Enlightened Gourmet 10Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the Quarterly Period ended June 30, 2009

£ 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 0-51597

THE ENLIGHTENED GOURMET, INC.

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


Nevada		32-0121206
(State of Incorporation)		(I.R.S. Employer Identification No.)

236 Centerbrook, Hamden, CT 06518

(Address of principal executive offices) (Zip Code)

Issuer’s Telephone Number: 203-230-9930

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. YesS 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 £ No

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	£	Smaller reporting company	S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£ NoS

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 14, 2009, 212,574,806 shares of the issuer's Common Stock were issued and 201,930,095 were outstanding.

THE ENLIGHTENED GOURMET, INC.

Index



		Page
		Number
PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Balance Sheets as of June 30, 2009 (unaudited), and December 31, 2008	3

	Statements of Operations for the three and six months ended June 30, 2009 and 2008 (unaudited)	4

	Statement of Stockholders’ Deficit For the six months ended June 30, 2009 (unaudited)	5

	Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (unaudited)	7

	Notes to Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4T.	Controls and Procedures	23

PART II.	OTHER INFORMATION	23

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	24

Item 4.	Submission of Matters to a Vote of Security Holders	25

Item 5.	Other Information	25

Item 6.	Exhibits	25

SIGNATURES		26

ITEM 1. FINANCIAL STATEMENTS

THE ENLIGHTENED GOURMET, INC.

BALANCE SHEETS

June 30, 2009 and December 31, 2008


	ASSETS
			(Unaudited)
			June 30,		December 31,
			2009		2008
CURRENT ASSETS:
	Cash and cash equivalents	$	5,547	$	2,629
	Accounts receivable		358,220		251,786
	Less slotting fees		325,000		240,000
	Accounts receivable, net		33,220		11,786
	Inventory
	Finished goods		51,554		34,136
	Raw materials		176,496		176,877
	Total inventory		228,050		211,013
	Prepaid expenses		2,131		-
TOTAL CURRENT ASSETS			268,948		225,428

DEFERRED FINANCING COSTS			11,454		-

INTANGIBLE ASSETS			250,000		250,000

TOTAL ASSETS		$	530,402	$	475,428

	LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
	Accounts payable	$	472,070	$	445,811
	Accrued expenses		559,754		474,388
	Notes payable
	Stockholders		449,000		449,000
	Other		921,644		699,549
			1,370,644		1,148,599
TOTAL CURRENT LIABILITIES			2,402,468		2,068,748

STOCKHOLDERS’ DEFICIT:
	Preferred stock, series B, $0.001 par value; 250,000 shares authorized
	183,333 shares issued and outstanding		183		183
	Additional paid in capital on preferred stock		1,938,174		1,938,174
	Common stock,par value $0.001, 350,000,000 shares authorized,
	197,741,473 shares issued and outstanding		197,741		185,069
	Additional Paid in Capital		7,129,829		6,867,638
	Accumulated Deficit		(11,127,348)		(10,546,017)
			(1,861,421)		(1,544,953)
	Less: Treasury stock, 10,644,711 shares		(10,645)		(10,645)
	Deferred financing costs		-		(27,722)
TOTAL STOCKHOLDERS’ DEFICIT			(1,872,066)		(1,593,320)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	530,402	$	475,428

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

THE ENLIGHTENED GOURMET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended				Six Months Ended
		June 30, 2009		June 30, 2008		June 30, 2009		June 30, 2008
REVENUE:
Sales of Products	$	56,178	$	209,656	$	120,372	$	400,549
Less Discounts and Slotting Fees		(29,431)		(217,301)		(89,431)		(232,683)
NET REVENUE		26,747		(7,645)		30,941		167,866

COST OF SALES		49,365		210,659		115,297		313,499

GROSS MARGIN		(22,618)		(218,303)		(84,356)		(145,633)

EXPENSES:
Selling, General & Administrative		165,287		471,574		319,797		895,631
Interest		80,905		228,091		177,179		565,369
		246,192		699,665		496,976		1,461,000

(LOSS) BEFORE TAXES		(268,810)		(917,968)		(581,332)		(1,606,633)

INCOME TAX EXPENSE		-		-		-		-

NET INCOME (LOSS)	$	(268,810)	$	(917,968)	$	(581,332)	$	(1,606,633)

BASIC/DILUTED LOSS
PER SHARE	$	(0.01)	$	(0.01)	$	(0.01)	$	(0.01)

Weighted Average Number of
Common Shares of Stock Outstanding		189,433,251		169,827,811		187,967,911		169,704,442

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

THE ENLIGHTENED GOURMET, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT


					Additional		Deferred			Total
	Common Stock		Preferred Stock		Paid – In	Unearned	Offering	Accumulated	Treasury	Stockholders’
	Shares	Amount	Shares	Amount	Capital	Compensation	Expense	Deficit	Stock	Equity

Balance at December 31, 2007	169,430,536	$169,430	-	$ -	$5,795,290	$(646,042)	$(292,951)	$(7,771,650)	$(16,445)	$(2,762,368)
Issuance of common stock from treasury as payment for convertible debenture obligation	-	-	-	-	578,200	-	-	-	11,800	590,000
Issuance of common stock for consulting services	15,012,785	15,013	-	-	191,418	-	-	-	(6,000)	200,431
Issuance of common stock as payment for accrued interest on convertible debt	625,184	626	-	-	48,965	-	-	-	-	49,591
Issuance of preferred stock	-	-	172,083	172	3,441,488	-	-	-	-	3,441,660
Placement fees & expenses for issuance of preferred stock	-	-	-	-	(1,728,303)	-	-	-	-	(1,728,303)
Issuance of preferred stock as payment of note payable	-	-	11,250	11	224,989	-	-	-	-	225,000
Issuance of warrants pursuant to certain notes payable	-	-	-	-	77,701	-	-	-	-	77,701
Amortization of unearned compensation	-	-	-	-	-	646,042	-	-	-	646,042
Amortization of deferred financing cost	-	-	-	-	-	-	265,229	-	-	265,229
Compensation expense for stock option plan	-	-	-	-	176,064	-	-	-	-	176,064
Net loss	-	-	-	-	-	-	-	(2,774,367)	-	(2,774,367)
Balance at December 31, 2008	185,068,505	$185,069	183,333	$ 183	$8,805,812	$ -	$(27,722)	$(10,546,017)	$(10,645)	$(1,593,320)

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

THE ENLIGHTENED GOURMET, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT


					Additional		Deferred			Total
	Common Stock		Preferred Stock		Paid – In	Unearned	Offering	Accumulated	Treasury	Stockholders’
	Shares	Amount	Shares	Amount	Capital	Compensation	Expense	Deficit	Stock	Equity

Balance at December 31, 2008	185,068,505	$185,069	183,333	$ 183	$8,805,812	$ -	$(27,722)	$(10,546,017)	$(10,645)	$(1,593,320)

Issuance of common stock for cash	3,000,000	3,000	-	-	27,000	-	-	-	-	30,000
Issuance of common stock for consulting services	500,000	500	-	-	9,500	-	-	-	-	10,000
Issuance of common stock pursuant to certain notes payable	2,225,000	2,225	-	-	42,275	-	-	-	-	44,500
Issuance of common stock for payment of interest	4,313,425	4,313	-	-	38,821	-	-	-	-	43,134
Issuance of common stock for repayment of accounts payable	2,634,543	2,634	-	-	56,263	-	-	-	-	58,897
Amortization of deferred financing cost	-	-	-	-	-	-	27,722	-	-	27,722
Compensation expense for stock option plan	-	-	-	-	88,333	-	-	-	-	88,333
Net loss	-	-	-	-	-	-	-	(581,332)	-	(581,332)
Balance at June 30, 2009	197,741,473	$197,741	183,333	$ 183	$9,068,004	$ -	$ -	$(11,127,349)	$(10,645)	$(1,872,066)

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

THE ENLIGHTENED GOURMET, INC.

STATEMENTS OF CASH FLOWS

For the Six Months ended June 30, 2009 and 2008


	Six Months Ended		Six Months Ended
	June 30, 2009		June 30, 2008
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss	$	(581,332)	$	(1,606,633)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-Cash stock based expenses & debt service		244,864		436,656
Amortization of deferred financing costs		33,268		275,650
Amortization of debt discount		53,995		140,936
Change in sales allowances taken		85,000		(45,000)
Issuance of warrants		-		28,575
Changes in Current Assets and Liabilities:
Accounts Receivable		(106,434)		1,328
Inventory		(17,037)		62,984
Prepaid Expenses		(2,130)		40,500
Accounts Payable		26,259		36,779
Accrued Expenses		85,365		12,735
NET CASH USED IN
OPERATING ACTIVITIES		(178,182)		(615,490)

CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from notes & loans		213,600		50,000
Proceeds from sale of preferred stock		-		3,716,250
Debt financing costs		(47,500)		(1,756,878)
Proceeds from sale of common stock		30,000		-
Payment on notes & loans		(15,000)		(1,400,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES		181,100		609,372

NET INCREASE (DECREASE) IN CASH		2,918		(6,118)
CASH, BEGINNING		2,629		6,240
CASH, ENDING	$	5,547	$	122


Non-cash financing activities:
Issuance of stock for payment of debts	$	102,031	$	515,000
Issuance of stock for placement fees	$	10,000	$	1,466,660
Interest paid	$	43,134	$	49,593

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

THE ENLIGHTENED GOURMET, INC.

NOTES TO FINANCIAL STATEMENTS

For the Three Months Ended June 30, 2009

NOTE 1.

FORMATION AND OPERATIONS OF THE COMPANY, GOING CONCERN AND MANAGEMENT’S PLAN:

Formation and Operations of the Company:

The Enlightened Gourmet, Inc. (the “Company”) was organized in the State of Nevada on June 25, 2004. On September 27, 2004, the Company acquired, via a tax free stock exchange with a wholly-owned and newly-formed subsidiary of the Company, all of the outstanding shares of Milt & Geno’s Frozen Desserts, Inc. (“M&G’s”). The Company acquired M&G’s because it believed that M&G’s had certain formulas and recipes that would enhance the Company’s development. Additionally, the Company acquired the brand name and tradedress, together with some limited inventory (less than $10,000) and certain liabilities, related to M & G’s fat free ice cream product Absolutely Free™. The transaction did not result in a business combination since M & G’s had no operations at the time. The subsidiary was subsequently dissolved.

The Company seeks to establish itself as a leading marketer and manufacturer of fat-free foods. As of June 30, 2009, the Company’s products were authorized in 18 supermarket chains having approximately 700 stores. This total does not include any convenience stores, smaller grocery stores or independent distributors for which we have also received authorizations. The Company’s major activities consist of producing and selling product and expanding its existing sales base; therefore management has determined that it is no longer a development stage entity.

Going Concern and Management’s Plan:

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. However, the Company is presently still dependent upon additional capital in the form of either debt or equity to continue its operations and is in the process of continuing to raise such additional capital through private placements of securities. This additional capital is necessary, because the Company’s working capital is presently insufficient to pay for the necessary ingredients and packaging, as well as production costs to manufacture the Company’s present and expected orders. There can be no assurance that the Company will be able to obtain additional financing in amounts or on terms acceptable to us, or at all. Compounding this problem, the Company presently does n ot have any sources of credit that it can access on a ready basis. In addition to needing additional capital to maintain it operations, the Company also needs to raise capital to pay for the various shareholder notes that are currently in default. However, there can be no assurance that the Company will be able to receive additional capital on a timely basis. (See Note 4)

As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $581,332 for the six months ending June 30, 2009 and a net loss of $2,774,367 for the year ended December 31, 2008. Additionally, as of June 30, 2009, the Company’s current liabilities exceeded its current assets. Those factors, and those described above, create an uncertainty about the Company’s ability to continue as a going concern. Management is developing a plan to (i) continue to contain overhead costs, (ii) increase sales (iii) significantly increase gross profits by reducing the slotting fees to be paid in 2009 and (iv) raise additional capital. These steps, if successful, together with the monies raised throughout 2008 (see Note 13) and 2009 provide management with a course of action they believe will allow the Company to deal with the current financial conditions and continue its operations.

NOTE 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Inventories:

Inventories are stated at the lower of cost or market. The cost of inventories is determined by the first-in, first-out (“FIFO”) method. Inventory costs associated with Semi-Finished Goods and Finished Goods include material, labor, and overhead, while costs associated with Raw Materials include only material. The Company provides inventory allowances for any excess and obsolete inventories.

Intangible Assets and Debt Issuance Costs:

Management assesses intangible assets for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For other intangible assets, the impairment test consists of a comparison of the fair value of the intangible assets to their respective carrying amount. The Company uses a discount rate equal to its average cost of funds to discount the expected future cash flows. There were no intangible assets deemed impaired as of June 30, 2009 or 2008.

Debt issuance costs are amortized over the life of the related debt or amendment. Amortization expense for debt issuance costs for the six months ended June 30, 2009 and 2008 were $53,995 and $275,650, respectively.

Stock Options:

The Company complies with SFAS No. 123R, “Share-Based Payment,” issued in December 2004 (“SFAS 123R”). SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25 (“APB No. 25”). Among other items, SFAS No. 123R eliminates the use of APB No. 25 and the intrinsic value method of accounting, and requires companies to recognize in the financial statements the cost of employee services received in exchange for awards of equity instruments, based on the fair value of those awards as of the vested date.

Income Taxes:

Income tax expense is based on pretax financial accounting income. The Company recognizes deferred tax assets and liabilities based on the difference between the financial reporting and tax bases of assets and liabilities, applying tax rates applicable to the year in which the differences are expected to reverse, in accordance with Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes (“SFAS 109”). A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be realized.

SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether it will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded.

The Company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (an interpretation of FASB Statement No. 109)” on January 1, 2007. As a result of the implementation of FIN 48, the Company performed a comprehensive review of any uncertain tax positions in accordance with recognition standards established by FIN 48. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax returns that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, the Company believes it has no uncertain tax positions and, accordingly, did not record any charges.

The Company will recognize accrued interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2009, the Company did not have any tax-related interest or penalties. The Company files income tax returns in the U.S. Federal and various state jurisdictions. The Company is not currently under examination by The Internal Revenue Service (IRS) of any other state jurisdictions. The tax years 2005 and forward remain subject to examination.

Revenue Recognition:

Sales, net of an estimate for discounts, returns, rebates and allowances, and related cost of sales are recorded in income when goods are shipped, at which time risk of loss and title transfers to the customer, in accordance with Staff Accounting Bulletin No. 101,Revenue Recognition in Financial Statements, as amended by Staff Accounting Bulletin No. 104,Revenue Recognition.

Additionally, the Company must initially pay customers for shelving space in the form of “slotting fees.” “Slotting fees” are one-time payments made to retail outlets to access their shelf space. These fees are common in most segments of the food industry and vary from chain to chain. Supermarket chains generally are reluctant to give up shelf space to new products when existing products are performing. These fees are deducted directly from revenues and revenues are shown net of such costs.

Accounts Receivable:

Accounts receivable are carried at original invoice amount less slotting fees deducted by the customers and less an estimate made for doubtful accounts. Management determines the allowance for doubtful accounts by regularly evaluating past due balances. Individual accounts receivable are written off when deemed uncollectible, with any future recoveries recorded as income when received.

Shipping and Handling Costs:

Shipping and handling costs are included in Selling, General and Administrative expense and are expensed as incurred. For the six months ending June 30, 2009 and 2008 shipping and handling costs totaled $19,892 and $86,555, respectively.

Advertising and Promotions:

Advertising and promotional costs including print ads, commercials, catalogs, brochures and co-op are expensed during the year incurred.

Cash and Cash Equivalents:

Cash and Cash Equivalents include demand deposits with banks and highly liquid investments with remaining maturities, when purchased, of three months or less.

Financial Instruments:

Market values of financial instruments were estimated in accordance with Statement of Financial Accounting Standards No. 107,Disclosures about Fair Value of Financial Instruments, and are based on quoted market prices, where available, or on current rates offered to the Company for debt with similar terms and maturities. Unless otherwise disclosed, the fair value of financial instruments approximates their recorded values.

Use of Estimates:

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements:

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring the fair value of assets and liabilities, and expands disclosure requirements regarding the fair value measurement. SFAS 157 does not expand the use of fair value measurements. This statement, as issued, is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. FASB Staff Position (FSP) FAS No. 157-2 was issued in February 2008 and deferred the effective date of SFAS 157 for non-financial assets and liabilities to fiscal years beginning after November 2008. As such, the Company adopted SFAS 157 as of January 1, 2008 for financial assets and liabilities only. There was no significant effect on the Co mpany’s financial statements. The Company does not believe that the adoption of SFAS 157 to non-financial assets and liabilities will significantly effect its financial statements.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Liabilities – including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards which requires assets or liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under SFAS 159, a company may elect to use fair value to measure eligible items at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Eligible items include, but are limited to, accounts receivable, accounts payable, and issued debt. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has not elected to measure any additional assets or liabilities at fair value that are not already measured at fair value under existing standards.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”(“SFAS 141”). SFAS 141 establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquired and the goodwill acquired. SFAS 141 also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141 is effective for fiscal years beginning after December 15, 2008. The Company will apply the provisions of SFAS 141 to any acquisition after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Accounting for Non-controlling Interests.” SFAS 160 clarifies the classification of non-controlling interests in consolidated balance sheets and reporting transactions between the reporting entity and holders of non-controlling interests. Under this statement, non-controlling interests are considered equity and reported as an element of consolidated equity. Further, net income encompasses all consolidated subsidiaries with disclosure of the attribution of net income between controlling and non-controlling interests. SFAS No. 160 is effective prospectively for fiscal years beginning after December 15, 2008. Currently, there are no non-controlling interests in the Company.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AIPCA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”(“FAS 107-1 and APB 28-1”), which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” and APB opinion No. 28, “Interim Financial Reporting,” to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. FSP FAS 107-1 and ABP 28-1 are effective for interim reporting periods ending after June 15, 2009. It is not believed that, based on the Company’s current corporate structure, FSP FAS 107-1 and ABP 28-1 will have an impact on the Company’s financial position, results of operations or cash flows.

NOTE 3.

IMPAIRMENT:

The impairment of intangible assets with respect to the non patented technology was assessed in accordance with the provisions of Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets (“SFAS 142”). The impairment test required us to estimate the fair value of the intangible asset. Management estimated fair value using a discounted cash flow model. Under this model, management utilized estimated revenue and cash flow forecasts, as well as assumptions of terminal value, together with an applicable discount rate, to determine fair value. Management then compared the carrying value of the intangible asset to its fair value. Since the fair value is greater than its carrying value, no impairment charge was recorded.

NOTE 4.

NOTES PAYABLE:

Stockholders

(a) A stockholder, on December 21, 2005, made cash advances to the Company of $245,000 (the “December 2005 Promissory Note”), which is $5,000 less than its face value of $250,000, resulting in a discount. The December 2005 Promissory Note did not accrue interest and is prepayable by the Company without penalty at any time. The borrowing was due and payable on April 1, 2006. In consideration of making the December 2005 Promissory Note, the lender received 666,667 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.0463, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $31,000, which has been fully amortized. This December 2005 Promissory Note was refinanced with the stockholder under identical terms and conditions and the new maturity date was July 1, 2006 (the “April Promissory Note& #148;). In consideration of making the April 2006 Promissory Note the lender received additional warrants to purchase 666,667 shares of common stock at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.0437, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $29,133, which has been fully amortized. The April Promissory Note is in default for failure to pay the principal when due at maturity. Since July 1, 2006, the April Promissory Note has borne interest at the rate of 18% per annum. Accrued interest for this Promissory Note is $134,938 and $89,938 as of June 30, 2009 and 2008 respectively.

(b) Another stockholder, on February 28, 2006, made cash advances to the Company of $94,000 (the “February 2006 Promissory Note”), which is $6,000 less than its face value of $100,000, resulting in a discount. The February 2006 Promissory Note did not accrue interest. The borrowing was due and payable on August 15, 2006. In consideration of making the February 2006 Promissory Note, the lender received 266,667 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.0463, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $11,893, which has been fully amortized. The February 2006 Promissory Note is in default for failure to pay the principal when due at maturity. Since August 15, 2006, the February 2006 Promissory Note has borne interest at the rate of 18% per annum. Accrued interest for this Promissory Note is $51,805 and $33,805 as of June 30, 2009 and 2008 respectively.

(c) Another stockholder, on March 10, 2006, made cash advances to the Company of $22,560 (the “March 2006 Promissory Note”), which is $1,440 less than its face value of $24,000, resulting in a discount. The March Promissory Note did not accrue interest. The borrowing was due and payable on August 15, 2006. In consideration of making the March 2006 Promissory Note, the lender received 64,000 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.0436, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $2,854, which has been fully amortized. The March 2006 Promissory Note is in default for failure to pay the principal when due at maturity. Since August 15, 2006, the March 2006 Promissory Note has borne interest at the rate of 18% per annum. Accrued interest for this Promissory Note i s $12,433 and $8,113 as of June 30, 2009 and 2008 respectively.

(d) Another stockholder, on May 1, 2006, made cash advances to the Company of $23,875 (the “May 2006 Promissory Note”), which is $1,125 less than its face value of $25,000 resulting in a discount. The May 2006 Promissory Note did not accrue interest. The borrowing was due and payable on September 1, 2006. In consideration of making the May 2006 Promissory Note, the lender received 83,333 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.0467, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $3,600, which has been fully amortized. The May 2006 Promissory Note is in default for failure to pay the principal when due at maturity. Since September 1, 2006, the May 2006 Promissory Note has borne interest at the rate of 18% per annum. Accrued interest for this Promissory Note is $12 ,742 and $8,242 as of June 30, 2009 and 2008 respectively.

(e) Another stockholder, on April 27, 2006, made cash advances to the Company of $47,750 (the “April 2006 Promissory Note”), which is $2,250 less than its face value of $50,000 resulting in a discount. The April 2006 Promissory Note did not accrue interest. The borrowing was due and payable on July 31, 2006. In consideration of making the April 2006 Promissory Note, the lender received 133,333 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.046, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $5,700, which has been fully amortized. The face value of the April 2006 Promissory Note ($50,000) was refinanced with the same stockholder with a new maturity date of December 1, 2006 and a stated interest rate of twelve percent (12%) (the “July 2006 Promissory Note”). In consid eration of making the July 2006 Promissory Note, the lender received 266,667 warrants exercisable at $0.15 per share. Following a Black Scholes valuation model, the value of a warrant was $0.047, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $12,534, of which $5,837 has been fully amortized. The stockholder agreed to extend the terms of the July 2006 Promissory Note as of December 1, 2006, with a maturity date of April 1, 2007 (the “December 2006 Promissory Note”). The stockholder received an additional 266,667 warrants exercisable at $0.05 per share. Following the same Black Scholes valuation model as previously, the value of a warrant was $0.0155, which resulted in an additional debt discount and corresponding additional paid in capital of approximately $4,133, of which approximately $1,001 was amortized through December 31, 2006. The December 2006 Promissory Note is now in default for failure to pay the p rincipal when due at maturity. Since April 1, 2007, the December 2006 Promissory Note has borne interest at the rate of 18% per annum. Accrued interest for this Promissory Note is $20,250 and $11,250 as of June 30, 2009 and 2008 respectively.

The following summarizes the stockholders notes as of June 30, 2009 and 2008:

Stockholder Notes in Default:


(a) Note matured July 1, 2006	$	250,000
(b) Note matured August 15, 2006		100,000
(c) Note matured August 15, 2006		24,000
(d) Note matured September 1, 2006		25,000
(e) Note matured April 1, 2007		50,000

Total Stockholder Notes outstanding	$	449,000

On June 13, 2007, each stockholder lender entered into an agreement to accept their pro rata amount of an aggregate of 4,644,711 shares of common stock in provisional satisfaction of the indebtedness represented by the Stockholder Notes in default. Under the terms of these agreements, each stockholder lender may, for a period of 30 days following the date that the Securities and Exchange Commission (“SEC”) declares effective the Registration Statement filed by the Company on Form SB-2 with the SEC on June 18, 2007, sell these shares, or, at their option, elect to return their shares of common stock to the Company, in whole or in part, and have all or a portion of their Stockholder Note reinstated.

On October 3, 2007, the Company notified the SEC that it was voluntarily withdrawing the previously filed SB-2. Consequently, the conditional settlement negotiated with each of the stockholder lenders could not be completed. The $449,000 in stockholder loans remains in default, and continue to accrue interest at the Default Rate of 18% per annum. The Company is negotiating with each of the lenders a new and different settlement to repay the amounts due them.

Bridge Loan Financing

During the period March 15, 2007 through November 21, 2007 the Company entered into eight promissory notes (collectively the “2007 Promissory Notes”) with a combined face value $1,975,000. Each of the 2007 Promissory Notes were due one year from the date of its issuance and accrue interest at the annual rate of 12%. The Company pledged all of its tangible and intangible assets as security for each of the 2007 Promissory Notes. However, this security interest in the Company’s assets was subordinate to the security interest granted to the Convertible Notes described in this Note 5. In consideration of making the 2007 Promissory Notes, the lenders received a total of 6.3 million shares of the Company’s common stock valued at $0.05 per share, which resulted in an additional debt discount and corresponding additional paid in capital of $315,000 which was amortized over the life of the loan. The following is the dollar amount of bridge loans outstanding as of June 30:


		June 30, 2009		June 30, 2008
Face Value of Bridge Loans Outstanding	$	575,000	$	575,000
Less: Debt discount due to share issuance		-		31,199
Net Bridge Loans Outstanding	$	575,000	$	543,801

Charles Morgan Securities (“CMS”) acted as placement agent and sold each of the 2007 Promissory Notes to investors that were neither officers nor directors of the Company. In connection with the sale of the 2007 Promissory Notes, CMS received a placement fee equal to 10% of the aggregate proceeds ($197,500) and a non-accountable expense allowance equal to 3% of the aggregate proceeds ($59,250). Additionally, CMS received 7,612,501 shares of the Company’s Common Stock as compensation for placing the 2007 Promissory Notes.

On October 24, 2007, the Company entered into a promissory note with a face value of $100,000 (the “October 2007 Bridge Loan”). The October 2007 Bridge Loan accrued interest at the annul rate of 12% and was due October 24, 2008. The Company also pledged all of its tangible and intangible assets as security for October 2007 Bridge Loan. Other than being subordinate to the September 2007 Bridge Loan, the holder of the October 2007 Bridge Loan has a priority interest in all of the tangible and intangible assets of the Company. The October 2007 Bridge Loan is currently in default for failure to pay the principal amount and accrued interest due at maturity. The Company is negotiating with the holder of the October 2007 Bridge Loan to pay the accrued interest due, and to extend its maturity. No assurances can be given that the holder of the October 2007 Bridge Loan will agree to any such terms.

On November 21, 2007, the Company entered into promissory notes with three separate lenders with a combined face value of $275,000 (the “November 2007 Bridge Loans”). The November 2007 Bridge Loans accrued interest at the annul rate of 12% and were due November 21, 2008. The Company also pledged all of its tangible and intangible assets as security for November 2007 Bridge Loans. Other than being subordinate to both the September 2007 Bridge Loan and the holder of the October 2007 Bridge Loan, the November 2007 Bridge Loans have a priority interest in all of the tangible and intangible assets of the Company. The November 2007 Bridge Loans are currently in default for failure to pay the principal amount and accrued interest due at maturity. The Company is negotiating with each of the holders of the November 2007 Bridge Loans to pay the accrued interest due, and to extend its maturity. No assurances can be given that the holder of the November 2007 Bridge Loan will agree to any such terms.

Working Capital Notes

On July 14, 2008, July 28, 2008, July 31, 2008, August 29, 2008, and October 22, 2008, the Company borrowed from a single accredited investor (“Investor”), five unsecured promissory notes (the “July-Oct 2008 Promissory Notes”). The respective amounts of each of the July-Oct 2008 Promissory Notes are: $12,000, $35,000, $11,500, $25,000 and $4,600. Each of the July-Oct 2008 Promissory Notes accrues interest at the annual rate of 12% and is due one year from its date of issuance. As additional compensation to purchase the July-Oct 2008 Promissory Notes, the Investor was issued 250,000 warrants exercisable at $0.065 per share for the July 14^thNote, 650,000 warrants exercisable at $0.06 per share for the July 28^th Note, 250,000 warrants exercisable at $0.06 per share for the July 31^st Note, 575,000 warrants exercisable at $0.05 per share for the August 29^th Note, and 13 5,000 warrants exercisable at $.04 per share for the October 22, 2008. This resulted in a debt discount of $49,126 and corresponding additional paid in capital which will be amortized over the life of the loans. Each of the warrants expires five years after the date of its issuance. The July-Oct 2008 Promissory Notes were sold in a private transaction arranged by the Company. Accordingly, no compensation was paid to any broker or placement agent.

On June 23, 2008, the Company borrowed, from a single accredited investor (“Investor”), an unsecured promissory note (the “June 2008 Promissory Note”) in the amount of $50,000. The June 2008 Promissory Note accrues interest at the annual rate of 12% and is due one year from its date of issuance. Additionally, as additional compensation to purchase the June 2008 Promissory Note the Investor was issued 750,000 warrants exercisable at $0.08 per share. The warrants have a cashless exercise provision and expire on June 23, 2013. Following a Black Scholes valuation model, the value of a warrant was $0.038, which resulted in a debt discount and corresponding additional paid in capital of approximately $28,575, which is being amortized over the term of the loan. The June 2008 Promissory Note was sold in a private transaction arranged by the Company. Accordingly, no compensation was paid to any broke r or placement agent.

On July 31, 2008 and September 5, 2008, the Company’s investment banker, Charles Morgan Securities, Inc., (“CMS”) arranged for two unsecured loans; each in the amount of $15,000 (the “CMS Notes”). Each of the CMS Notes was arranged as a professional courtesy and accrue no interest, were due 30 days from the date they was issued. Neither loan has been repaid nor have the lenders taken any action against the Company. CMS did not charge any placement agent, or additional investment banking fees for arranging these borrowings. Between May 28, 2009 and June 17, 2009 the Company borrowed an additional $62,600. A 1% facility fee was charged to the Company. The $62,600 was repaid on July 9, 2009.

On February 6, 2009, the Company entered into a promissory note with a face value of $100,000 (the “February 2009 Bridge Loan”). The February 2009 Bridge Loan accrues interest at the annul rate of 12% and is due February 14, 2010. In consideration of making the February 2009 Bridge Loan, the lender received 1,500,000 shares of the Company’s common stock valued at $0.02 per share, which resulted in an additional debt discount and corresponding additional paid in capital of $30,000 which will be amortized over the life of the loan.

On February 17, 2009, to obtain funding for working capital, the Company entered into a loan agreement with an accredited investor for the sale of an $18,000 Promissory Note (the “February Note”). The Note was sold at a discount of $3,000 and bears no interest. In connection with this transaction, the Company issued the Investor 225,000 restricted shares of common stock valued at $0.02 per share, which resulted in an additional debt discount and corresponding additional paid in capital of $4,500 which, together with the $3,000 discount, will be amortized over the life of the loan. The Note was originally due May 18, 2009. However, on May 17, 2009 the lender agreed to extend the maturity to July 18, 2009. The full principal amount of the Note is due upon default under the terms of Note. On June 26, 2009 the Company repaid the February Note.

The Company borrowed $50,000 from an unaffiliated lender on May 14, 2009. This 12% unsecured loan is due May 14, 2010. In consideration of making the loan, the lender received 500,000 shares of common stock valued at $0.02 per share, which resulted in a debt discount of $10,000, which will be amortized over the life of the loan.

NOTE 5.

CONVERTIBLE DEBENTURES:

During 2007, the Company sold, to a group of outside investors (“Note Purchasers”), 12% Convertible Notes (“Convertible Notes”). The Convertible Notes were sold in private transactions arranged through Charles Morgan Securities, Inc. (“CMS”) pursuant to a Placement Agreement (the “Placement Agreement”) between the Company and CMS, which provides for the private placement by CMS of up to $1,500,000 aggregate principal amount of Convertible Notes. As of December 31, 2007, $1,500,000 of Convertible Notes were issued and the net proceeds were received by the Company. The Convertible Notes issued are, pursuant to the terms of the Convertible Notes, convertible into shares of the Company’s Common Stock at the rate of $.05 per share. No beneficial imbedded conversion benefit was recognized due to the conversion price being equal to or greater than the fair value of the Common Stock.

The Convertible Notes are secured by a lien upon the Company’s accounts receivable and general intangibles and a pledge of 30,000,000 shares of the Company’s Common Stock, which shares of Common Stock have been issued as treasury stock, which does not affect the Company’s net stockholders’ deficit.

In connection with the sale of the Convertible Notes, CMS received (i) a placement fee equal to 10% of the aggregate proceeds ($150,000 at December 31, 2007); (ii) a non-accountable expense allowance equal to 3% of the aggregate proceeds ($45,000 at December 31, 2007), and a common Stock Purchase Warrant (the “Warrant”) to purchase shares equal to 10% of shares issuable upon conversion of the Convertible Notes; 3,000,000 shares at December 31, 2007. The Warrant is exercisable at $.06 per share. The Company recognized the amounts paid to CMS for its accountable and non-accountable expenses and legal costs totaling $197,000 as deferred financing costs. These costs were amortized as an expense using the interest method until the Convertible Notes were repaid.

During the last quarter of 2007 and the first nine months of 2008, lenders representing $1,500,000 converted their debt to equity. The Company issued 30,000,000 common shares from Treasury in satisfaction of the debt. In addition, 1,352,876 common shares valued at $0.1125 were issued for payment of accrued interest totaling $131,459. On June 30, 2009 the Company issued an additional 4,313,425 of restricted common stock valued at $0.01 per share in satisfaction of $43,134 of accrued interest. Accrued interest unpaid as of June 30, 2009 totaled $73,290.

Pursuant to the terms of the Convertible Notes, the Company was obligated to file a registration statement with the Securities and Exchange Commission within 90 days of closing the Convertible Notes. Because the Company did not file such registration statement within this 90 day period, the Company was obligated to issue to the holders of such notes an aggregate amount of 21,874,977 shares of common stock of the Company. The shares were issued on December 31, 2007 pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as amended.

NOTE 6. PREFERRED STOCK

On February 12, 2008, the Company entered into a placement agreement (“Placement Agreement”) with CMS to sell up to $3 million of the Company’s Series B Convertible Redeemable Preferred Stock (“Series B Preferred”). Pursuant to the Placement Agreement, CMS could sell, on a best efforts basis, a maximum of 165,000 shares of Series B Preferred Stock, including a 10% broker’s over allowance, par value $.001 per share. The Series B Preferred have a liquidation preference of $20.00 per share and if all of the shares in the offering are sold, holders of all of the shares of the Series B Preferred (including those issued to CMS) would receive, upon conversion, common stock equal to 25% of the number of shares of the Company’s common stock that would be outstanding as of the date of conversion if all of our outstanding convertible securities were converted and all of the Company’s outstanding warrants were ex ercised.

The Company can redeem the Series B Preferred Shares upon not less than 15 days written notice to the holder at a price of $.001 per share:(i) at any time after the Company’s annual revenue is not less than $20 million, (ii) upon closing of a financing, or multiple financings, from unrelated investors totaling not less than $8,000,000, or (iii)at any time after the second anniversary of their date of issuance.

As of June 30, 2009, CMS has sold 110,000 shares of the Series B Preferred ($2,199,947).

In connection with the sale of the Series B Preferred, CMS received (i) a placement fee equal to 10% of the aggregate proceeds ($220,000); (ii) a non-accountable expense allowance equal to 3% of the aggregate proceeds ($66,000), and (iii) 73,333 shares of the Series B Preferred.

NOTE 7.

COMMON STOCK:

On June 26, 2009, 3,000,000 shares of common stock were sold in a private placement offering. The shares were sold at $0.01 per share for a total of $30,000.

On June 30, 2009, the Company issued a cumulative total of 2,634,543 shares of the Company’s unregistered common stock to two vendors in lieu of a total of $58,897 cash in full satisfaction of the payables due to these vendors.

No shares of common stock were issued during the six month period ending June 30, 2008 in connection with private placement offerings.

NOTE 8.

STOCK BASED COMPENSATION:

The Company currently utilizes the Black-Scholes option pricing model to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, it also permits the use of a “lattice” model. The Company expects to continue using the Black-Scholes option pricing model in connection with its adoption of SFAS No. 123R to measure the fair value of stock options.

A summary of the option awards under the Company’s Stock Option Plan as of June 30, 2009 and changes during the two-year period ended June 30, 2009 is presented below:


Stock Option Summary
		Weighted
		Average
		Stock
Stock Options	Shares	Price
Outstanding, January 1, 2007	2,820,000	$0.14
Granted, 2007	18,500,000	$0.05
Granted, 2008	3,680,000	$0.02
Exercised	-	-
Forfeited	(2,430,000)
Outstanding at June 30, 2009	22,570,000	$0.0666

Options vested at June 30, 2009	7,967,000	$0.0661

At June 30, 2009, the average remaining term for outstanding stock options is 6.7 years.

A summary of the status of non-vested shares under the Company’s Stock Option Plan, as of June 30, 2009 and changes during the two-year period ended June 30, 2009 is presented below:


Non-Vested Option Summary
		Weighted
		Average
		Stock
Stock Options	Shares	Price
Non-vested, June 30, 2007	678,000	$0.15
Non-vested, June 30, 2008	11,375,000	$0.06
Granted during 2008	2,550,000	$0.02
Granted during 2009	-	-

Total Non-vested, June 30, 2009	14,603,000	$0.0503

As of June, 30, 2009 and 2008, there was a total of $541,223 and $699,930 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Stock Option Plan, respectively. That cost is expected to be recognized over a weighted-average period of 7 years. This disclosure is provided in the aggregate for all awards that vest based on service conditions.

NOTE 9.

INCOME TAXES

As of June 30, 2009 and December 31, 2008, the Company had deferred tax assets of approximately $3,700,000 and $2,700,000, respectively, with equal corresponding valuation allowances in accordance with the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”).

Realization of the deferred tax assets is largely dependent upon future profitable operations, if any, and the reversals of existing taxable temporary differences. As a result of previous pre-tax losses from continuing operations and future taxable income expected to arise primarily from the reversal of and creation of temporary differences for the foreseeable future, management determined that in accordance with SFAS No. 109, it is not appropriate to recognize these deferred tax assets. Although there can be no assurance that such events will occur, the valuation allowance may be reversed in future periods to the extent that the related deferred income tax assets no longer require a valuation allowance under the provisions of SFAS No. 109.

Income tax payments were approximately zero in 2009 and 2008, respectively.

At December 31, 2008, the Company has loss carry-forwards available to reduce future taxable income and tax thereon. The carry-forwards will expire as outlined in the following table:


Federal Expiration			State Expiration
Federal Expiration	Federal	State	State Expiration
2024	$ 67,516	$ 63,216	2009
2025	1,026,016	1,026,016	2010
2026	2,145,548	2,143,198	2011
2027	3,420,263	3,417,596	2012
2028	2,113,344	2,110,677	2013
TOTALS	$ 8,772,687	$ 8,760,703

NOTE 10.

RELIANCE ON OFFICERS:

The Company presently has only 1 full time employee; the president. This person is the only person who has the experience to develop and sell the Company’s products. If he was no longer able or willing to function in that capacity, the Company would be negatively affected. The Company also retains a full time consultant to assist with the operations of the Company.

NOTE 11.

RELATED PARTIES:

Nutmeg Farms Ice Cream, LLC (“Nutmeg”)

Nutmeg formerly manufactured and co-packed all of the Company’s ice cream cups. The Company discontinued selling ice cream cups late in 2006 and, consequently, no longer employs Nutmeg as a co-packer. However, while they no longer co-pack for the Company, they are involved in certain product testing for the Company. Nutmeg employs a director of the Company. The Company did not incur any costs to Nutmeg for the six months ending June 30, 2009 and 2008.

NOTE 12.

CONCENTRATION OF CREDIT RISK:

The Company has one major customer that accounted for approximately 78% of gross sales and another customer that accounted for 9% of gross sales for the six months ended June 30, 2009. Additionally, net of slotting allowances, as of June 30, 2009, one customer accounted for 27% of accounts receivables, one customer accounted for 25% of accounts receivable, one customer accounted for 14% and two customers accounted for approximately 10% of receivables each.

NOTE 13.

FINANCIAL ADVISORY AGREEMENTS:

On March 28, 2006, the Company entered into a financial advisory and investment banking agreement (the “Agreement”) with an unrelated party (the “Investment Banker”) to secure financing and to provide general financial consulting services to the Company. The Agreement required the Company to issue to the Investment Banker 3,066,450 five-year warrants, at the time equal to five percent of the outstanding Common Stock of the Company, at an exercise price equal to the price of any securities sold by the Company in connection with any financing that is placed by the Investment Banker. The Agreement also called for reimbursement of all out-of-pocket expenses, including legal expense, incurred in conjunction with all services performed by the Investment Banker, including the raising of capital. If the Investment Banker had been successful in raising the capital, it would have received an additional cash fee of 10% of the gross proceeds raised and a cash fee for unaccounted expenses equal to 3% of the gross proceeds raised. The Investment Banker would also have received warrants equal to ten percent of the number of shares of Common Stock underlying the securities issued in the financing. Additionally, the Company was also obligated to pay a monthly consulting fee to the Investment Banker of $5,000 a month, commencing July 1, 2006 for a period of twelve months. Simultaneously, with the execution of the Agreement, the Company issued the Investment Banker 3,066,450 warrants. Following a Black Scholes valuation model, the value of a warrant was $0.0741, which resulted in an additional debt discount and corresponding additional paid in capital of $227,225.

The Agreement required the Investment Banker to perform its obligations pursuant to raising capital within sixty days of the execution of the Agreement. The Investment Banker failed to fulfill this obligation and as a result, pursuant to the Agreement, has forfeited the 3,066,450 warrants received. The effect of the warrants on additional paid in capital has been reversed along with reversing $18,936 that was previously included as compensation expense. Lastly, on November 2, 2006, the Company and the Investment Banker entered into a release and termination agreement which terminated the services of the Investment Banker and released the Company from any further obligation to compensate the Investment Banker for any services. During 2006, the Company paid the Investment Banker a total of $52,639 for its services.

Charles Morgan Securities, Inc.

In connection with entering the Placement Agreement with CMS regarding the sale of the Convertible Notes (see Note 5), the Company and CMS entered into an Investment Advisory Agreement pursuant to which CMS has agreed to provide certain advisory services in exchange for (i) the payment of a $30,000 engagement fee, (ii) an agreement to pay $240,000 over 24 months, and (iii) the issuance to CMS of 13,250,000 shares of the Company’s Common Stock.

The fees of $270,000 ($240,000 plus $30,000) are being amortized on a straight line basis over the 24-month term of the Investment Advisory Agreement. The 13,250,000 shares received by CMS are valued at $0.05 per share based upon the exercise prices of various warrant awards. This results in a value of $662,500, which is recognized as an issuance of common stock and additional capital of which the total amount is also being amortized into expense over the 24-month period of the Investment Advisory Agreement. The unamortized amount is shown as unearned compensation expense as a further increase to stockholders’ deficit.

Also in connection with entering the Placement Agreement with CMS, the Company and CMS entered into an Investment Banking Agreement providing for the sale of the Convertible Notes and contemplating a future placement of the Company’s securities by CMS.

NOTE 14.

SUBSEQUENT EVENTS:

On July 9, 2009, the Company issued 12,000,000 shares of the Company’s unregistered common stock in connection with a private placement offering. The Company received $120,000 in gross proceeds from the offering. CMS acted as placement agent for the sale of the shares of common stock. In connection with the closing, CMS receives a cash fee equal to 10% of the gross proceeds ($12,000), together with non-accountable expenses in the amount of 3% ($3,600) of the proceeds in cash. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering and the investor was an accredited investor.

On July 16, 2009, a lender representing a $25,000 2007 Bridge Loan converted their debt to equity. The Company issued 2,000,000 shares of the Company’s unregistered common stock from Treasury in satisfaction of the debt including $4,792 of accrued interest.

On July 20, 2009, the Company issued 833,333 shares of the Company’s unregistered common stock in full satisfaction of $10,000 of consulting fees.

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

Management’s Discussion and Analysis and other portions of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking information. Factors that may cause such differences include, but are not limited to, availability and cost of financial resources, product demand, and market acceptance as well as other factors. This Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes included elsewhere in this Quarterly Report.

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company’s services, fluctuations in pricing for materials, and competition.

Overview.

Since January 1, 2006, the Company’s major activities have been producing and selling product, as well as attempting to expand our sales base. Prior to January 1, 2006, the Company was a development stage company and recorded no revenues from sales. The Company presently has its products for sale in approximately 700 stores; primarily in the New York Metro Area and in parts of southern New England. Sales for the quarter ended June 30, 2009 were less than the comparable period of 2008, as the Company’s sales, like retail sales in general, continue to be hampered by the economic recession. Additionally, the Company’s sales in this quarter come from a fewer number of stores than the comparable quarter of 2008, as the Company’s products were discontinued in about 900 stores in the first quarter of 2009 when the Company, due to lack of available capital, elected not to pay slotting fees again. This so called “Pay to Stay” has become prevalent in the grocery market, as stores look for additional ways to increase profits. However, sales to stores in upper level economic areas remained strong compared to stores in middle, or lower income areas. Almost all of the Company’s gross revenues during the quarter were offset by slotting fees primarily for new product authorizations in existing stores and for various promotional activities.

Results of Operations.

During the three months ended June 30, 2009, we recorded gross sales of $56,178 compared to $209,656 for the comparable quarter of 2008. For the six months ending June 30, 2009 sales were $120,372 compared to $400,549 for the comparable six month period of 2008. The decline in sales was primarily due to the fewer number of stores that our products were authorized in 2009 compared to 2008. We were offered the opportunity to return to these stores in 2009, but would have had to pay additional slotting to do so. Given the scarcity of capital, we decided not to do so. Another reason for the decrease in sales was the economic recession which adversely affected sales, as consumers looked to conserve money by purchasing less expensive brands. While our products offer long term health benefits compared to regular full fatted ice cream, consumers are typically less likely to make short term sacrifices, by paying more fo r our products, to garner long term benefits. Additionally, consumers typically cut back on higher priced items, regardless of their health benefits, as they usually conserve cash in during weak or uncertain economic times. Accordingly, our revenue for both 3 months and 6 months ending June 30, 2009 was significantly less than it was for the comparable periods in 2008. Nevertheless, our sales in the New York Metro Area during both the 3 months and the 6 month period ended June 30, 2009 were greater than the comparable periods of 2008. The New York Metro area is serviced via a direct store delivery distributor rather than a warehouse delivery system, which we believes is the reason for the increase in sales compared to stores serviced by warehouse distribution. While direct store delivery distributors (“DSD”) are more costly to the Company compared to a warehouse distribution, direct store delivery does a much better job of insuring that the Company’s product s are on the stores shelves. Therefore, while the Company’s gross margin is less per case sold via a DSD distributor compared to a warehouse distributor, the Company typically sells more product via DSD distribution compared to warehouse distribution. In the past the Company looked to increase revenues by garnering authorizations from new stores rather than increasing sales in existing stores. Unfortunately, this plan reduced our cash as slotting payments for ice cream are quite expensive and, given the difficulty of raising capital, it left an insufficient amount of capital to spend on marketing and sales. Consequently, we now believe a more effective and efficient way of increasing revenues is by focusing our attention on our existing stores, primarily the New York Metro market, rather than growing sales by obtaining authorizations from new stores. The Company typically promotes its products by offering discounted pricing to retailers, coupons and in-store demonstrations to increase customer awareness of its products. Not paying slotting for new stores will provide more funds available to market our products. The Company believes it offers the only no fat, no lactose, no sugar added ice cream with fewer calories than the competition while maintaining the taste and texture of full fatted premium ice cream, and as the economy improves, these will be attributes that consumers will find attractive. This belief is supported by positive feedback from brokers, store representatives and consumers validating that its products are well received in the marketplace. Additionally, to enhance the Company’s products, the Company is currently testing a reformulation of its recipe to allow its ice cream to be considered “all natural.” The “natural” segment of food sales, together with the “organic” segment are two of the fastest growing divisions of grocery sales. The Company believes that by replacing only one of its ing redients with another ingredient, its ice cream will be considered all natural and will qualify to be sold in health food stores like Whole Foods. Historically, consumers have been willing to pay more for foods considered to be natural and/or organic and the Company believes this will be beneficial to the Company. The Company expects to complete this internal testing sometime in the next few months and be able to market its ice cream as all natural beginning later this year, and continuing into 2010.

All of our revenue during the first 6 months of 2009 was from the sale of ice cream bars to supermarket chains. Our Double Chocolate Swirl remained our best selling flavor for both the 3 months, and the 6 months ending June 30, 2009. For the 3 month period, Double Chocolate Swirl represented about 46.7% of our sales and for the 6 month period represented 42.1 of sales. Double Chocolate Swirl has been our best selling ice cream bar for the past several years, and equaled 41.6% and 40.4% for the comparable 3 and 6 month periods of 2008. Our Orange & Vanilla Cream bar, which was reworked last year to look and taste more like a traditional “50/50” bar remained our second best selling product representing about 33.4% of sales for the 3 months ending June 30, 2009 and 28%, for the 6 months ending June 30^th. The comparable percentages for the 3 and 6 months ending 2008 were 35.2% and 34.4% respectiv ely. Sales of our Double Sundae Swirl bar, introduced in mid-2007, declined slightly, as a percentage of total sales, from 22.6% of sales in the first 6 months of 2008 to 18.4% of sales for the six months of 2009. This percentage decline is based primarily on the decrease in authorized stores which were selling the Double Sundae Swirl bar in 2008 compared to 2009. We reintroduced our Cappuccino Fudge bar last year and it represented about 9.3% of sales in the 2^nd quarter, compared to about 2% of sales for the comparable period of 2008. We expect it to be an attractive flavor in the New York and New England markets where coffee flavored beverages are strong sellers. Lastly, our Peach Melba bar represented about 3.7% of sales for the first 6 months of this year similar to the 6.5% of sales for the comparable period of 2008.

We have no manufacturing facilities of our own and we rely on third-party vendors, or co-packers, to manufacture our products. Unlike traditional co-packing arrangements where the co-packer is responsible for purchasing all of the raw materials to manufacture the items and then selling the completed product back to the marketing company at a profit to reflect its manufacturing costs, we are responsible for purchasing and maintaining the inventory of all of the necessary ingredients and packaging and then paying a separate fee to the co-packer to manufacture our products. While the traditional method would be more efficient and effective for us, because we would not be responsible for purchasing and maintaining inventories of raw materials, the uniqueness of our products, coupled with the start-up nature of our Company, precluded any co-packer from entering into such an arrangement at this time.

This year all of our ice cream bars have been manufactured at our original co-packing facility in New Jersey. Due to logistical concerns, we no longer manufacture any products at the second co-packer we employed located in Wisconsin. We had no long term agreement to manufacture our products with the Wisconsin co-packer, and presently do not have a long term agreement to manufacture our product with our original co-packer. While having two co-packers helped diminish the potential adverse effects should either co-packer experience any production issues, or shortages, the logistical concerns of having two co-packers and scheduling production time caused us to consolidate back into a single co-packer. However, to the extent that our co-packer is unable to manufacture our products going forward, or produce amounts that are sufficient to meet customer demands, we would not be able to fill all of our orders and, similar to what t ook place in 2007,we could be adversely impacted. We have had discussions with our co-packer to determine the likelihood that they can continue to meet our need for production time. Our current co-packer has assured us, given our sales expectations, and so long as we can continue to pay for such production in a timely basis, it has sufficient capacity to meet our projected needs through 2009 and 2010. We still anticipate the need to enter into a long-term production agreement with this co-packer once we can reasonably determine our sales for the next twelve to eighteen months. Additionally, we believe that until we are more stable financially, this co-packer will not be willing to enter into a long-term agreement since they cannot be reasonably assured we will be able to pay for such production.

The Company incurred a net loss of $268,810 for the 2^nd quarter of 2009, compared to a net loss $917,968 for the comparable quarter ended 2008, reducing its loss by $649,158; an improvement of 70.1%. The net loss for the 6 month period ending June 30, 2009 was $581,332 compared to a net loss of $1,606,633 for the comparable period of 2008; a decrease of $1,025,301 or 63.8%. Sales for both the 6 months and 3 months ending June 30, 2009 were less than the comparable periods of 2008. Consequently the Company’s cost of goods sold was also less in the 3 and 6 month period ending June 30, 2009. Additionally, the slotting fees and expenses paid by the Company in both the 3 and 6 months ending June 30, 2009 were considerably less than those incurred in the comparable periods of 2009 as the Company focused its efforts on increasing sales from existing stores rather than attempting to get sales from new stores. ;Consequently the Company’s slotting expenses have been considerably less this year compared to previous year. Additionally, the Company’s selling, general and administrative expenses have been reduced significantly from $471,574 for the 3 months ending June 30, 2008 to $165,287 for the same three month period this year. For the 6 months ending June 30, 2009 the Company’s SGA expenses were $319,797 compared to $895,631 compared to the same period in 2008; and improvement of $575,834. Finally, as a result the Company’s effort to reduce its debt burden, the Company’s interest expense was considerably less for both the 3 months ending June 30, 2009 ($80,905) compared to the 3 months ending June 30, 2008 ($228,091). This comparison is even more dramatic for the 6 month period were interest expense was $177,179 in 2009 compared to $565,369 in 2008. The Company has worked hard to make its operations more efficient and to reduce its debt burden so that it can have more capital available for production related expenses to insure it has product to sell, as well as capital to market and promote its products.

The Company had revenues of $56,178 paid $29,431, representing 52.4% of sales, in slotting, discounts & other credits in the quarter ending June 30^th compared to revenues of $209,656 and slotting discounts & other credits of $217,301 in the comparable quarter of 2008. Slotting fees for the first six months of 2009 were $89,431, compared to $232,683 for the first six months of 2008. The decrease in slotting fess represents the Company’s efforts to increase sales from existing accounts, rather than form obtaining authorizations from new stores, or “paying to stay” in existing stores. The Company believes it is best served by using its available capital to insure that it can make and deliver product to the stores, and increase sales in existing stores by spending more money on marketing and promotion rather than slotting. Historically, slotting charges have typically been one-time payments made to retail outlets to access their shelf space. These fees are common in most segments of the food industry and vary from chain to chain. However, more recently, supermarkets have been asking for annual slotting payments, called “Pay to Stay,” to add additional revenues to the stores. The Company is examining this recent trend and how the Company can avoid paying additional slotting to retain its shelf space. Nevertheless, the Company anticipates that until the rollout of its products to all stores in the country is completed, slotting expenses and discounts will continue to offset a portion of sales revenue. However over time, as more stores authorize the Company’s products, even with “Pay to Stay,” slotting payments should represent a smaller portion of gross revenues. However, slotting fees are not a guarantee that a store will reauthorize our product from one year to the next. For example, if sales of the Company’s prod ucts are not acceptable to the stores, the Company’s products may be discontinued, similar to what happened with certain supermarket chains the Company was selling to in 2007 and to a lesser degree in 2008. The Company intends to focus on increasing its sales revenues by attempting to increase existing store sales via marketing and promotional programs rather than adding new stores. The Company believes this emphasis, primarily in the New York Metro region will be a more effective and efficient way to increase sales. Nevertheless, as the Company receives new store authorizations, or receives an order from an authorized store for a new product that was not previously authorized, additional slotting expenses will most likely be assessed.

The $268,810 loss for the 2^nd quarter of 2009 and the $581,332 loss for the first 6 months of 2009 resulted primarily from (i) slotting fees and discounts, (ii) the Company’s unusually high cost of goods sold incurred during 2009, (iii) selling, general and administrative expenses and (iv) interest expenses. Additionally, supermarkets deducted $29,431, or about 52.4% of sales, during the 2^nd quarter of 2009 and $217,301, about 103.6% of sales in the first 6 months of the year to pay for slotting charges, promotional fees and payment discounts for new items in existing stores. The Company’s slotting expenses, as a percentage of revenues, were usually high during the first 3 months of 2009, due to lower than expected sales as a result of the weak economy and lower consumer spending. This ratio improved during the 2^nd quarter of the year as consumers began to return to more normal buying h abits. The Company expects this trend to continue, because it committed to spend fewer dollars on slotting this year compared to previous years. The Company’s cost of goods sold, $49,365, or 87.9% of sales for the 3 months ended June 30, 2009 is considerably greater than normal as a result of the Company’s inability, due to lack of working capital to order raw materials in sufficient volume to obtain bulk purchasing prices. This is also reflected in the 6 months ended June 30^th where the cost of goods sold, $210,659, was slightly more than the Company’s sales of $209,656. However, subsequent to the 1^st quarter of 2009, the Company changed the way it orders its raw materials to make its basic ice cream mix, as well as how it is blended and mixed. This has resulted in a decrease in the Company’s cost of goods sold compared to what it experienced in 2008, and the Company is continuing to look for ways to increase its gross margin without sacrificing the quality of its product. The Company has never had sufficient financial resources to purchase its raw materials in greater volume, so it still incurs smaller batch pricing. The Company continues to believe it will be able to lower the cost of its ingredients and packaging if and when it can purchase these items in greater quantity. The Company continues to believe that as its sales increase, and the payments for slotting as a percentage of gross sales are eventually reduced, the Company’s working capital will improve. Additionally, the Company expects that it will be able to purchase its raw materials, including packaging and ingredients, in sufficient volume to obtain discounts from what it has paid for these materials to date. The weak economy has also helped hold down the prices for the raw materials the Company purchases to make its product.

The Company incurred Selling, General & Administrative costs of $165,287 in the current quarter compared to $471,574 last year; a decrease of $306,287. For the first six months of 2009, the amount was $319,797, compared to $895,631 in the same period in 2008. Almost all of this improvement is attributable to the decrease in fees paid to the Company’s investment banker related to the private placement of the Company’s Series B Preferred in the 2008, as well as other fees paid to our investment banker as a result of various private placements to raise capital. The Company incurred Sales and Distribution expenses during the 2^nd quarter of 2009, of $4,739 of which $1,123 was related to cold storage costs. For the six months ending June 30^,2009 the Company’s Sales and Distribution expense was $19,892 of which $14,763 was for cold storage. Almost all of the Company’s sales dur ing the second quarter were sales made by the Company’s two direct store distributor. These distributors pick up their orders directly from the Company’s leased distribution warehouse and deduct 2% of the cost of their item to cover the delivery cost. This is less expensive than hiring an independent trucker to deliver these orders. Accordingly, fluctuations in fuel costs have had less of an effect on the Company’s gross margin from these sales. Sales and Distribution expenses for the first six months of 2009 were $19,892, compared to $86,555 for the like period in 2008. Almost all of the decrease in sales and Distribution expenses from 2008 to 2009 was due to lower gross sales in 2009 compared to 2008.

The Company incurred $13,188 in costs attributable to salaries and benefits during the 2^nd quarter, compared to $43,049 in the comparable period of 2008. For the six months ended June 30, 2009, the Company had salary and benefits expenses of $46,357, compared to $93,622 for the same period in 2008. The decrease is related to the reduction in full time head count of one employee which took place during the 1^st quarter of the year. While it does not effect the Company’s earnings, the Company’s President has continued to defer a considerable portion of his salary, which improves the Company’s working capital. The balance of the Company’s SG&A was incurred in general operating expenses including advertising, marketing, travel and entertainment.

The Company incurred interest charges of $80,905 during the quarter compared to $228,091 in the comparable period in 2008; a decrease of $147,186 or about 64.5%. For the six moths ended June 30^th the interest costs were $177,179, compared to $565,369 in the comparable period of 2008. The decrease in interest cost for both the 2^nd quarter of 2009, and the 6 month period ending June 30, 2009 compared to comparable periods of 2008 is attributable to the repayment of $1.69 million of term debt during the first six months of 2008. The majority of the interest expense in the current quarter is related to the $449,000 Stockholders Notes that are currently in default and accruing interest at the annual rate of 12%, and the $575,000 of 2007 Promissory Notes which were outstanding for most of the 2^nd quarter. Of the $80,905 incurred during the current quarter $30,460 represents the accretion of debt discount related to restricted shares of common stock issued to lenders, as well as fees paid to the placement agent, including shares of restricted common stock, $46,674, is accrued interest on the various borrowings, and the balance, $3,771, represent deferred financing cost on all of the Company’s various financings.

Liquidity and Capital Resources.

During the quarter the Company’s total assets increased $54,974 from $475,428 at December 31, 2008 to $530,402 at June 30, 2009. The majority of this increase ($21,434) came from an increase in the Company’s net accounts receivable. Additionally, the Company’s finished foods inventory increased $17,418 to $51,554 from $34,136 at December 31, 2008 as the Company increased its finished goods inventory to help insure that the Company could deliver product for the all of the orders it expects to receive. Lastly, deferred financing costs increased from $0 at December 31, 2008 to $11,454 as a result of the placement fees and expenses incurred related to the Company’s borrowing during the first six months of the year.

The Company’s current assets increased $43,520 from $225,428 at December 31, 2008 to $268,948 at June 30, 2009. The increase in current assets was primarily as a result of the aforementioned increase in net accounts receivable ($21,434) and increase in finished goods inventory ($17,418). Cash also increased $2,918 from $2,629 at December 31, 2008 to $5,547 at June 30, 2009. Lastly, prepaid expenses increased $2,131 fro $0 at December 31, 2009.

At June 30, 2009, the Company had negative working capital of approximately $1,872,066, which consisted of current assets of approximately $268,948 and current liabilities of $2,402,468. The Company’s negative working capital was up slightly from $1,843,320 at year end. All of the Company’s borrowings come due within the next 12 months, or are in default and are past due. Consequently this has a negative impact on the Company’s working capital. The Company is working with each of its lenders to work out an alternative repayment plan and to extend the maturity of the various loans. The Company’s working capital is also hampered by $472,070 of accounts payable and accrued expenses of $559,754. Our current assets consisted of $5,547 cash, $33,320 in trade accounts receivables net of slotting fees, discounts and allowances, $228,050 in inventory including both finished goods, $51,554, and raw ma terials, $176,877, and prepaid expenses of $2.131. Our current liabilities included accounts payable of $472,070, up $26,259 from $445,811 at December 31, 2008, accrued expenses of $559,754 up $474,388 from $474,388 at December 31, 2008 and various promissory notes payable within one year of $1,370,644. Of this amount, $449,000 has been and continues to be in default. The note holders of the defaulted notes have demanded repayment. The Company is in discussion with each of the lenders to enter into a settlement for the amounts due. Additionally, $350,000 of the $550,000 2007 bridge loans are also in default. The Company has made an offer to each of these lenders to pay the accrued interest and outstanding principal in shares of common stock and to extend the maturity of each of the loans to December 31, 2009.

Other than the typical 30-day grace period for paying vendors, the Company presently has no bank credit lines that it may rely on to fund working capital. However, many of the Company’s vendors have been willing to lengthen payment terms and generally accommodate the Company’s needs, based upon the fact that Company has previously paid their invoices; albeit not in a timely manner. In many cases vendors work with the Company, because they view it in their best interest to work with the Company during this period of limited working capital. However, not all vendors have been willing to extend such credit terms, and many vendors have required sizeable up-front deposits, or full payment in advance.

The Company is still dependent upon additional capital in the near term in the form of either debt or equity to continue its operations. This is necessary because the Company’s working capital is presently insufficient to pay for the necessary ingredients and packaging, as well as production costs to manufacture the Company’s expected orders, as well as to pay down its accounts payable and existing indebtedness. The current situation in the financial markets has made this task even more difficult than it has been. The Company has been able to finance its operations, but has never received sufficient capital at any given time not to have to focus considerable attention to raising capital. Consequently, it is still dependent upon additional capital, particularly equity capital, to pay down its indebtedness to a more manageable amount and to insure its long term financial stability. Compounding the Company’s li quidity problem, the Company presently does not have any sources of credit that it can access on a ready basis. The Company requires additional capital in order to (i) purchase additional raw materials, including ingredients and packaging, as well as pay the cost of manufacturing its products all in a timely basis; (ii) pay advertising costs and other marketing expenses to promote the sale of its products; (iii) finish paying its slotting fees; (iv) repay its existing indebtedness including its accounts payable and (v) increase its corporate infrastructure. The Company believes that it needs about $1,000,000 of additional capital. A significant portion of this capital, if received, would go towards reducing the Company’s remaining indebtedness, and to purchase raw materials to insure the Company can fill all of the orders it expects to receive during 2009. However, there can be no assurance that the Company will be able to obtain additional financing in amounts or on terms accept able to us, or at all. To the extent that the Company is unable to receive such funding on a timely basis, the Company’s ability to continue to pay its existing obligations, as well as enter new markets or exploit existing markets may be delayed or potentially lost, and management’s revenue projections will not be met. Additionally, it’s possible that the Company’s reputation may be damaged if it is not able to deliver its products to the supermarkets from which it has received orders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A

ITEM 4T. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedure

As of June 30, 2009, the Company’s management carried out an evaluation, with the participation of the Company's Chief Executive Officer (principal executive officer) and Chief Accounting Officer (principal financial officer), of the effectiveness of the Company's disclosure controls and procedures and the Company’s internal control over financial reporting. Management concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report were effective in timely alerting it to material information required to be included in the Company's periodic Securities and Exchange Commission filings and were also effective to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and is accumulated and c ommunicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There was no change in the Company's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

N/A

ITEM 1A. RISK FACTORS

Not Applicable

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

On May 14, 2009, the Company entered into a promissory note with a face value of $50,000 (the “May 2009 Bridge Loan”). The May 2009 Bridge Loan accrues interest at the annul rate of 12% and is due May 14, 2010. In consideration of making the May 2009 Bridge Loan, the lender received 500,000 shares of the Company’s common stock. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering and the investor was an accredited investor.

On June 26, 2009, the Company issued 3,000,000 shares of the Company’s unregistered common stock in connection with a private placement offering. The Company received $30,000 in gross proceeds from the offering. Charles Morgan Securities, Inc., a registered broker-dealer ("CMS"), acted as placement agent for the sale of the shares of common stock. In connection with the closing, CMS was receives a cash fee equal to 10% of the gross proceeds ($3,000), together with non-accountable expenses in the amount of 3% ($900) of the proceeds in cash. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering and the investor was an accredited investor.

On June 30, 2009, the Company issued 1,520,765 shares of the Company’s unregistered common stock in lieu of $33,837.19 cash in full satisfaction of a payable due a vendor of the Company.

On June 30, 2009, the Company issued 1,113,778 shares of the Company’s unregistered common stock in lieu of $25,060.00 cash in full satisfaction of a payable due a vendor of the Company.

On June 30, 2009, the Company issued 4,313,425 shares of the Company’s unregistered common stock in lieu of $43,134.25 cash in full satisfaction of accrued interest due a lender related to a $200,000 2007 Bridge Loan for the period September 14, 2007 to June 30, 2009.

On July 9, 2009, the Company issued 12,000,000 shares of the Company’s unregistered common stock in connection with a private placement offering. The Company received $120,000 in gross proceeds from the offering. Charles Morgan Securities, Inc., a registered broker-dealer ("CMS"), acted as placement agent for the sale of the shares of common stock. In connection with the closing, CMS was receives a cash fee equal to 10% of the gross proceeds ($12,000), together with non-accountable expenses in the amount of 3% ($3,600) of the proceeds in cash. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering and the investor was an accredited investor.

On July 20, 2009, the Company issued 833,333 shares of the Company’s unregistered common stock in full satisfaction of $10,000 of consulting fees due to a consultant retained by the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

The Company continues to be in default with respect to $449,000 aggregate principal amount of unsecured promissory notes (the “Promissory Notes”) payable to various stockholders of the Company (each a “Lender”). The interest rate on such Promissory Notes has increased to the Default Rate of 18% per annum from the stated rate of 12% per annum.

On June 13, 2007, each Lender entered into an agreement to accept their prorata amount of an aggregate of 4,644,711 shares of common stock in conditional satisfaction of the indebtedness represented by such Promissory Notes. Under the terms of theses agreements, each Lender may, for a period of 30 days following the date that the Securities and Exchange Commission (“SEC”) declares effective the Registration Statement filed by the Company on Form SB-2 with the SEC on June 18, 2007, sell these shares, or, at their option, elect to return their shares of common stock to the Company, in whole or in part, and have all or a portion of their Promissory Notes reinstated.

To the extent any Lender elects to return some or all of their shares of common stock to the Company, the Company intends to repay such Promissory Notes with the proceeds from future financings, although there can be no assurance that such future financings will be available to the Company, or that if financings become available in the future what the terms of such financings will be, or that they will be in amounts sufficient to pay these Promissory Notes and other obligations of the Company.

On October 2, 2007, the Company notified the SEC that it was withdrawing the Registration Statement, and the Promissory Notes are still in default and continue to accrue interest at the Default Rate of 18% per annum. The Company is negotiating with each of the lenders a new and different settlement to repay the amounts due.

On September 14, 2007, the Company entered into a promissory note with a face value of $200,000 (the “September 2007 Bridge Loan”). The September 2007 Bridge Loan accrued interest at the annul rate of 12% and was due September 14, 2008. The Company pledged all of its tangible and intangible assets as security for the September 2007 Bridge Loan. The September 2007 Bridge Loan was in default for failure to pay the principal amount and accrued interest due at maturity On January 14, 2009 the Lender agreed to waive the default and extend the maturity of the September 2007 Bridge Loan to September 14, 2009. On June 30, 2009, the Company issued 4,313,425 shares of the Company’s unregistered common stock to the Lender in lieu of $43,134.25 cash in full satisfaction of accrued interest due for the period September 14, 2007 to June 30, 2009 and the Lender agreed to extend the maturity to December 31, 2009.

On November 21, 2007, the Company entered into promissory notes with two separate lenders with a combined face value of $250,000 (the “November 2007 Bridge Loans”). The November 2007 Bridge Loans accrued interest at the annul rate of 12% and were due November 21, 2008. The Company also pledged all of its tangible and intangible assets as security for each of the November 2007 Bridge Loans. Other than being subordinate to both the September 2007 Bridge Loan and the holder of the October 2007 Bridge Loan, the November 2007 Bridge Loans have a priority interest in all of the tangible and intangible assets of the Company. The November 2007 Bridge Loans are currently in default for failure to pay the principal amount and accrued interest due at maturity. The Company is negotiating with each of the holders of the November 2007 Bridge Loans to pay the accrued interest due, and to extend its maturity. No assurances can be given that the holder of the November 2007 Bridge Loan will agree to any such terms.

On June 26, 2008, the Company entered into a promissory note with a lender in the amount of $50,000 (the “June 2008 Loan”). The June 2008 Loan accrues interest at the annual rate of 12% and was due June 26, 2008 and is unsecured. The June 2008 Loan is currently in default for failure to pay the principal amount and accrued interest due at maturity. The Company is negotiating with the holder of the June 2008 Loan to pay the accrued interest due, and to extend its maturity. No assurances can be given that the lender of the June 2008 Loan will agree to any such terms.

Between July 14, and August 8, 2008, the Company entered into a various promissory notes with an unaffiliated lender totaling $58,500 (the “July-August 2008 Loans”). Each of the July-August 2008 Loans accrues interest at the annual rate of 12% and is unsecured. As of August 8, 2009, each of the July-August 2008 Loans is in default for failure to pay the principal amount and accrued interest due at maturity. The Company is negotiating with the holder of the July-August 2008 Loans to pay the accrued interest due, and to extend its maturity. No assurances can be given that the lender of the July-August 2008 Loans will agree to any such terms.

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

None.

ITEM 5. OTHER INFORMATION.

On June 30, 2009, the Company issued 1,520,765 shares of the Company’s unregistered common stock in lieu of $33,837.19 cash in full satisfaction of a payable due a vendor of the Company.

On June 30, 2009, the Company issued 1,113,778 shares of the Company’s unregistered common stock in lieu of $25,060.00 cash in full satisfaction of a payable due a vendor of the Company.

On July 9, 2009, the Company issued 12,000,000 shares of the Company’s unregistered common stock in connection with a private placement offering. The Company received $120,000 in gross proceeds from the offering. Charles Morgan Securities, Inc., a registered broker-dealer ("CMS"), acted as placement agent for the sale of the shares of common stock. In connection with the closing, CMS was receives a cash fee equal to 10% of the gross proceeds ($12,000), together with non-accountable expenses in the amount of 3% ($3,600) of the proceeds in cash. The Company claims an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering and the investor was an accredited investor.

On July 20, 2009, the Company issued 833,333 shares of the Company’s unregistered common stock in full satisfaction of $10,000 of consulting fees due to a consultant retained by the Company.

ITEM 6. EXHIBITS.

Exhibits filed with this report:


No.	Description

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

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

32	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on its behalf by the undersigned thereunto duly authorized on this 19^th day of August 2009.

THE ENLIGHTENED GOURMET, INC.

By: /s/ ALEXANDER L. BOZZI, III

Alexander L. Bozzi, III, President

(Principal Executive Officer and

Principal Financial Officer and Chief Accounting Officer)

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Enlightened Gourmet Inactive 10-Q2009 Q2 Quarterly report

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