITF 00-08"). Under EITF 00-08 the 450,000 shares of UFood (formerly known as KnowFat) common stock was recorded at the estimated fair value of $513,000 at the date of vesting. On June 12, 2008, an additional 304,702 shares of UFood vested in accordance with the licensing agreement. These shares were valued at their fair value of $588,075 on the vesting date. On June 12, 2009, an additional 152,351 shares of UFood vested in accordance with the licensing agreement. These shares were valued at their fair value of $30,470 on the vesting date. As the remaining shares vest in accordance with the terms of the agreement, they will also be recorded at their then estimated fair value. The Company recorded an unrealized holding loss of $1,005,856 reducing the value of the vested UFood shares to $125,689 as of September 30, 2009 as management determined the investment was other-than-temporarily impaired.

In August 2008, the Company and Z-Trim Holdings, Inc. (“Z-Trim”) entered into a settlement agreement to completely and finally resolve all disputes between the parties and release each party of any allegations asserted. The settlement included a payment to the Company by Z-Trim of $300,000 and three million shares of Z-Trim common stock valued at $450,000 at the date of issuance. The gain on settlement of $750,000 was included in the Company’s consolidated statement of operations for the year ended December 31, 2008. The Company recorded an unrealized holding loss of $371,000 reducing the value of the Z-Trim shares to $79,000 as of September 30, 2009 as management determined the investment was other-than-temporarily impaired.

The investment in common stock of KnowFat was originally accounted for under the cost method, in accordance with Accounting Principal Board Opinion ("APB") 18, as Ventures owns less than a 20% interest in KnowFat including all shares granted. However, at the date of merger of KnowFat into UFood, the investment in common stock of UFood is now accounted for under FASB ASC 320, “Investments – Debt and Equity Securities”, and classified as a trading security due to management’s intent to trade the investment in the near term. The Company has recorded an unrealized holding loss of $1,005,856 on the UFood securities through September 30, 2009 and is included as a component of other income (expense) on the consolidated statement of operations as management determined the investments were other-than-temporarily impaired.

10. PREFERRED SHARES

A trust of which George Foreman, Jr. and George Foreman III are the trustees was issued two shares of the Company's Series A Preferred Stock, which shares entitle the holders thereof, voting separately as a class, to elect two (2) members of the Company's Board of Directors (the "Board"). The trust, as holder of such Series A Preferred Stock, has elected George Foreman and George Foreman, Jr. to serve as its designated directors on the Board. On May 28, 2010, George Foreman and George Foreman Jr. resigned as directors and waived all rights to the shares of preferred stock which was then cancelled by the Company.

11. DEFERRED ROYALTY REVENUES

Deferred revenues include the unearned portion of licensing fees from UFood (formerly known as KnowFat) amounting to $1,131,545, net of $553,615 recognized as revenue through September 30, 2009, to be recognized on a straight-line basis over the four-year term of the contract. As future shares of UFood vest (see Note 9), their fair value will be deferred and recognized over the remaining term of the contract.

12. LEASE COMMITMENTS

Commencing as of October 1, 1999, the Company entered into a lease agreement ("Prime Lease") for 7,566 square feet of general office space located in New York City, which expires in February 2010. Under the terms of the prime lease, the fixed monthly rent, which commenced on March 1, 2000, was $32,156 for the initial three years, $34,678 for the next four years, and $35,939 for the remainder of the term. In July 2001, the Company entered into a sublease back with the landlord of this office space through June 30, 2006. The landlord then subleased the premises to a third party. The amount of fixed rent payable under the sublease to the landlord was substantially equivalent to that payable under the Prime Lease. The Company subsequently entered into a Termination and Assignment Agreement with the landlord and the third party dated May 10, 2005. Under the terms of the Termination and Assignment Agreement, the Company has agreed to pay the landlord $90,672 annually beginning July 1, 2006 through the expiration of the Prime Lease in February 2010. The present value of the resulting liability has been recorded on the consolidated balance sheet. A letter of credit, collateralized by a time deposit, has been established to secure the Company's payment to the landlord. Provided no event of default has occurred, the Company may reduce the letter of credit by $90,792 on each anniversary beginning on June 30, 2007. With the landlord's approval, the letter of credit was reduced from $333,000 to $242,000 in June 2007 and to $152,000 in May 2008. A letter of credit for $152,000, collateralized by a time deposit of $152,000, was established to secure the Company's payment to the landlord. This obligation was settled with the Landlord in June 2009.

13. NON-CONTROLLING INTEREST

Mr. Foreman and GFPI have a combined 15% interest in Ventures, a subsidiary of the Company. The minority interest's portion of Ventures' loss has not been included in the consolidated financial statements of the Company. Vitaquest's minority portion of future profits and losses in Vita Ventures and Instride LLC's minority portion of future profits and losses in Instride Ventures is not included in the consolidated financial statements of the Company.

14. RELATED PARTY TRANSACTIONS

Included in related party payables at September 30, 2009 are advances received by InStride Ventures, LLC from its non-controlling interest owner of $5,661 and unpaid management fees of $62,500. In accordance with the operating agreements, the advances received by InStride Ventures, LLC from its non-controlling interest owner are interest-free and have no specified repayment term. The Company retains Jewelcor Management Inc. ("JMI") for the use of their Wilkes-Barre office and use of various administrative services of JMI for $4,167 per month. Since July 2008, these fees have been accruing but have not been paid. The Company's principal executive offices are in space leased by JMI from Seymour Holtzman, who served as the Company's Co-Chairman of the Board and Chief Executive Officer until his resignation on November 8, 2010, and his wife, and made available to the Company (without separate charge) through the Company's consulting arrangement with JMI, which is controlled by Mr. Holtzman.

15. CONTINGENT LIABILITY

The Registration Rights Agreement, dated as of August 15, 2005, by and among the Company, and George Foreman and George Foreman Productions (the "Registration Rights Agreement") provides for contingent additional shares of preferred stock to be issued to GFPI unless the market capitalization of the Company exceeds an average of $20 million over a ten-day trading period within the first three years of the Registration Rights Agreement. At Mr. Foreman's request, the Company shall issue a new series of preferred stock of the Company, having an aggregate liquidation preference of $1 million, bearing interest at 8% per annum, redeemable at the option of the holder three years from the date of issuance. During the year ended December 31, 2007, the Company, in accordance with FASB Statement No. 5, "Loss Contingencies", believed it was probable at that time the market capitalization would not reach or exceed $20 million and therefore recognition of a loss contingency was appropriate. The Company recorded a charge in 2007 of $1 million for this class of contingent preferred stock. As of August 15, 2008, the market capitalization did not reach or exceed $20 million and the shares were issuable upon Mr. Foreman's request, subject to the terms of the Registration Rights Agreement. Mr. Foreman requested these shares on or about October 8, 2008. As of September 30, 2009 the shares were not issued. On May 28, 2010, the Company and Ventures entered into an agreement with George Foreman and GFPI, which restructured the contractual rights and obligations of the parties. As part of this agreement, Foreman agreed to waive any right to receive shares of preferred stock pursuant to the Registration Rights Agreement.

16. CONVERTIBLE NOTES PAYABLE

On March 7, 2008, the Company sold 8% Convertible Promissory Notes (the “Notes”) in the aggregate principal amount of $800,000. The Notes are convertible into units of the Company at a conversion price of $2.50 per unit, subject to adjustment. Each unit consists of one share of the Company’s common stock, par value $0.01 and one common stock purchase warrant, exercisable at a price of $3.00 per share, subject to adjustment. The fair value of the detachable warrants was $640,000. The buyers of the Notes included two entities that are controlled by Seymour Holtzman. Mr. Holtzman was a director, chief executive officer and co-chairman of the board of directors of the Company until November 8, 2010. The buyers also included Jeremy Anderson, the chief financial officer of the Company. These notes were due on March 6, 2010 and the Company has not paid any of the outstanding principal amount of the Notes that was due and payable upon the maturity date. The Company paid interest on the March 7, 2008 Notes through February 7, 2010 but is in default under the Notes due to its failure to pay principal and interest in the aggregate amount of $805,333, which was due on March 6, 2010.

Effective March 31, 2008, the Company sold newly issued 8% Convertible Notes in the aggregate principal amount of $200,000. The Notes are also convertible into units of the Company at a conversion price of $2.50 per unit, subject to adjustment. Also, each unit consists of one share of the Company’s common stock, par value $0.01 and one common stock purchase warrant, exercisable at a price of $3.00 per share, subject to adjustment. The fair value of the detachable warrants was $160,000. These notes were due on March 31, 2010 and the Company has not paid any of the outstanding principal amount of the Notes that was due and payable upon the maturity date. The Company paid interest on the March 31, 2008 Notes through February 28, 2010 but is in default under the Notes due to its failure to pay interest in the aggregate amount of $201,333, which was due on March 31, 2010.

Both the March 7, 2008 and the March 31, 2008 Notes are currently in default as the Notes were not paid on the maturity dates. The default interest rate under these notes is fifteen percent (15%) and is payable until all of the Company’s obligations under the notes have been satisfied.

On December 8, 2010, the Company issued checks to all holders of the notes, in an amount equal to three (3) months of interest at the pre-default rate, which amounted to $19,500. Jeremy Anderson waived the interest payment due to him as a holder of one of the notes and thus was not paid any amount. The Company currently remains in default on both the March 7, 2008 and March 31, 2008 Notes.

The convertible debentures were issued in accordance with ASC 470-20-30, "Debt with Conversion and Other Options". The Company calculated the value of the beneficial conversion feature embedded in the convertible notes. In accordance with ASC 470-20-30, convertible notes are split into two components: a debt component and a component representing the embedded derivatives in the debt. The debt component represents the Company’s liability for interest coupon payments and redemption amounts. The embedded derivative represents the value of the warrant that debt holders have to convert into ordinary shares of the Company. The debt component of the convertible note is measured at amortized cost and therefore increases, with a corresponding charge to finance cost-other than interest. The debt component decreases by the cash interest coupon payments made. The beneficial conversion feature is a discount against the debt and the value to the warrants increases additional paid-in capital.

Convertible debt as of September 30, 2009 and December 31, 2008:

	Sept ,30 2009			Dec. 31, 2008
Notes payable	$	1,000,000		$	1,000,000

Discount on notes payable net of amortization		(167,000	)		(467,000	)
		833,000			533,000
Less: Current portion		(833,000	)		-
	$	-		$	533,000

17. NET LOSS PER SHARE

Basic earnings (loss) per share excludes dilution and is computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shares in the earnings (loss) of the Company. Certain unexercised stock options and stock warrants to purchase shares of the Company's common stock as of September 30, 2009 and 2008, were excluded in the computation of diluted earnings (loss) per share because the options' and warrants’ exercise price was greater than the average market price of the Company's common stock and the effect would be antidilutive. For the nine months ended September 30, 2009 and 2008, there were 3,314,753 potential common shares outstanding, respectively.

18. SUBSEQUENT EVENTS

The Company paid interest on the March 7, 2008 Notes through February 7, 2010 but is in default under the Notes due to its failure to pay principal and interest in the aggregate amount of $805,333, which was due on March 6, 2010, and to date we have not paid any of the outstanding principal amount of the Notes that was due and payable upon the maturity date. The default interest rate under these Notes is fifteen percent (15%) and is payable until all of the Company’s obligations under the Notes have been satisfied.

The Company paid interest on the March 31, 2008 Notes through February 28, 2010 but is in default under the Notes due to its failure to pay principal and interest in the aggregate amount of $201,333, which was due on March 31, 2010, and to date we have not paid any of the outstanding principal amount of the Notes that was due and payable upon the maturity date. The default interest rate under these Notes is fifteen percent (15%) and is payable until all of the Company’s obligations under the Notes have been satisfied.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

Note Regarding Forward- Looking Information

The statements contained in this quarterly report that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. Without limiting the foregoing, the words "anticipates," "believes," "expects," "intends," "may" and "plans" and similar expressions are intended to identify forward-looking statements. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's views as of the date they are made with respect to future events, but are subject to many risks and uncertainties, which could cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. These statements speak only as of the date hereof. The Company is under no duty to update, and does not undertake to update, any of the forward-looking statements contained in this quarterly report to conform them to actual results or to changes in its expectations. The following discussion should be read in conjunction with the consolidated financial statements contained in Item 1 of Part I of this Form 10-Q.

Overview

On August 15, 2005, the Company and George Foreman Ventures, LLC ("Ventures") entered into a series of agreements with George Foreman and George Foreman Productions, Inc. ("GFPI") pursuant to which, among other things, Mr. Foreman assigned certain trademarks and rights to the name, image, signature, voice, likenesses, caricatures, sobriquets, and all other identifying features and indicia of Mr. Foreman to Ventures, and GFPI agreed to furnish the personal services of Mr. Foreman to Ventures. In exchange, Mr. Foreman and GFPI were issued membership interests in Ventures. These membership interests can be, at the option of Mr. Foreman and GFPI, exchanged into approximately thirty-five percent (35%), or 1,799,753 shares, of the fully-diluted shares of common stock of the Company. In addition, a trust of which George Foreman, Jr. and George Foreman III are the trustees was issued two shares of the Company's Series A Preferred Stock, which shares entitle the holders thereof, voting separately as a class, to elect two (2) members of the Company's Board of Directors (the "Board"). The Company was formed in Delaware in April 1996. The Company’s operations are derived from licensing agreements and royalties received from the right to use the George Foreman name. The Company’s current revenues are derived from the sale of diabetic shoes in InStride Ventures as well as shares of stock and quarterly royalty payments from UFood.

The Company's employees are retained by the Company's wholly-owned subsidiary, George Foreman Management, Inc. ("Foreman Management"). As of September 30, 2009, Foreman Management had six part-time employees. These employees also perform services for other entities.

On September 7, 2006, G-Nutritional, an indirect majority-owned subsidiary of the Company, entered into an agreement with Vitaquest International, LLC ("Vitaquest") to operate a newly formed limited liability company for the purpose of marketing and selling certain products principally related to wellness, vitamins and nutritional supplements (the "Products") using the name and likeness of George Foreman. G-Nutritional and Vitaquest entered into an Operating Agreement (the "Operating Agreement") for the newly formed limited liability company, Vita Ventures, under which G-Nutritional and Vitaquest are the sole members. Under the terms of the Operating Agreement, G-Nutritional has sole approval over matters relating to the selection of products and the use of the Foreman trade name. G-Nutritional is therefore considered to hold a controlling interest over Vita Ventures. G-Nutritional owns 50.1% of the membership interests of Vita Ventures and Vitaquest owns 49.9% of the membership interests of Vita Ventures. Additionally, as part of this transaction, G-Nutritional entered into a Trademark License and Service Agreement with Vita Ventures on September 7, 2006 under which Vita Ventures was granted a worldwide non-exclusive license to use the name and likeness of George Foreman in connection with the sale of the Products. Vita Ventures acquires its inventory from our business partner and then resells it through their infomercial. Vita Ventures produced an informercial to promote the Products, which aired for the first time during the fourth quarter of 2007. Vita Ventures discontinued the sale of its products during the last quarter of 2008 and is currently contemplating marketing the Products again on a test basis through our infomercial.

On April 20, 2007, Ventures entered into an agreement with InStride LLC ("InStride"), Olen Rice and Paul Koester to operate a newly formed limited liability company named InStride Ventures, LLC for the purpose of manufacturing, marketing and selling therapeutic footwear using the name and likeness of George Foreman. Ventures owns 50.1% of the membership interest of InStride Ventures, In Stride owns 47.9% of the membership interest of InStride Ventures and Messrs. Rice and Koester each own 1% of the membership interest of InStride Ventures. Additionally, in connection with this transaction, Ventures entered into a License Agreement with InStride Ventures granting InStride Ventures a license to use the name and likeness of George Foreman in connection with the business activities of InStride Ventures. Also, in accordance with the terms of an Exclusive Trademark License Agreement, InStride granted InStride Ventures a license to use certain trademarks owned by InStride in connection with the business activities of InStride Ventures. Instride Ventures also acquires its inventory from our business partner and then resells it. During the nine months ended September 30, 2009, InStride Ventures recognized $74,885 of sales as a result of its agreements to supply therapeutic footwear using the name and likeness of George Foreman.

On June 12, 2007, Ventures granted KnowFat a non-exclusive limited license to use the name and likeness of George Foreman in connection with the promotion of restaurants operated by KnowFat and its franchisees. As consideration for use of the license, Ventures was granted 900,000 shares of common stock of KnowFat, half of which vested as of the closing date and half of which vests over the four year term of the license agreement. In addition, Ventures has the potential to earn additional shares based on the number of franchises sold, as well as earning royalties based on KnowFat sales. On December 18, 2007, KnowFat merged with and into a publicly traded company and now operates under the name UFood Restaurant Group, Inc ("UFood"). The number of KnowFat shares owned by Ventures was converted to 1,371,157 shares of UFood as part of the transaction. These shares also vest over the four year term of the license agreement. Ventures recognized licensing fees and royalties of $259,914 for the nine months ended September 30, 2009.

Ventures entered into a License Agreement, dated as of June 13, 2007, with Northern Foods plc ("Northern Foods"). Pursuant to this License Agreement, Ventures granted to Northern Foods, its subsidiaries and affiliated entities under its own ownership or control the nonexclusive right to manufacture, and the exclusive right to distribute and sell, frozen meats, poultry and fish that utilize, use or otherwise feature the name, image and likeness of George Foreman on packaging or other sales materials, to food stores and food wholesalers operating in the United Kingdom and the Republic of Ireland. As of September 30, 2009, Ventures recognized royalty income of $142,313 for the nine months from its licensing agreement with Northern Foods. Ventures’ License Agreement with Northern Foods expired in September 2009 and it was not renewed.

The Company's principal executive offices are in space leased by JMI from Seymour Holtzman and his wife and made available to the Company (without separate charge). JMI, a company controlled by Mr. Holtzman, the Company's Co-Chairman of the Board and Chief Executive Officer of the Company, provides the Company with certain consulting, management and other services in exchange for a monthly fee of $4,167. Since July 2008, these fees have been accruing but have not been paid.

Financial Position

At September 30, 2009, the Company had $39,818 in cash and cash equivalents compared to $102,944 at December 31, 2008. The Company believes its current obligations will primarily relate to marketing the current products licensed by Ventures, repayment of its debt under the Notes as well as costs associated with the operation as a public company (legal, accounting, consulting, insurance, etc.).

Mr. Foreman has entered into numerous licensing, endorsement and other agreements over the last decade, and there can be no assurances that a third party will not assert a claim to some or all of the intellectual property rights that the Company believes have been assigned to Ventures. In addition, the United States Patent and Trademark Office ("the "PTO") may cite preexisting trademark applications and registrations by third parties against, and prior trademark owners may oppose, future trademark applications by the Company or Ventures incorporating the George Foreman name. Further, even if the Company or Ventures were able to obtain acceptance of its trademark applications by the PTO, a significant number of similar marks registered by, and licensed to, third parties could diminish the value and protectability of the intellectual property held by the Company or Ventures.

Results of Operations

REVENUE Revenue for the three months and nine months ended September 30, 2009 was $160,833 and $477,112, respectively. Revenue during the three months and nine months ended September 30, 2009, consisted of sales of therapeutic footwear by Instride Ventures of $24,670 and $74,885 and licensing fees earned from Northern Foods and UFood of $136,163 and $402,227, respectively. Revenue for the three months and nine months ended September 30, 2008 was $334,220 and $1,208,445, respectively. Revenue during the three months and nine months ended September 30, 2008, consisted of sales of the Lifeshake product through Vita Ventures of $180,274 and $885,909, licensing fees earned from Northern Foods and UFood of $102,823 and $234,011, and sales of therapeutic footwear by Instride Ventures of $51,123 and $88,525, respectively. Vita Ventures discontinued the sale of its products during the last quarter of 2008.

COST OF GOODS SOLD For the three months ended September 30, 2009, cost of goods sold were $3,564, related to purchases of footwear sold through InStride Ventures' supply agreements. For the nine months ended September 30, 2009, cost of goods sold were $24,639, related to purchases footwear sold through InStride Ventures' supply agreements. For the three months ended September 30, 2008, cost of goods sold were $55,642, related to purchases of $28,692 for the footwear sold through InStride Ventures' supply agreements and $26,950 from sales of the Lifeshake. For the nine months ended September 30, 2008, cost of goods sold were $179,725, related to purchases of $53,598 for the footwear sold through InStride Ventures' supply agreements and $126,127 from sales of the Lifeshake. Vita Ventures discontinued the sale of its products during the last quarter of 2008.

SELLING GENERAL AND ADMINISTRATIVE EXPENSES During the three months and nine months ended September 30, 2009, selling general and administrative expenses primarily consisted of payroll and related expenses for accounting and legal personnel, professional and consulting fees, and Directors and Officers insurance, as well as other general corporate expenses. Selling general and administrative expenses were $417,981 for the nine months ended September 30, 2009, compared to $2,038,215 for the nine months ended September 30, 2008. The Company's selling general and administrative expenses decreased by $1,620,234 for the nine months ended September 30, 2009 compared to last year as a result of reduced marketing, consulting and fulfillment expenses of $804,102 as the Lifeshake product was discontinued. Consulting and marketing fees were $223,430 higher for the nine months ended September 30, 2008 as the diabetic shoes sold by Instride Ventures were introduced into retail stores. Legal fees were about $184,000 higher, travel expenses were about $27,000 higher, and investor relations expenses were about $30,000 higher for the nine months ended September 30, 2008 as the Company sought additional financing through the issuance of $1,000,000 in Promissory Notes. Audit fees were about $25,000 higher for the nine months ended September 30, 2008 compared to this year as the Company changed independent public accountants. Lastly, payroll and related expenses were about $320,000 lower for the nine months ended September 30, 2009 as the Company attempted to reduce overall general and administrative expenses.

Selling, general and administrative expenses were $120,536 for the three months ended September 30, 2009, compared to $339,442 for the three months ended September 30, 2008, a decrease of $218,906 compared to last year. The Company's selling general and administrative expenses decreased by about $50,000 for the three months ended September 30, 2009 compared to last year as a result of reduced marketing, consulting and fulfillment expenses as the Lifeshake product was discontinued. Consulting and marketing fees were approximately $35,000 higher for the three months ended September 30, 2008 as the diabetic shoes sold by Instride Ventures were introduced into retail stores. Audit fees were about $25,000 higher for the nine months ended September 30, 2008 compared to this year as the Company changed independent public accountants. Lastly, payroll and related expenses were about $100,000 lower for the three months ended September 30, 2009 as the Company attempted to reduce overall general and administrative expenses.

AMORTIZATION Amortization expense for the three months and nine months ended September 30, 2008 was $-0- and $206,972, respectively, while the Company recorded no amortization expense in 2009. The Company determined that the trade name was impaired and recorded an impairment charge of $909,629, the unamortized balance, during the quarter ended June 30, 2008 reducing the amount of the intangible asset to $-0-. The trade name was being amortized over its five year estimated useful life prior to its impairment loss.

OTHER INCOME(EXPENSE) Other expense for the three months and nine months ended September 30, 2009 was $282,740 and $486,071, respectively. Included in other income(expense) for the three months ended September 30, 2009 is interest expense of $20,333 as the Company paid interest on the convertible notes issued in March 2008 and interest expense on amortization on discount of those same notes of $100,000. Also included in other expenses for the three months ended September 30, 2009 are unrealized holding losses in marketable securities of $162,411. Included in other income(expense) for the nine months ended September 30, 2009 is interest income on money market accounts of $332, interest expense of $62,663 primarily related to interest due on the convertible notes issued in March 2008 and interest expense on amortization on discount of those same notes of $300,000. Also included in other expenses for the nine months ended September 30, 2009 are unrealized holding losses in marketable securities of $256,212.

Other expense for the three months and nine months ended September 30, 2008 was $441,026 and $538,636, respectively. Included in other income(expense) for the three months ended September 30, 2008 is interest income on money market accounts of $1,860, interest expense of $21,926 as the Company paid interest on the convertible notes issued in March 2008, and interest expense on amortization on discount of those same notes of $100,000. Also included in other expenses for the three months ended September 30, 2008 are unrealized holding losses in marketable securities of $320,960. Included in other income(expense) for the nine months ended September 30, 2008 is interest income on money market accounts of $11,450, interest expense of $50,874 primarily related to interest due on the convertible notes issued in March 2008, and interest expense on amortization on discount of those same notes of $233,000. Also included in other income for the nine months ended September 30, 2008 are unrealized holding losses of $256,212 on marketable securities.

Liquidity and Capital Resources

The Company incurred a net loss of $451,579 and negative cash flows from operating activities of $208,355 for the nine months ended September 30, 2009. In addition, the Company is currently in default with its debt holders, has a history of net losses and negative cash flows from operations, mainly due to its inability to generate significant revenues to date, and the remaining cash available at September 30, 2009 is $39,818. These factors create substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Net cash used in operating activities was $208,355 for the nine months ended September 30, 2009. This was the result of the net loss of $451,579, licensing fees recognized from UFood and Northern Foods of $389,327, and payment of the lease obligation of $102,566, offset by amortization on discount of the notes of $300,000, an increase in accounts payable and accrued expenses of $251,466, a decrease in accounts receivable of $64,015 mainly due to a payment received from Z-Trim, and unrealized holding losses on UFood and Z-Trim of $123,740. Net cash used in operating activities was $1,604,666 for the nine months ended September 30, 2008. This was the result of the net loss of $2,654,732, marketable securities received in the Z-Trim settlement of $450,000, an increase in accounts receivable of $248,664, amortization of deferred royalties of $223,713, a $164,730 increase in inventory, a decrease in accounts payable and accrued expenses of $141,637, and lease obligation payments of $61,328, offset by unrealized holding losses of $1,006,212, the $909,629 impairment loss, amortization on discount of the notes of $233,000, and amortization expense on the intangible assets of $206,972.

Net cash provided by investing activities was $152,000 for the nine months ended September 30, 2009 as the Company satisfied its lease obligation in June of 2009. Net cash provided by investing activities was $98,000 for the nine months ended September 30, 2008. This was the result of proceeds from a matured time deposit of $250,000 of which $152,000 was used to purchase another time deposit.

Net cash used in connection with financing activities was $6,771 for the nine months ended September 30, 2009. This was the result of $37,500 received from related parties and $44,271 paid to related parties. Net cash obtained through financing activities was $1,295,274 for the nine months ended September 30, 2008. This was primarily due to $1,000,000 from proceeds of convertible notes received in March as well as proceeds received from related parties. These proceeds were used for working capital.

The Company expects that its primary use of cash over the short-term will be for the payment of expenses to develop sales of the therapeutic footwear of InStride Ventures LLC, possible test marketing of the LifeShake, costs associated with the operation as a public company (legal, accounting, consulting, insurance, etc.) and the repayment of its interest and debt under the Notes.

Effective March 31, 2008, the Company sold newly issued 8% Convertible Notes in the aggregate principal amount of $200,000. The Notes are also convertible into units of the Company at a conversion price of $2.50 per unit, subject to adjustment. Also, each unit consists of one share of the Company’s common stock, par value $0.01 and one common stock purchase warrant, exercisable at a price of $3.00 per share, subject to adjustment. The fair value of the detachable warrants was $160,000. These notes were due on March 31, 2010 and the Company has not paid any of the outstanding principal amount of the Notes that was due and payable upon the maturity date. The Company paid interest on the March 31, 2008 Notes through February 28, 2010 but is in default under the Notes due to its failure to pay principal and interest in the aggregate amount of $201,333, which was due on March 31, 2010.

Off-Balance Sheet Arrangements

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Under the supervision and participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the design and effectiveness of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2009, based on the material weakness described below.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Company's annual or interim financial statements that is more than inconsequential will not be prevented or detected.

Based upon our evaluation, we believe that internal controls over the financial reporting process are not operating effectively because the Company's severe cash shortage has resulted in the Company having insufficient personnel and other resources. This, in turn, prevented management from being able to receive the necessary financial data and other information to be disclosed in compliance with the SEC requirements. As a result, the Company became delinquent in its filing obligations with the SEC. Specifically, the Company has not been current in its filing obligations since it filed its 10-Q for the quarter ended September 30, 2008. Our management presently is taking measures to address this delinquency; however, no assurance can be given in this regard. The Company has sold a significant amount of its marketable securities and has retained an independent public accountant to audit its financial statements for the years ended December 31, 2008, 2009, and 2010 as well as review its quarterly financial statements for those non-filed periods.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On December 13, 2010, Ventures received a letter from the minority members of InStride Ventures claiming that Ventures breached its fiduciary duty to InStride Ventures by entering into an Agreement with United States Pharmaceutical Group, LLC (“USPG”) on May 28, 2010 and demanding that the Company protect and the rights of InStride Ventures. InStride Ventures had previously entered into a product distribution agreement with USPG on September 4, 2008 and the minority members contend that the May 28, 2010 agreement bypassed the rights of InStride Ventures LLC. No further action has been taken by the minority members of InStride Ventures. The Company believes that the claims set forth in the demand letter are without merit and will vigorously defend these claims.

We are, from time to time, involved in various legal proceedings in the ordinary course of business. We do not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on our business, results of operations or financial condition. Nevertheless, we cannot assure you that lawsuits, arbitrations or other litigation will not have a material adverse effect on our business, financial condition or results of operations. We anticipate that we will continue to be subject to litigation and arbitration proceedings in the ordinary course of business. There can be no assurance that any such future litigation will not have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

Reference is made to the Risk Factors included in the Company’s filings with the SEC, including without limitation, its Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Removed

Item 5. Other Information

None.

Item 6. Exhibits

3.1	Form of Amended and Restated Certificate of Incorporation.(1)

3.2	Certificate of Ownership and Merger.(4)

3.3	Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Preferred Stock.(4)

4.1	Form of Common Stock Certificate.(1)

4.2	Form of Series A Preferred Stock Certificate.

10.1	The Company's Amended Stock Option Plan.(1)

10.2	Stock appreciation rights agreement, dated as of December 19, 2002, between the Company and Seymour Holtzman.(2)

10.3	Code of ethics.(3)

10.4	Consulting agreement, dated as of June 10, 2004, between the Company and Jewelcor Management, Inc.(3)

10.5	Assignment Agreement, dated as of August 15, 2005, by and among George Foreman and George Foreman Productions, Inc., on one hand, and George Foreman Ventures LLC, on the other hand.(4)

10.6	Services Agreement dated as of August 15, 2005, by and between George Foreman Productions f/s/o George Foreman and George Foreman Ventures LLC.(4)

10.7	Registration Rights Agreement, dated as of August 15, 2005, by and among MM Companies, Inc., on one hand, and George Foreman and George Foreman Productions, on the other hand.(4)

10.8	Investor Rights Agreement, dated as of August 15, 2005, by and among MM Companies, Inc. and George Foreman Ventures LLC, on one hand, and George Foreman and George Foreman Productions, on the other hand.(4)

10.9	Amended and Restated Limited Liability Company Agreement of George Foreman Ventures LLC, dated August 15, 2005.(4)

10.10	Employment Agreement dated as of August 15, 2005, by and between George Foreman Ventures LLC and George Foreman, Jr.(4)

10.11	Employment Agreement dated as of August 15, 2005, by and between George Foreman Ventures LLC and George Foreman III.(4)

31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Previously filed as an exhibit to the Company's registration statement on Form S-1, as amended and incorporated herein by reference.

(2)	Previously filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference.

(3)	Previously filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.

(4)	Previously filed as an exhibit to the Company's Form 8-K filed on August 15, 2005 and incorporated herein by reference

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GEORGE FOREMAN ENTERPRISES, INC.
By	/s/ Chuck Gartenhaus
	Chuck Gartenhaus
	Chief Executive Officer
	August 25, 2011

GEORGE FOREMAN ENTERPRISES, INC.
By	/s/ Jeremy Anderson
	Jeremy Anderson
	Chief Financial Officer
	August 25, 2011

George Foreman Enterprises Inc - FORM 10-Q - August 25, 2011

Attached files

George Foreman Enterprises Inc Reports